Reading summaries - weeks two and three, Spring 2018

Class themes were The Distinctive Challenge and Historical Perspectives and Theories of the Sector

Table of contents

Week 2

Week 3

Week 2

Managing Nonprofit Organizations, Tschirhart and Bielefeld (2012)

Chapter 1 - Understanding Nonprofit Organizations

  • Nonprofit organizations have a distinct mandate to be good stewards of the resources they receive
  • this is a book about nonprofit leadership and management
  • importance of context becomes clear when we look at the competencies proposed in November 2011 for nonprofit managers and leaders by the Non-Profit Management Education Section of NASPAA (National Association of Schools of Public Affairs and Administration)
    1. history, values, ethics, and philosophies of nonprofit organizations, and the need for transparency in nonprofit management practices to maintain the public trust
    2. current legal frameworks for operating a nonprofit organization, and the process of forming an incorporated nonprofit organization
    3. fundamental principles and concepts of fiscal management, and the ethical imperative to be a good steward
    4. leadership challenges of the sector as they relate to the strategic management of nonprofit organizations
    5. human resource and volunteer management principles
    6. standards for accountability, performance measurement, and program evaluation, and performance measurement techniques
  • Our comprehensive approach to excelling at managing and leading nonprofits is built around these competency and curriculum guidelines
  • This book is not about management and leadership in general; it is about management and leadership in the nonprofit sector
  • Alternative terms used for the nonprofit sector: independent sector, third sector, not-for-profit sector, charitable sector, philanthropic sector, civil society sector, tax-exempt sector, social sector, Outside the United States: nongovernmental organizations (NGOs) and civil society organizations
  • Diversity in the Nonprofit Sector
    • Of the close to 1.6 million registered nonprofits in the United States, the majority are public charities, about 1 million.
    • About 100,000 are classified as private foundations
    • Over 500,000 tax-exempt organizations are classified as other types of nonprofits, such as chambers of commerce, fraternal organizations, social and recreational clubs, and business leagues
  • Overall in 2009, registered nonprofits in all Internal Revenue Service (IRS) categories accounted for 9 percent of the wages and salaries paid in the United States
  • There is no precise, accurate count of the number of organizations making up the U.S. nonprofit sector. The U.S. government does not require churches and other religious places of worship to register
  • One estimate is that there are close to 280,000 religious congregations in the country
  • There are also many grassroots organizations that are not legally incorporated and thus left uncounted
  • David Horton Smith suggests that the nonprofit sector also contains what he refers to as deviant nonprofits, such as gangs, cults, covens, and quasi-underground organizations such as the Ku Klux Klan. These organizations operate outside normal conventions and are not legally recognized or tax exempt
  • In the early history of the United States, voluntary action was the primary way things got done in communities
  • Nonprofits often function in areas where markets are lacking, such as the provision of food and shelter to those without money to pay for them
  • nonprofits provide services that government, with its reliance on voter mandates, cannot
  • nonprofits contribute to the establishment of social capital and the solidarity of American society, helping individuals to form bonds of trust and reciprocity with others
  • Between September of 2009 and September of 2010, 26.3 percent of Americans over sixteen years of age volunteered through or for a nonprofit
  • In 2010, nonprofit organizations received $290.9 billion in charitable contributions (of which $211.8 billion came from individuals)
  • In 2009, the nonprofit sector’s share of the gross domestic product (GDP) was 5.4 percent
  • In that year, public charities reported over $1.41 trillion in revenues and held $2.56 trillion in total assets.
  • One of the most important challenges is to keep the mission in mind in all decision making
  • Other challenges:
    • fiscal difficulties, some starting with government cutbacks in the 1980s in areas where nonprofits were active
    • Government assistance has become more targeted with stricter requirements
    • growing competition as more for-profits move into areas traditionally served by nonprofits
    • rise of B corporations
    • under pressure from funders who are demanding more evidence in evaluation
    • legitimacy of the nonprofit sector has been challenged on a number of fronts
  • As this short summary of challenges illustrates, today’s nonprofit leaders must navigate turbulent waters in the pursuit of their organization’s mission

Chapter 3 - Founding Nonprofits and the Business Case

  • Nonprofits, unlike biological entities, do not always have a clear birth date. An organization may receive legal recognition years after it began to serve the public.
  • A founder may imprint norms and values that are hard to change, even after that founder leaves
  • Over time the founder may actually harm the long-term health of the organization because of his or her central role and inability to give up control, sometimes known as founder’s syndrome
  • new nonprofits shape the collaborative and competitive environment around them, entrants may be an innovator organization or a reproducer
  • Organizations can be founded in a number of ways - individual entrepreneur, legislative action, spun off from a larger parent org, federated associations that set up chapters or affiliates
  • Some organizational transformations are so profound and radical that it can appear that one organization died and a fundamentally new one was born,
  • The term social entrepreneurship became popular in the 1980s. It refers to the creation of products, organizations, and practices that yield and sustain social benefits
  • a social entrepreneur can be any individual, group, network, organization, or alliance of organizations that seeks large-scale change through pattern-breaking ideas
  • Social entrepreneurs can learn from their purely profit-seeking business counterparts (commercial entrepreneurs) by adapting Sahlman’s PCDO model: people, context, deal, opportunity
  • overlap of people and capital with opportunity create a social value proposition in an environmental context of tax, regulatory, sociocultural, demographic, political, and macroeconomic influences
  • People and capital
    • The social entrepreneurship model emphasizes the people who actively participate in the venture
    • Economic self-interest is likely to play less of a role in social entrepreneurship than in commercial entrepreneurship
    • One of the newest options for capital for some social entrepreneurs is social impact bonds
  • Context
    • Contextual elements outside the control of the entrepreneur infl uence success or failure
    • Commercial and social entrepreneurship ventures may be subject to different regulatory, fi nancing, tax, sociopolitical, and other infl uences
  • Social Value Proposition
    • A project’s or organization’s social value proposition addresses the reasons why individuals will choose to be involved in a particular effort over other alternatives
    • The social value proposition typically speaks to fundamental values that the people involved in an enterprise’s transactions hold dear
  • Opportunity
    • For a social entrepreneurship enterprise to be successful, enough individuals need to believe that it has a chance
    • Social entrepreneurs identify something they can do that others are not doing because it is not viable within existing commercial markets
  • Consideration of the differences between social entrepreneurship and commercial entrepreneurship:
    • Centrality of social value
    • Organization and environmental alignment
    • Organizational boundaries
    • Cooperation
  • Each nonprofit’s founding story is unique
  • The idea for a new nonprofit organization can be assessed on three dimensions:
    • Social value potentially
    • Market potential
    • Sustainability potential
  • The business plan differs from the strategic plan in its purpose and content. The strategic plan explains how an organization will achieve its objectives over a specified period of time.
  • Business plans do not need to be long, elaborate documents. They should concisely and clearly state what business the nonprofit is in and the social value proposition.
  • Perhaps the most important elements of the business plan are the vision and mission statements
    • The vision statement expresses a nonprofit’s ultimate goal
    • The mission statement should convey the nonprofit’s essential purpose, approach, and values, distinguishing it from other organizations
  • There are many reasons to formally establish a nonprofit. Once formalized, it takes on an identity beyond that of its founders.
  • One of the first options is whether to set up the nonprofit as an unincorporated association, charitable trust, or nonprofit corporation
  • Nonprofit corporations may be either public benefit organizations or mutual benefit organizations
  • The appeal of becoming a 501(c)(3) organization is that the nonprofit gains increased receptivity to appeals for support, tax deductibility for donors, eligibility for low-cost mailing permits, exemption from some taxes, ability to apply for gambling permits in some states, eligibility for government and foundation contracts and grants, and discounts from some businesses
  • once established as a 501(c)(3) organization, the nonprofit is not allowed to engage in political campaigning, is subject to limits on lobbying and unrelated business activity, must ensure that social activities for participants are insubstantial if they are unrelated to its mission, and must also ensure that no excess benefits or inurements go to staff or board members
  • The (c)(3) classification is not available to all nonprofits. Some entrepreneurs who wish their organizations to engage heavily in advocacy choose to pursue a 501(c)(4) rather than a 501(c)(3) classification
  • Once the founder decides what legal form to pursue, an application can be made to the federal government for a definitive ruling, based on support the organization has received to date, or an advance ruling, based on support the organization will receive during its first five tax years\
  • At the state level it is necessary to prepare and submit articles of incorporation
  • After their nonprofit’s formal incorporation, founders need to have the mindset that the nonprofit is no longer their organization. It exists to serve a public purpose.
  • Due to the efforts of social entrepreneurs, innovative approaches are continually being tested to address social problems that cannot viably be addressed by commercial markets.
  • Whether a nonprofit emerges as a spin-off, subsidiary, or franchise or is established outside of an existing organization, its social value proposition will likely frame its fundamental approach and the types of supporters it can attract

