As a 26 year veteran, I don’t have much experience working in the “for profit” business world. I have plenty of consumer experience, but the pressures of bottom line dollars, stock holders influence, competitive market edge, etc., didn’t apply much in the military. Although, we did compete for government budget dollars and trust from our nations citizens, our mission is to “defend the United States against all enemies, foreign and domestic.” We also fought to keep bases open, recruit top applicants to our service, and retain them after they received quality leadership training and specialty skills that made their marketability to future employers very appealing. So in a sense, even the military, which is not considered a “non-profit organizations”, but isn’t a “for profit” either, are fighting for your attention…. your money, and dedication.
Through the years I have accumulated volunteer hours through many non-profit organizations. Some were true organized 501(c)(3), such as the Sandwich Fairgrounds, others were just social groups raising funds to do good within the community. Like the River City Cycling Club in Elizabeth City, NC, who raised funds through organized bike rides, and then passed the donations to a specific family within the community that were in need. Obviously they were doing good work of a social cause, but they were not a non-profit by definition.
So let’s start there… what exactly is a non-profit? According to Wikipedia, “A non-profit organization (NPO), also known as a non-business entity or non-profit institution, is dedicated to furthering a particular social cause or advocating for a shared point of view.”
“In economic terms, it is an organization that uses its surplus of the revenues to further achieve its ultimate objective, rather than distributing its income to the organization’s shareholders, leaders, or members.”
“Non-profits are tax exempt or charitable, meaning they do not pay income tax on the money that they receive for their organization. They can operate in religious, scientific, research, or educational settings.”
“The key aspects of non-profits is accountability, trustworthiness, honesty, and openness to every person who has invested time, money, and faith into the organization. Non-profit organizations are accountable to the donors, funders, volunteers, program recipients, and the public community. Public confidence is a factor in the amount of money that a non-profit organization is able to raise. The more non-profits focus on their mission, the more public confidence they will have, and as a result, more money for the organization. The activities a non-profit is partaking in can help build the public’s confidence in non-profits, as well as how ethical the standards and practices are.”
I deliberately included such a long definition because non-profits have become big business in America and throughout the world. In fact, according to Drucker, in Managing the Non Profit Organization, “with every second American adult serving as a volunteer in the non-profit sector and spending at least three hours a week in non-profit work, the non-profits are America’s largest employer” Drucker states that, “We now realize that it is central to the quality of life in America, central to citizenship, and indeed carries the values of American society and of the American tradition.”
Volunteerism can be found before biblical times. According to Ott, The Nature of the Non Profit Sector, it is a foundation in which giving and helping others is a part of community. That “non-profit organization management is derived quite centrally from the historical ethos of charity and philanthropy.” “In these early societies, the welfare and preservation of individuals and families required the community to share in the tasks of food gathering, hunting, and providing shelter.” “The Western tradition of voluntarism has its roots in two diverse ideological streams: the Greco Roman heritage of emphasis on community, citizenry and social responsibility … and the Judeo-Christian belief that relationships with higher power affect our choices and thus our decision-making.”
So from the beginning of society, until today, non-profits exceed over 1.5 MILLION registered organizations. Here are some quick facts, taken from the National Center for Charitable Statistics website:
- 1,571,056 tax-exempt organizations, including:
- 1,097,689 public charities
- 105,030 private foundations
- 368,337 other types of non-profit organizations, including chambers of commerce, fraternal organizations and civic leagues.
(Source: NCCS Business Master File 4/2016)
- In 2010, non-profits accounted for 9.2% of all wages and salaries paid in the United States.
(Source: The Non-profit Almanac, 2012)
- Non-profit Share of GDP was 5.3% in 2014. (Source: US Bureau of Economic Analysis)
- There are an estimated 312,373 congregations in the United States in May 2016.