Chapter 4 - Organizational structure

  • A nonprofit’s structure is designed and created during the founding of the organization and then evolves, or is reorganized, continuously from that point on
  • many dimensions of structure that affect how a nonprofit’s work gets done
  • structure provides a way for organizations to meet two confl icting needs—the need to differentiate and the need to integrate
  • In any but the smallest organizations with the simplest output, the operation and work of an organization needs to be broken up into separate tasks and functions. This is the organization’s division of labor
  • organizational structure supports the production of outputs and achievement of organizational goals, minimizes or at least regulates the influence of individual variation on the organization, and provides the setting within which power is exercised
  • Elements of organizations
    • environment
    • strategy
    • work and technology
    • formal organization
    • informal organization
    • people
  • Dimensions of structure
    • formalization
    • complexity
    • centralization
    • specialization
    • standardization
    • Professionalism
    • hierarchy of authority
  • Two types of internal management structures:
    • mechanistic structures - more formalized and centralized, most decision making occurs at the top
    • organic structures - less rigid and more flexible, fewer rules and more reliance on informal adoption, decisions made at lower levels with authority more dispersed
  • Many nonprofits exemplify the organic structure type because it appeals to values regarding the desirability of shared power, permeable organizational boundaries to facilitate collaboration, easy movement of members into and out of the organization, and an ability to be innovative and to mobilize quickly to address needs.
  • primary incentives for participating in the organization are intrinsic (doing something that fits one’s values and preferred social benefits), and extrinsic incentives (material benefits such as financial compensation) are secondary
  • Common organizational configurations:
    • In a functional structure activities are grouped together into units or departments by types of work skills and tasks—common functions such as fundraising
    • In a divisional structure unit grouping is based not on functions but on organizational outputs or products
      • allows for decentralized decision making at the divisional level, freeing the top level of the organization to concentrate on overall decision making
    • Principle in a geographical structure is to organize in terms of the location of the organization’s users or customers
    • A matrix structure simultaneously uses aspects of both the functional and divisional structures.
    • an emerging form termed the virtual network structure extends the concept of horizontal coordination and collaboration beyond the boundaries of the traditional organization.
      • characterized by the outsourcing, or contracting, of some of an organization’s functions or activities
  • information needs are a function of three dimensions of technology: complexity, uncertainty, and interdependence
    • complexity is a function of the number of different items or elements that must be dealt with simultaneously in task accomplishment
    • Uncertainty refers to the variability of the items or elements on which work is performed
    • Interdependency is the extent to which items or elements on which work is performed or the work processes themselves are interrelated
      • pooled interdependence staff from multiple departments need to work together as a team
      • sequential interdependence someone must first secure one thing before another can be arranged
      • reciprocal interdependence, with units posing critical contingencies for each other that have to be resolved before action can be taken
    • In addition, organizational information needs have been linked to organizational environments and strategy
    • When information flow in a nonprofit is inadequate, a number of problems can arise.
    • A nonprofit’s structure is key to proper information flow. The design challenge is to create structures that match the demands for information processing. Information needs to flow horizontally as well as vertically through an organization in order to link employees, work units, and organizational levels.
      • Vertical linkages can be used to coordinate activities between the various levels of a nonprofit and are primarily used for control. They ensure that lower levels of the nonprofit are aligned with goals set at higher levels and higher levels are informed of the activities of lower levels.
      • Horizontal linkages can be used to ensure coordination between units at the same level of a nonprofit, such as divisions or departments within a division
  • Organizations, including nonprofits, seek to be rational and to design their structures for efficiency and effectiveness. Organizational design, however, is a far from simple process with predictable outcomes
  • The strategic choices organizations make are influenced by bounded rationality and the politics of the decision-making process. Organizational choices are made by dominant coalitions
    • The power of a coalition comes from combining the power held by the various parties in the coalition. The power of a dominant coalition is greater than that of other coalitions in the organization.
  • National culture will also influence organizational structure. Organizations are located in national cultural contexts, and organizational cultures will be a reflection of the larger culture
  • Organizational culture is the set of key values, beliefs, understandings, and norms shared by organizational participant
  • The consequences of inattention to structural needs or inappropriate structural design can, however, be quite serious. A number of symptoms of structural deficiency have been identified:
    • Decision making is delayed or lacking in quality
    • The organization does not respond innovatively to a changing environment
    • Employee performance declines and goals are not being met
    • Too much conflict is evident
  • Nonprofit organizational structure is both a consequence and a cause. It is a consequence of the nonprofit’s external context as well as its work processes and strategy. In turn structure influences many of the internal features of the nonprofit
  • important to remember that strategy formulation process, as well as the others, are intimately interrelated with structure

National Council of Nonprofits Fast Facts about the Nonprofit Sector (2017)

  • Nonprofit organizations employed more than 10.6% of the workforce in 2013
  • nonprofit sector contributed $634 billion in wages and salaries, 8.9% of all wages and salaries paid in the United States in 2013.
  • nonprofit sector contributed an estimated $937.7 billion to the US economy in 2014, 5.4 percent of the country’s gross domestic product
  • In Dec 2016 there were 1,202,719 public charities and private foundations
  • Governments at all levels paid $130 billion to nonprofit organizations for services in 2014
  • About 62.6 million people, or 24.9% of Americans age 16 and older, volunteered through or for a nonprofit organization at least once between September 2014 and September 2015
  • estimated value of volunteer time for 2016 is $24.14 per hour, equaling an estimated $1.5 trillion.