(Source: American Church Lists)
Public Charity Finances
- In 2013, public charities reported over $1.74 trillion in total revenues and $1.63 trillion in total expenses. Of the revenue:
- 21% came from contributions, gifts and government grants.
- 72% came from program service revenues, which include government fees and contracts.
- 7% came from “other” sources including dues, rental income, special event income, and gains or losses from goods sold.
(Source: NCCS Core Files 2013)
- Public charities reported over $3 trillion in total assets in 2013.
(Source: NCCS Core Files 2013)
Volunteering and Charitable Giving
Charitable Giving in America: Some Facts and Figures
- Approximately 25.3% of Americans over the age of 16 volunteered through or for an organization between September 2010 and September 2014. This proportion has remained relatively constant since 2003 after a slight increase from 27.4% to 28.8% in 2003.
(Source: Current Population Survey, September 2014)
- Charitable contributions by individuals, foundations, bequests, and corporations reached $358.38 billion in 2014, an increase of 7.1% from the revised 2013 estimates and after adjusting for inflation. Of these charitable contributions:
- Religious organizations received the largest share, with 32% of total estimated contributions.
- Educational institutions received the second largest percentage, with 15% of total estimated contributions.
- Human service organizations accounted for 12% of total estimated contributions in 2014, the third largest share.
(Source: Giving USA 2015)
- Individuals gave $258.51 billion in 2014, an increase of 5.7 percent from 2013.
(Source: Giving USA 2015)
I sat down with Catharine Crooker, owner of Crooker Consulting to ask her some questions about non-profits. She explains that the basis of non-profits being tax exempt is a benefit they receive for their contribution to society. That the organization of a non-profit is ran through volunteer boards, verses paid positions, and that the Board of Directors holds the legal responsibility to oversee the mission and strategy of a non-profit organization. The board then hires people to make the daily operations and mission achievable. This is much different from private corporations, where the owner is often the President and has a vested interest in profits, and mission. This difference in structure often makes a non-profit operate at a slower pace than that of a profit business, but the oversight is geared to stay true to the mission and objectives of the non-profit.
So I asked Cathy, is there a good operating expense in which non-profits should operate within to make it a “good non-profit”? She replied, that’s a good question, and one which is causing a good amount of debate right now. That being a non-profit still requires a lot of overhead costs. For example, a non-profit hospital still requires a Human Resources Department, doctors, lawyers, facility managers, and people to continue to fundraise on behalf of the non-profit. These expenses can add up quickly, but in general a good guideline would be around the 20% area. However, Cathy explained, This can become a very arbitrary number. For instance, in a profit business, you may have growth years, where you’re re-investing in capital, technology advances, or labor. Often share holders do not take fear, and recognize this as an investment period which will yield results later down the road. In the non-profit sector, this is a delicate balance, and is often scrutinized with much pressure to keep operating expenses low. Which is often a disservice to the growth and improvement of a non-profit organization.
I asked Cathy about the controversies of non-profits, and while she thinks that the mismanagement is rare, she thinks that problems arise when the Board of Directors manage a non-profit like a profit business. Remember, one person can not approve mission and strategy changes within a non-profit. Oversight and group decisions are critical to the success of a healthy non-profit.
This leads me to my next question for Cathy, “do you think a non-profit can be too big?” She said yes, that she has seen this happen, especially within the health care fields, such as a non-profit hospital. She explained that sometimes, when a non-profit becomes so big, with a large budget, and a competitive market, that failing to keep true to a non-profit mission can spiral into the for profit business mindset. The charitable work needs to take priority, and oversight is the most important part of keeping non-profits on track and within the guidelines and expectations of being tax exempt.