Minnesota Council of Nonprofits Nonprofit Economy Report (2016)

  • From 2007 to 2016, the number of nonprofit employees grew in every single year and by 15 percent in total.
  • helpful to separate hospitals, colleges and universities to better understand how the nonprofit sector has fared
  • Between 2007 and 2016, nonprofit employment outside of hospitals and higher education grew an average of two percent per year
  • The overall number of nonprofit employers in Minnesota has fallen by 17 percent over the last ten years, to fewer than 3,300 employers in 2016
  • number of nonprofit locations has also been falling, 7 percent decline in the past five years
  • Over time, nonprofit average annual wages have been closing the gap with average annual wages for for-profit and government employees.
    • In 2003, average wages in nonprofit sector were 12 percent below for-profit
    • By 2016, with hospitals and higher education included, nonprofit wages for the first time passed for-profit wages
    • Without hospitals and higher education institutions, the wage gap between the nonprofit sector and the for-profit sector remains seven percent below for-profit and three percent below government sector
  • Average annual wages in nonprofit sector are highest in the health care industry, lowest for vocational rehabilitation services, child care providers and civic organizations
  • a different picture emerges when comparing median wages within the same activity area. Nonprofit median wages compare more favorably, and are often higher than for-profit wages, in areas such as arts and entertainment, health care, individual and family services, child care and community services

Salamon et al. What do Nonprofits Stand For? (2012)

  • Nonprofits face significant loss of market share in a number of traditional nonprofit fields
  • increasingly competitive environment
  • as discussed in The State of Nonprofit America by Lester Salamon, powerful impulses pull organizations simultaneously in different directions
    • voluntaristic past
    • greater Professionalism
    • expanded civic activism
    • deeper engagement with commercialism
  • Salmon identifies three alternative courses the nonprofit sector can take in response
  • consensus about what core values are poses an enormous challenge
  • Two key findings emerged from this survey:
    • despite their diversity, this broad group of U.S. nonprofits is in basic agreement about the attributes that comprise the nonprofit sector’s core values
    • key stakeholders in government, the media, and the general public do not seem to understand these core values
  • seven features commonly associated with the nonprofit sector
    • being productive
    • effective
    • enriching
    • empowering
    • responsive
    • reliable
    • caring
  • over 50 percent of respondents said that neither the general public nor government officials have a solid grasp of the nonprofit sector’s special qualities
  • over a third of respondents that both the media and organizational funders are also missing this information
  • problem cannot be blamed on these external barriers alone. Fully 62 percent of respondents acknowledged that the nonprofit sector does a poor job of articulating its special qualities
  • survey reveals significant difficulties in manifesting these attributes and conveying them to key target audiences.
    • the sector’s role in empowering and mobilizing citizens seems to be attracting somewhat less vigorous endorsement from sector organizations
    • Sector leaders seem less certain about the productiveness of their efforts
    • Serious doubts exist about the success with which the sector is articulating and communicating its core values,
    • this is a problem that needs to be addressed for the sector to survive

Willets What is a Non-Governmental Organization?

  • The term “non-governmental organization” (NGO) came into currency in 1945, because of the need for the UN to differentiate in its charter between participation rights
  • At the UN, virtually all types of private bodies can be recognized as NGOs
  • Structures of NGOs vary considerably
  • NGOs are components of social movements
  • There is no generally accepted definition of an NGO, but some fundamental features:
    • independent from the direct control of any government
    • not constituted as a political party
    • non-profit-making
    • not a criminal group, in particular non-violent
    • never constituted as a govenment bureaucracy, a party, a company, a criminal organization, or a guerilla group
  • For the purpose of this article, define NGO as an independent voluntary association of people acting together on a continuous basis, for some common purpose, other than achieving government office, making money or illegal activities
  • Distinction between interest groups and pressure groups or between lobbies and private voluntary organizations has no analytical value
  • The most difficult question about the interdependence of NGOs is whether they come under governmental influence
  • In more authoritarian societies, NGOs may find it very difficult to act independently
  • There is widespread prejudice that government funding leads to government control
  • NGOs may appear to be independent, when they design their own programs, but government influence can arise indirectly
  • variety of ways in which NGOs are structured
    • classic model is a membership organization, co-ordinated in a geographically-defined hierarchy
    • a minority of NGOs conform to the model of a global democratic hierarchy, in which any person may become a member
    • third variant is a religious organization
  • Once NGOs decide to influence public policy, they organize, in broad coalitions, specifically for this purpose
  • advent of email and the internet in the 1990s meant the cost s of running a network dropped substantially
  • number of networks increased dramatically and they no longer needed any formal structure
  • impact of technological change should not be exaggerated. Most effective modern networks still derive their impact from being coalitions of well-organized NGOs. Although communications costs are now minimal, it is still essential to have sufficient resources at the center
  • A variant of the global network is a global caucus
  • When we consider something as loose and transient as a caucus, it is perhaps inappropriate to call it an organization.
  • All societies in modern times have had large numbers of NGOs at least at the local level
  • Presence or absence of a democratic political culture is one of the major variables determining the number of NGOs.
  • Size of a country, its ethnic, religious and cultural diversity, the complexity of its economy and the quality of its communications infrastructure are also crucial importance
  • We may distinguish different activities, most common distinction is between operational and campaigning NGOs
  • Operational NGOs have to mobilize resources in order to sustain projects and programs, and need to possess an efficient headquarters bureaucracy
  • Campaigning NGOs will carry out much the same functions, but with a different balance between them
  • Only the defining activities - implementing projects or holding demonstrations - serve to differentiate them
  • Distinctions are not as sharp as the labels suggest
  • Various other types of NGOs can be regarded as promoting change by variants on these primary functions. Range across a spectrum from those promoting an academic, non-political image to those collating and disseminating information for campaign purposes
  • NGOs should not be contrasted with social movements, because NGOs are essential components of social movements
  • In the 1990s, four mutually-reinforcing processes of change led to emphasis on the concept of civil society:
    • explosion in global communication facilities
    • new forms of private association were recognized
    • fall of communist regimes
    • major UN conferences produced an unprecedented scale of public engagement
  • The simplest, most common meaning given to “civil society” is all public activity. In the broadest sense, it encompasses all social, economic, cultural and political relations
  • The United Nations used the term civil society to express its desire to strengthen its relations with both companies and NGOs
  • NGOs are very likely to be political in the broadest sense of affecting social discourse and can often have an indirect effect on politics in the narrow sense of shaping public policy.
  • The point of this debate about terminology is to emphasize that NGOs are not just well-meaning, uncontroversial, non-political groups
  • There is often confusion about the role of NGOs in democratic political processes
  • a wider view of democracy totally legitimizes the role of NGOs
  • policy-making could not be democratic without the active participation of NGOs

Week 3

Arnesberger et al. A History of the Tax-Exempt Sector: An SOI Perspective

  • origins of the tax-exempt sector in the United States predate the formation of the republic
  • By the end of the 19th century, private philanthropy, as typified by the modern private foundation, had joined voluntary associations as an important component of the public-serving charitable sector of the United States
  • This article explores the legislative history of tax exemption and presents historical data that highlight recent financial trends among tax-exempt organizations.
  • structure of tax exemption was developed through legislation enacted between 1894 and 1969
    • established the basic principles and requirements
    • identified business activities of tax-exempt organizations that were subject to taxation
    • defined and regulated private foundations
  • Early legislation, 1894-1936
    • Early tax-exemption regulations developed around three major principles
      • exemption from the Federal income tax
      • required to be free of private inurement
      • income tax deduction for contribution
  • Revenue Act of 1950
    • Before the 1950s, tax-exempt organizations could earn tax-free income from both mission-related activities and commercial business activities that were un-related to the purpose for which they were exempt
    • 1940s, concerns grew in Congress over the perception that tax-exempt organizations were permitted an unfair competitive advantage
    • “unrelated business income tax” (UBIT) as part of the Revenue Act of 1950.
    • Income was considered UBI if it was produced from an activity deemed a “trade or business” that was “regularly carried on” and was not “substantially related” to the organization’s exempt purpose(s)
  • Tax Reform Act of 1969
    • By the 1960s, there was a growing perception among lawmakers that private foundations were less accountable to the public than traditional charities.
    • Tax Reform Act of 1969 (TRA69) introduced sweeping reforms to the charitable sector
    • TRA69 established two annual requirements and a variety of “prohibited activities” specific to private foundations
      • annual excise tax on investment income
      • nonoperating foundations were required to distribute a minimum amount for charitable purposes each year
    • foundations that failed to meet the minimum charitable distribution requirement or engaged in certain prohibited activities were subject to taxes and other sanctions
    • TRA69 also increased the existing charitable deduction limits for individual donors and sharpened the definitions of the organizations to which contributions were deductible
    • TRA69 also expanded the tax on unrelated business income, extending the tax to all tax-exempt organizations and including churches for the first time
    • Since 1969, Congress has made a number of changes to the UBIT statutes. However, the rules on unrelated business taxation have remained largely intact.
  • Overview of the Statistics of Income exempt Organization Program
    • Internal Revenue Service provides, by Congressional mandate, statistics and microdata derived from information and tax returns filed with IRS
    • has conducted annual studies for every tax year since 1985
    • SOI currently collects information from stratified random samples of Forms 990, 990-PF, 990-T, and the population of Forms 4720.
    • SOI produces a variety of statistical tables and articles annually for all of the tax-exempt organization program
    • SOI samples approximately 10 percent of all Forms 990 and 990-PF, and about 20 percent of all Forms 990-T filed for a given tax year.
    • To ensure complete coverage of a single tax year, SOI draws samples of Form 990-series returns over a 2-year timeframe.
    • The following sections provide highlights of historical data for charitable and other tax-exempt organizations
  • Public Charity and Private Foundation Historical Data, 1985-2004
    • Tax Year 2004 aggregate book value of assets was $2.5 trillion, a real increase of 222 percent over Tax Year 1985
    • reported increase of 171 percent more revenue
    • Total charitable expenditures were 182 percent larger than Tax Year 1985 and experienced a real annual rate of growth of nearly 6 percent
    • Gross Domestic Product grew at a real annual rate of 3 percent over the period
    • Public Charities
      • $2.0 trillion in assets
      • nearly $1.2 trillion in revenue, 70 percent of which came from program services
      • The universe of public charities has changed dramatically over the past 2 decades.
      • 335,000 public charities in 1985 nearly tripled to 933,000 by 2004
      • Public charities filed 276,191 information returns in 2004, 159 percent more than 1985
    • Public Charity Growth
      • 20-year period between Tax Years 1985 and 2004 experienced significant and steady growth
      • with one notable exception, all of the major financial categories - total liabilities, total revenue, total expenses - increased in real terms in each of those years
        • exception was 1997-1998 when two very large teachers’ pension organizations lost their tax exemption
      • unlike other financial variables, net income did not increase steadily over this period
      • Total assets grew, in real terms, by 210 percent, from $665.0 billion in 1985 to $2.1 trillion in 2004
      • Total revenue and total expenses showed similar trends over the 20-period, with real increases of 174 percent and 176 percent, respectively
    • Private Foundation Growth
      • Tax Years 1985 through 2004 also represented a period of significant growth for the private foundation segment
      • Between Tax Years 1985 and 2004, real growth in foundation assets and giving outpaced the number of new foundations that entered the charitable sector
      • number of private foundations increased substantially, more than doubling between 1985 and 2004
      • 31,170 private foundations in Tax Year 1985 grew to was 76,897 for Tax Year 2004
      • fair market value of total foundation assets more than tripled over the 20-year period
    • Foundation Investments and Income
      • The real fair market value of foundations’ total investments more than tripled between Tax Years 1985 and 2004, growing from $137.8 billion in Tax Year 1985 to $481.2 billion in Tax Year 2004
      • median fair market value of investments held more than doubled, growing from $159,349 in Tax Year 1985 to $333,798 in Tax Year 2004
      • regulations enacted under TRA69 require foundations to pay an annual tax on net investment income, the realized income that private foundations receive from their investments
        • For most domestic foundations, the tax equals 2 percent of net investment income
        • Net investment income more than doubled, in real terms, between Tax Years 1985 and 2004, from $15.7 billion to $34.0 billion
        • associated tax grew from $263.1 million in Tax Year 1985 to $468.7 million in 2004
    • Private Foundations’ Excise Taxes 2003-2006
      • The “private foundation rules” outlined in TRA69 prohibit private foundations from engaging in “self-dealing”
      • Taxes on self-dealing can be imposed on both self-dealers and foundation managers
      • For Calendar Year 2006, private foundations reported $5.3 million in total tax liability on Form 4720, and tax on undistributed income accounted for nearly $3 million
      • A small number of filers were responsible for this increase.
        • Number of undistributed income filers fell slightly from 1,549 in 2003 to 1,529 in 2006
        • Number of self-dealing filers increased from 119 in 2003 to 159 in 2006
    • Unrelated Business Income taxation of exempt entities (UBIT)
      • $364.4 million reported in 2004, nearly three times more than reported for 1990
      • Periods of erratic swings in annual amounts of UBIT reported

The Global Journal - NGOs: A Long and Turbulent History (2013)

  • in contrast to conventional wisdom, international NGOs have a long and turbulent history, which has often placed these actors at the center of key transformations shaping international society over the last two centuries
  • Since the 13th century at least, humanitarian associations were active along Chinese rivers
  • Amongst the most influential NGOs of the late 18th and early 19th centuries were the many anti-slavery groups
  • peace movement has the distinction of being responsible for the earliest recorded organization to actually describe itself as international
  • Whereas most of the international associations of the 1830s were to prove short-lived, the British and Foreign Anti-Slavery Society established in 1839 has survived to the present day as the oldest international human rights organization
  • Few individuals were to play a more critical role in the development of international NGOs, however, than Swiss philanthropist Henri Dunant
  • 1855 creation of the World Alliance of Young Men’s Christian Associations
  • More famously, after witnessing the carnage of the Battle of Solferino in 1859, Dunant went on in 1863 to found the Red Cross movement
  • In the period from the 1870s to World War I, there was a massive expansion in the number and variety of international NGOs parallel to the second industrial revolution
  • The achievements of international NGOs in the decades preceding the war included successful campaigns for new treaties, international copyright laws, curtailing of sex trafficking, and dissemination of suffrage activism

Turner Why Has the Number of International Non-Governmental Organizations Exploded since 1960? (2010)

  • rapid expansion of international non-governmental organizations (INGOs) in the last half century is usually explained as the result of decolonization, globalization, and/or increase in the number of global issues
  • One additional hypothesis: expansion caused by the post-war baby boom and a crisis in the credential system
  • evidence supports the idea that demographic-structural mechanisms contributed to the surge as a by-product of intra-elite competition
  • Today over 3,000 INGOs have consultative status in the United Nation’s Economic and Social Council (ECOSOC)
  • rise of the INGO is a relatively recent phenomenon, literature does not adequately explain why
  • three-quarters of all estimated 27,472 INGOs active in 2005 were added since 1975
  • existing literature proposes two classes of explanations for the dramatic proliferation in number of INGOs
    • factors increasing demand, such as decolonization or increased number of global issues
    • technological changes that made INGOs easier to organize and operate
  • additional explanation: hypothesis that acceleration in INGO numbers was caused by the post-war baby boom and a crisis in the credential system.
  • expanding supply of credentialed professionals, rather than a greater demand for their services
  • Demand-Side Explanations
    • If INGO numbers expand in response to increased demand for their services, then changes in the prevailing global environment should be correlated with ups and downs in INGO numbers.
    • not so clear whether the qualitative and quantitative shift the West observed in terms of its INGOs from the 1970s simply due to absence of war and not some additional factors
    • Decolonization was another global trend
    • According to world-system theorists, increase in INGO activity could be due to the expansion of the Western capitalist system
    • Another demand side explanation - many more global issues for INGOs to resolve
    • The numbers of INGOs within ECOSOC increased not because there were more issues for them to address, but as a result of multiplication of the INGOs addressing the same theme
  • Enabling Role of Technology
    • If the spread of technology caused the dramatic rise in INGOs, expect that transnational companies (TNCs) would show a large rise in numbers
    • There were 5,300 TNCs in 1950 and 76,000 in 2005
    • The globalization of technology appears to help explain the dynamics of INGO and TNC growth, although there are limits to this explanation
  • Demographic-structural trends
    • The demographic-structural hypothesis stresses that an over-supply of elites (and elite aspirants) might lead to the creation of auxiliary vehicles for maintaining wealth and status – such as the INGOs
    • a rise in the numbers of individuals with advanced degrees, a baby boom, cultural trends, economic displacement of middle class workers due to globalization and technological change
    • The demographic surge in individuals competing for work and status is usually accompanied by what Collins termed a “credential crisis”
    • academic credential explosion preceded the expansion in INGOs
    • If this hypothesis is correct, then we expect that surges in the INGO numbers would be correlated with demographic oscillations in the USA and Western Europe.
  • The alternative explanation for the upward trend observes that cyclical demographic-structural processes have increased intra-elite competition over the last half-century
  • this paper has shown that demographic-structural processes, the availability of the building blocks for a rapid expansion (a surplus of credentialed professionals and intra-elite competition), should be considered a powerful driver of INGO activity.

Dollery and Wallis - Economic Theories of the Voluntary Sector: a survey of Government Failure and Market Failure Approaches (2002)

  • This paper attempts to survey the economic literature on demand-based theories of the voluntary sector
  • The paper ends with some tentative extensions and criticisms of the literature on demand-based theories of the voluntary sector
  • despite considerable uncertainties in measurement and significant national differences in size, the voluntary sector appears to be a substantial and growing element in the economic structures of most advanced economies
  • This survey of the economic literature focuses exclusively on demand-based theories of the voluntary sector, which derive from government failure and market failure.
  • Notwithstanding the difficulties involved in establishing a formal definition of the voluntary sector, numerous scholars have attempted to identify criteria
  • Seibel and Anheier (1990) suggest three major sets of criteria:
    • institutional characteristics of organisations
    • different rationales for social and economic action
    • the institutional functions served by the organisations
  • Kendall and Knapp four approaches:
    • legal approach
    • economic/financial approach
    • functional approach
    • structural/operational definition approach
  • latter approach has five criteria:
    • formal
    • self-governing
    • independent of government
    • not profit distributing (and primarily non-business)
    • voluntary
  • James and Rose-Ackermann contemporary conclusion - voluntary organizations combine three important attributes:
    • legally and structurally nonprofit
    • provide socially useful services
    • are philanthropies
  • Hall functionalist approach defines a nonprofit as a body of individuals who associate for any of three purposes:
    • to perform public tasks that have been delegated to them by the state
    • to perform public tasks for which there is a demand that neither the state nor for-profit organisations are willing to fulfil
    • to influence the direction of policy in the state, the for-profit sector, or other nonprofit organisations
  • Abzug observed that nonprofit organisations are hybrid institutions that intermesh resources and rationales from the three actual sectors of state, market, and community/family
  • Mashall argued for a discussion of the multiplicity of voluntary sectors, proposing a fourfold taxonomy comprising:
    • religious sector
    • philanthropic sector
    • community sector
    • informal sector
  • The complex and heterogeneous nature of the voluntary sector has greatly complicated the work of theoreticians
  • considerable progress has been made and several plausible theories now exist
  • In broad terms, we can distinguish between two genres of theories - ‘demand’ and ‘supply’ models
  • demand theories attempt to explain the genesis of voluntary organisations as a response to either market failure or government failure
  • supply models endeavour to explain voluntary organisations as the outcome of ‘social entrepreneurship’
  • The second main theoretical approach to the voluntary sector seeks to explain the behaviour of voluntary organisation
  • dichotomy between theories focussing on the role of the voluntary sector and theories concerned with the behaviour of organisations in this sector is somewhat artificial
  • for our present purposes we will follow the more sedate typology developed by Weisbrod (1987) which distinguishes between demand theories and supply theories, with the former category sub-divided into market failure and government failure arguments.
  • it is not clear why the private and voluntary sectors respond to government provision shortcomings and not vice versa
  • Theories of the voluntary sector, which have their origins in market failure, can be traced back to the literature on health economics
  • James and Rose-Ackerman (1986) identify three kinds of theories of voluntary organisation which fall within the market failure genre: namely, asymmetric information models, principal-agent or ‘customer control’ models and principal-agent or ‘private philanthropy’ models.
  • We conclude this survey of demand-based theories of the voluntary sector by offering some tentative extensions and criticisms of the literature in its present form.
  • Turning our attention to demand theories based on market failure, at least three observations can be made
    • Firstly, none of the theories of the voluntary sector based on market failure differentiate explicitly between the ‘narrow’ efficiency-only model of market failure and its more extended ‘efficiency and equity’ counterpart
    • Secondly, in practice it is generally exceedingly difficult to determine the marginal social costs and marginal social benefits of any particular economic activity and accordingly problematic to ascertain whether or not market failure is indeed present.
    • Finally, theories of the voluntary sector premised on market failure seem to fit well into a comparative institutions approach. This kind of approach would distinguish between shades or intensities of market failure in a specific industry

Hall - Historical Perspectives of Nonprofit Organizations in the United States (2016)

  • the concept of “nonprofit organizations” as a unified and coherent “sector” dates back only to the 1970s.
  • over 90 percent of nonprofit organizations currently in existence were created since 1950.
  • Nonprofits and NGOs are the most rapidly growing types of organizations in the world.
  • Because of the complexity and diversity of nonprofit organizations, the term nonprofit itself has a variety of meanings
  • Good arguments can be made for including other noncharitable nonprofits such as cemeteries; veterans’ and fraternal and sororal organizations
  • For all these reasons-diversity, complexity, and disagreement about how to define them-nonprofits pose particular difficulties for scholars trying to explain their history.
  • in trying to understand the history of nonprofits, we can identify the various ideas and institutions that make up today’s nonprofit domain and show how they have evolved over time
  • Assoications in early America
    • because the colonists understood the role of government and the rights and responsibilities of citizenship so differently, these vehicles and practices little resembled the forms they take in modern America.
    • To begin with, there was no clear demarcation between the public and the private realm
    • No private corporation as we understand the term today existed in America before the 1780s
    • Citizens often pitched in to maintain roads, to build meetinghouses, to fight with militias, and to assist with other public tasks
    • Service of this kind was a common way of paying taxes
    • Militia duty and service in public office were often required by law-and those who failed to “volunteer” to serve were often punished by fines
    • Despite obvious differences, these colonial institutions resembled modern non profits in important ways
      • Self-governing
      • had no owners or stockholders
      • exempt from taxation
      • could accept donations and bequests for charitable purposes
    • Out of a century of religious warfare and political strife in Europe came philosophies that asserted the “natural rights” of citizens, including freedom of speech, assembly, and worship, and questioned the authority of arbitrary and oppressive government
    • Closer ties to Europe brought not only new ideas but also new institutions.
    • Freemasonry spread rapidly through the colonies in the mid-1700s
  • Voluntary associations in the new republic, 1780-1860
    • Despite their importance during the Revolution. many Americans distrusted voluntary associations and feared the power of wealthy private institutions
    • Led by Virginia, many states actively discouraged private charity
    • Favoring public over private institutions, Virginia established the first state university in 1818
    • In contrast, the New England states actively encouraged private initiatives of all sorts.
    • As a result. the New England states became national centers for education, culture, and science
    • During the first half of the nineteenth century, voluntary associations played increasingly important roles in the nation’s public life
    • voluntary associations, organized on a national basis with state and local chapters, became the preferred vehicles for social movements promoting reform.
    • Beginning in the 1830s, European emigrants began to flock to our shores, bringing with them rich traditions of voluntary action
    • Catholic Church began creating a benevolent empire
    • there remained significant geographical variations in citizens’ willingness to use them
    • in states where private initiative was discouraged, care for the dependent and disabled was often carried out by public agencies.
    • public provision did not preclude private support
    • Along with newer forms of voluntary action, older traditions of public philanthropy and volunteerism continued to flourish.
  • Nation building, 1860-1890
    • Associations, private charities, and giving and volunteering all played prominent roles in the Civil War
    • At the war’s end, nation faced the immense task of “reconstructing” devastated states
    • government turned to voluntary organizations
    • Reconstruction also showed some of the darker possibilities of voluntary association as embittered southerners organized violent groups
    • Universities became hubs for a universe of new associational and philanthropic institutions and activities
    • Beginning in the 1870s, the American economy was shaken by a series of crises
    • In 1886, Andrew Carnegie began writing a series of articles on the labor crisis that argued that shorter hours, better working conditions, and employer recognition of workers’ right to organize were in the interests of both capital and labor.
    • Carnegie was harshly critical of traditional charity, which. he believed, only responded to suffering rather than addressing the causes of poverty
    • “The best means of benefiting the community,” Carnegie urged his fellow millionaires, “is to place within its reach the ladders upon which the aspiring can rise
    • In popularizing the idea that businessmen could use the same “genius for affairs” that had made them rich to reform society, Carnegie set an example
    • Before Carnegie, most philanthropy had been small-scale and conventional. After Carnegie, philanthropy, organized and focused through foundations, would assume an unprecedented scale and scope
    • consolidation of American political, economic, and social institutions between the Civil War and the First World War
    • was the outcome of associational activity at all levels in society
    • In the second half of the nineteenth century, America became “a nation of joiners”
    • Widespread participation in these broad-based associations was probably the most powerful and effective school of democracy
  • New charitable vehicles, 1890-1930
    • The kind of large-scale targeted giving Carnegie recommended faced a number of obstacles. The most important of them were legal barriers to private charity
    • Another obstacle was the lack of organizational vehicles for large-scale philanthropy.
    • The solution was the creation of corporate entities, staffed by experts, to scientifically distribute this surplus wealth.
    • problem was that American law had traditionally required that charitable trusts be specific in designating classes of beneficiaries.
    • coordinated effort to reform charity laws in the leading industrial states
    • Concerns about the power of foundations and the continuing concentration of wealth continued to grow
    • Grantmaking foundations were not the only new charitable vehicles created in the decades before the First World War.
    • In 1910, Cleveland’s chamber of commerce convened a committee to consider problems. Appeals for charity were multiplying, but donors had no way of knowing whether they came from reputable organizations. The number of charitable organizations seek aid was increasing, producing duplicated efforts and wasted resources.
    • donor base was shrinking, with an increasing proportion of donations coming from a smaller number of donors.
    • new kind of charity-the Community Chest-idea spread rapidly. Ancestor of today’s United Way.
    • Cleveland also fostered cooperation among the city’s social agencies through its Charities Federation, establishing lines of communication between agencies
    • The Community Chest and the Charities Federation addressed problems of current giving and spending. In 1925, Cleveland banker Frederick Goff proposed the idea of the community foundation.
    • Like the Community Chest, the community foundation was intended to democratize charitable giving while at the same time giving civic leaders control
    • None of these innovations would have been possible without the enthusiastic backing of business leaders
    • Banner of “welfare capitalism”
    • charitable innovations were only a small part of a far broader associational revolution in the first three decades of the twentieth century.
    • fraternal and sororal organizations peaked in numbers of organizations and members in the rnid-1920s
    • Hoover believed that a nation based on public interest volunteerism would not need the radical remedies of socialism and communism to address problems of inequality and injustice
    • Accompanying this associational revolution was a related transformation of fund raising, becoming professionalized
    • Reform-oriented social movements and other kinds of organized advocacy continued to grow during this period
  • Big government, the nonprofit sector, and the transformation of public life, 1930-1980
    • Between 1930 and 1980, American public life was transformed by huge growth in the scope and scale of government, which in turn stimulated commensurate expansion of private institutions
    • incremental process - 1930s, no one envisioned that the emergency powers assumed by the federal government to deal with the Great Depression would become permanent
    • President Hoover attempts to deal with Depression through a system of voluntary associations proved ineffective. Roosevelt entered office with similarly conservative views, the National Recovery Administration (NRA)-with its motto “We do our part”-was similarly based on voluntaristic principles
    • When the NRA was declared unconstitutional in 1935, Roosevelt turned to more activist remedies
    • tax reforms had little impact on average Americans, few of whom earned enough money to owe income tax. But they proved to be a powerful incentive for the wealthy to avoid taxation through large-scale charitable giving.
    • New Deal established the paradigm for the later growth of government.
    • During the Second World War and afterward, federal government policies played a key role in stimulating growth in the number and importance of nonprofit organizations. Most important of these involved taxation.
    • Policies had dramatic effects.
      • By 1940, there were only 12,500 charitable tax-exempt organizations registered by the IRS, along with 179,742 religious congregations and 60,000 noncharitable nonprofits
      • By 1980, there were 320,000 charitable tax-exempt nonprofits, 336,000 religious bodies, and 526,000 noncharitable nonprofits
      • Today there are more than 600,000 charitables, 400,000 religious congregations, and 600,000 noncharitable
    • By the 1970s. between 12 and 55 percent of total nonprofit revenues were direct payments from the federal government
    • Although the scope and scale of its responsibilities vastly increased in the second half of the twentieth century, the size of the federal government did not
    • number of federal civilian employees remained unchanged between 1950 and 2000
    • state and local employees doubled and tripled, respectively
    • Doing its work through states and localities and through policies that encouraged flows of resources to private actors, the American welfare state was a remarkable example of what Lester Salamon has called “third-party government.”
    • Of the proliferating organizations in the nonprofit sector, none attracted more attention in the years following the war than foundations
    • founders of the huge fortunes built in the boom years of the twentieth century were increasingly likely to use foundations as mechanisms for avoiding taxation
    • helped fuel an enormous increase in the number and importance of foundations. From a mere 203 in 1929, the number of foundations with assets exceeding $1 million grew to 2,058 by 1959. the vast majority of them established in the 1950s
    • Between 1952 and 1969, congressional committees investigating foundations and “other tax-exempt entities” cast an increasingly skeptical eye on their activities
    • Despite these periodic outbursts of regulatory enthusiasm, funds continued to fuel the growth and transformation of nonprofit enterprises.
    • Industries like the performing arts and health care, which had been almost entirely for-profit in ownership before 1950, became dominated by nonprofit firms. On the other hand, industries like elder care, which had been largely nonprofit. became for-profit in ownership as government social and medical insurance programs made nursing homes an increasingly profitable enterprise.
    • increasing centrality of government also encouraged the growth of special-interest advocacy organizations
    • Increasing government activism and foundation funding also stimulated grassroots social movement activit
    • 1950s and 1960s gave rise to a host of movements
    • On the whole, these social change organizations differed in significant ways from their nineteenth-century predecessors.
    • Earlier organizations had been broadly based membership organizations. Late-twentieth-century social change organizations were increasingly likely to be based in the national capital and to be run by professional managers, policy experts, communications specialists, and lobbyists
    • Changing political culture, combined with a more educated, affluent, and mobile citizenry, helped kill off traditional kinds of voluntary association
    • Civic engagement declined sharply after the 1960s
    • Taking the place of traditional voluntary and membership-based engagement was a growing domain of narrowly focused, professionally managed nonprofit organizations that obtained their funding from a mix of earned revenues, government and foundation grants and contracts, and corporate contributions
    • These organizations were more likely to provide specific kinds of services (child day care, elder care, education, health services) and to engage in advocacy, lobbying, and public education than to promote generalized sociability and civic engagement.
    • It appeared that the “nation of joiners” celebrated by Schlesinger in the 1940s were left without opportunities for joining.
    • major exception to this trend was religion
    • membership in religious bodies and attendance at worship services increased steadily through the second half of the twentieth century
    • impressive increases in numbers of congregations and new religious organizations, often of an evangelical bent
    • ecumenical and parachurch organizations like Habitat for Humanity, which drew on members’ religious commitment but were nonsectarian, grew steadily
    • New religious organizations were more likely to be politically active
    • Even more important, the new religious organizations were likely to be broadly based in ways that cross lines of class, occupation, education, and ethnicity, making them especially potent in imparting civic values and skills
    • As religious organizations have assumed a new visibility, also gained recognition as centrally important parts of the nonprofit sector
    • not only because they constitute a large part of the nonprofit universe but also because they serve as paths of recruitment into secular activities
  • The conservative revolution and the nonprofit sector, 1980-2000
    • For much of the twentieth century, foundations and secular nonprofit organizations had been generally associated with liberal political causes
    • began to change after the defeat of Barry Goldwater in 1964,
    • To achieve their ends, conservatives would have to overcome their aversion to nonprofits in order to create their own “establishment” of think tanks, advocacy organizations, and foundations
    • number of factors fueled this
      • emergence of a new cadre of moneyed conservatives whose wealth was based on defense production and extractive industries
      • political mobilization of conservative Christians, particularly in the South
    • The convergence of big new money and a broad-based religious movement with a social agenda created new opportunities for conservative Republicans to begin organizing around “wedge issues”
    • mobilization of conservative voters, in turn, created the conditions for articulating a positive set of conservative policies that could credibly challenge liberal orthodoxies.
    • Reagan assumed office with strong opinions on the role of nonprofit organizations in public life.
    • He believed that big government had stifled private initiative, and intended to undo the damage through a combination of higher levels of corporate giving and cutting government spending
    • By the time he took office, nearly a third of annual revenues of private research universities came from government contracts and grants
    • In nonprofit industries like human services, direct federal support ranged as high as 90 percent
    • Urban Institute report pointed out in 1982, the federal government had become the largest single source of revenue for secular nonprofit organizations
    • For this reason, massive cuts in government social spending would decimate the nonprofit sector
    • Although it remains to be seen whether privatized social services have fulfilled any of these promises, it is clear that among the most important effects of these policies was to increase the need for professionally trained nonprofit managers and entrepreneurs
    • Although the conservative revolution in many ways favored nonprofit enterprises, especially with the huge expansion of contracted programs, it also intensified competition for contracts by allowing for-profit businesses to be eligible for grants and contracts.
    • In such an environment, skilled management. entrepreneurial attitudes, and political acumen became crucial to the survival of nonprofits.
    • By putting nonprofits in competition with for-profits offering similar services and by demanding higher levels of accountability for decreasing government funding, conservative policies helped erode many of the boundaries between nonprofit and for-profit enterprises
    • Whether nonprofits’ commitments to missions of public service could survive such relentless attention to the bottom line remained in doubt
  • The nonprofit sector and the global challenge
    • Nonstate actors are assuming extraordinary importance as the world’s economy becomes more globalized
    • Many NGOs are based in the United States or Europe but conduct their operations elsewhere. Others are genuinely transnational
    • Transnational entities are difficult to police and control
    • Of equal importance is the extent to which transnational NGOs are linked to indigenous organizations outside of advanced nations
    • Advances in information technology have vastly increased the influence of transnational NGOs
    • The nature of globalization and the role of transnational nonstate actors is far from clear.
      • To some observers, they represent a kind of neocolonialism
      • To others, they represent a new empowering force for democracy and social and economic justice
  • In significant ways. today’s centrally important but poorly demarcated roles and responsibilities of nonprofits and NGOs are more like those of three centuries ago
  • History shows, if nothing else, that ownerless collectivities of the nonprofit type are remarkably flexible instruments that can be put to a multitude of use

Clemens - The constitution of Citizens: Political Theories of the Nonprofit Sector (2010)

  • Whether or not they are operated for profit, corporations are political creations, endowed with rights, but not strictly accountable to the sovereigns or legislatures
  • organizations are political constructions but are not part of the formal political system
  • analyses of voluntary associations and nonprofit organizations frequently develop at the margins of political theory
  • dominant political theory of nonprofit organizations: a market model of democracy
  • Public services or goods that gain support from a majority of constituents will be provided by public agencies; those that are more controversial or preferred by only a minority will be provided by nonprofits
  • approach has been developed to explain patterns of public-private partnership; its core logic is consistent with both economic models of nonprofit organization and demographic or “entrepreneurial” models
  • A range of political theories and theories of state development make important claims about the role of nonprofit organizations
  • political theories of nonprofit organizations are increasingly entwined with broad debates over civil society, social capital, and the rights of association
  • arguments concur in viewing the role of associations and formal politics as complementing one another in a democratic polity
  • Not all participatory organizations sustain values consistent with democracy, there are diverse and conflicting claims about the implications of nonprofit organizations and voluntary associations for the quality of democracy
  • Whereas Douglas’s initial formulation drew on market models of democracy ask why some services are and are not provided by government, these broader theoretical debates ask about the consequences for democracy
  • divergent arguments about the place of nonprofits and voluntary associations in democratic polities are increasingly relevant as organizational models are exported to developing nations
  • Basic questions:
    • Do voluntary associations and nonprofit organizations generate greater democratic participation?
    • Are these organizational forms effective and legitimate vehicles for political engagement?
    • Does reliance on or collaboration with nonprofits improve the efficiency of publicly funded services or generate innovative programs and new solutions?
    • In sum, are voluntary associations and nonprofit organizations a necessary or even desirable component of democratic polities?
  • Much of the interest of political theory in nonprofit organization stems from the presumption that associations are embodiments of the constitutional forms, organizational skills, and political virtues required by a liberal democracy
  • For such arguments, associations are foundational to democracy insofar as they are sites for the cultivation of democratic values and skills – “schools of citizenship”
  • A burgeoning literature amply documents the “golden age of associationalism” during the nineteenth century,
  • The large voluntary associations that dominated the organizational landscape from the nineteenth through the mid-twentieth centuries have increasingly given way to professionally managed advocacy groups that tend to privilege the already-educated and already-politicized, rather than serving as schools of citizenship
  • Comparisons of participation across religious organizations underscore the importance of organizational structure—and denominational commitments—for political socialization
  • In important respects, this literature extends a longstanding concern in comparative politics for the cultural foundations of democracy
  • The effects attributed to participatory associations cannot be assumed for nonprofit organizations in general
  • For nonprofit scholars, the key question is whether the “associations” featured in these political analyses are equivalent—and in what way—to nonprofit organization
  • as nonprofit organizations become increasingly professionalized, we should not expect them to generate the same levels and socio-economic distribution of democratic political socialization
  • As a general rule, the larger and richer and more formalized the organization, the fewer the opportunities for participatory governance and democratic socialization of members (to the extent that they exist at all)
  • Thus the opportunities for participation and leadership may be greatest in those organizations with the fewest resources
  • The findings from this literature resonate with the evidence on organizational hierarchy and professionalism in studies of nonprofit organizations in the industrial democracies
  • large and professionalized nonprofits may advance the interests of the disadvantaged or of the public good through their advocacy work (Boris and Krehely 2003), but advocacy for others raises a host of issues about legitimate representation
  • critics of the optimistic accounts of political socialization go still further, contending that even participatory organizations may fail to generate the skills necessary for democratic participation or that they may cultivate values that are actually hostile to liberal democracy
  • Eliasoph demonstrates how social, even civic, engagement may actually cultivate political apathy
  • Kaufman (2002) argues that the rich array of Masonic, Pythian, and other lodges cultivated identities grounded in racial, ethnic, and gender separateness.
  • voluntary and nonprofit organizations may nurture intolerance and damaging exclusion
  • associations are understood to constitute political actors, but not necessarily democratic citizens
  • Associations that practice internal self-governance may also be problematic insofar as they restrict some citizens from membership
  • For liberal theorists, the “dark side” of participation poses a particular problem, demanding a balancing of individual liberties to join associations with concerns for the preservation of core liberal commitments.
  • balance may be established around the requirement for reciprocity, “the recognition of other citizens, even those with whom one has deep disagreement, as moral agents deserving civility”
  • voluntary associations and nonprofit organizations matter not only as potential sites of political socialization for individuals but also as vehicles for social regulation
  • The causal chain from participation to political outcomes is not complete with individual socialization and acquisition of civic skills (or even uncivil values)
  • any assessment of political consequences of voluntary associations and nonprofit organizations must directly address the forms of engagement between these private entities and formal political institutions
  • The long history of restrictions on association reminds us that voluntary organizations may be potent forces of change
  • In addressing these issues, research has become somewhat bifurcated between charities, foundations, and philanthropies that are generally recognized as core concerns for nonprofit research and more politically engaged voluntary associations such as labor unions
  • in general, the political or advocacy activities of nonprofit organizations are treated with care-insofar as “politics” has been held to invalidate nonprofit standing in the context of US politics
  • In a very fundamental sense, the lineage of the nonprofit organization may be traced to efforts by elites to craft a means to extend their wishes
  • Elizabethan Statute of 1601, the law of charities enabled durable and/or collective forms of activity beyond the bounds of the state, so long as that activity was dedicated to purposes approved by the state
  • in American history, through the nineteenth century this organizational form represented a controversial but effective vehicle for nationalizing projects of northeastern elites.
  • Through their tax-exempt status and receipt of public funds, both advocacy and service organizations remain vulnerable to political efforts
  • Research has repeatedly demonstrated that nonprofits spend fewer funds on political activities than are allowed by law
  • decoupling of nonprofit associations and political activity has become still more problematic as nonprofits become ever more active in the delivery of publicly funded services
  • This conceptualization of public and nonprofit provision as mutually exclusive alternatives—discrete choices—has been challenged by a growing body of empirical research
  • As an analytic lens, concern for collaboration highlights the division of labor between governments and nonprofit organizations while obscuring issues central to analyses of political socialization and group contestation discussed above.
  • this approach to the division of labor between government agencies and nonprofit organizations obscures the political process by which partnerships are constituted and politics are remade
  • Recent scholarship, however, has tended to develop more dynamic or processual accounts of the turn of welfare states toward greater reliance on or collaboration with nonprofit organizations.
  • During the War on Poverty, for example, the U.S. federal government adopted a “contracting regime”
  • resulting growth of government funding of nonprofit activities led, in turn, to a perception of those nonprofits as interest groups
  • the expansion of government-nonprofit partnerships has led to the increasing politicization of nonprofits as providers of public services even as they were increasingly wary of engaging as political actors
  • studies of welfare reform suggest how the use of nonprofit organizations to provide services provides cover for downsizing programs and shifts risk from public authorities
  • “Government accountability to citizens is undermined when responsibility for admission, treatment, and outcomes seems to be in the hands of private organizations”
  • One response is to heighten formal accountability requirements
  • In an era when the case for delegation and decentralization is routinely joined to a stylized critique of public bureaucracies as necessarily ineffective
  • evidence of the efficacy of nonprofit organizations—and increasingly “faith-based” programs—is contrasted to the purported failure of public programs
  • such contrasts feed the stream of anti-statism in American political culture
  • The questions raised by contracting out are rather different when viewed from the perspective of constituting citizens
  • To the extent that publicly funded services are delivered by nongovernmental organizations, it becomes more difficult for citizens to answer the question of “what are my tax dollars doing?” and easier to misrecognize public services as private benefits
  • possibility that as publicly funded services are increasingly mistaken for—or at least experienced as—private and charitable, this will undermine political support for continued public spending on these services.
  • second concern invokes problems of patronage politics: will increased government-nonprofit partnerships facilitate the cooptation of these “schools of citizenship” by elected officials?
  • answers to these explicitly political questions are not yet clear
  • If voluntary associations and nonprofit organizations are valued, in part, because of their capacity to constitute citizens, then the increasing ties of nonprofits to the states signal an important shift
  • From the perspective of political theory, nonprofits matter not simply as providers of services but also as potential sites for the constitution of citizens and vehicles for the expression of articulated interests and values.
  • In the place of a “political theory of nonprofits,” the current moment requires close attention to the implication of nonprofit organizations in diverse projects of state-building and political mobilization.
Written on February 4, 2018