We then talked about the salaries of the Executives. Cathy explained that years ago, there was kind of an ethos that working for a non-profit was out of the goodness of your heart. That many people did volunteer work to keep engaged in public activities, use skills they had developed in college, and that it was a supplement to household income and not a primary household salary. That has changed over the years. Now, it is important to hire qualified executives with experience to run a non-profit. After all, with 1.5 MILLION non-profits, it’s a competitive market for your donations. So hiring these qualified, and experienced professionals comes at a cost. Although, the other side of the coin is the scrutiny from donors and the public of paying executives high salaries verses contributing dollars to the charity work in which they serve, and keeping overhead (operating) expenses low. It’s a complicated business, oh, but wait, it’s NOT a business.
And to add complications to the Non-Profit Organization, Cathy explains that a huge problem that plagues them is employee “turn-over”. Fundraising professionals only stay with a non-profit for an average of 18 months. Without proper pay and incentives that for profit businesses offer (like stock options, 401k’s, expense accounts, etc.), the typical employee grows tired of operating on a shoe string budget and doing multiple tasking. The successful non-profits are realizing the importance of proper wages for talented and dedicated people.
I wrapped up my conversation with Cathy talking about her joy of being involved in the non-profit world. That this passion of helping people, the ability to truly have an impact and stay true to her own beliefs and values has been her life’s work. It is her ethos, and one she stresses to the donors she helps connect to non-profit organizations to make a difference. Thank you Cathy for taking the time to sit down with me, I really enjoyed our conversation. You inspire me!
Distrust in the government, such as Watergate, the energy crisis, the banking, loan and mortgage corruption, and significant recessions has led to a lack of confidence and trust in both business, and government. (aka Wall Street, political contributions exceeding millions of dollars, lobbyist influence, etc.). Who has people’s interest in mind vs. profits? Silk and Vogel discuss in Ethics and profits, the crisis of confidence in American business, that “Americans still believe in the free enterprise system. They have no quarrel with profit-making. But they do have a quarrel with unethical and questionable business practices conducted at the public expense.”
Where I get disturbed most is with politics. That non-profits are used to funnel money during elections and influence voters with advertisement ads pushing their agendas. The Washington Post wrote Jan 5, 2014, an article by Matea Gold, Koch-backed political network, built to shield donors, raised $400 million in 2012 elections, “Much of the money that flowed through the network in the last election cycle originated with two non-profit groups that served as de facto banks, feeding money to groups downstream, according to an analysis by Center for Responsive Politics researcher Robert Maguire, who investigates politically active non-profits.”
Getting money out of politics is an agenda item that even politicians support. In The Atlantic, March 16, 2016, article, Russell Berman writes:
“The problem of money in politics is so universally recognized that even Donald Trump, the ultimate capitalist, and Bernie Sanders, a self-described Democratic socialist, agree on it. Sanders has spent his career railing against the corrupting influence of wealthy and corporate donors, while Trump has unmasked the game by admitting that he gave money to politicians to curry favor with them. The success of both of these politicians suggests the degree to which Americans are fed up with the influence of money on politics. If we don’t reduce that influence, our system risks losing its legitimacy.”
Berman continues his story with a further point, “One of the big fears among good-government groups after Citizens United was that wealthy donors, corporations, and unions would not only be able to spend unlimited sums of money, but that they would try to do so secretly because of the loose disclosure requirements that allow donors to funnel money to super PACs through committees that don’t have to disclose the source of their contributions.”
My second disgust is when people misuse the trust that citizens have placed in Veterans, and misuse the premise of helping Veterans to further their own personal cause, whether it’s politically, or through the mismanagement of non-profits such as the Wounded Warrior Project. Following the Wounded Warrior Project (WWP) scandal of 2016, the WWP fired their top executives and focused on transparency and recovering from losing the confidence of many. Now, non-profit review organizations such as Charity Navigator has given them three of four stars in their rating process and the Better Business Bureau Wise Giving Alliance has cleared them of mismanagement.
But, has the non-profit image been tainted in the shadows of stories like these? Stories like political donor contributions exceeding millions, or scandals of non-profits such as the Susan G. Komen Foundation, Red Cross, and Goodwill ; where CEO’s are paid massive salaries, and employees are not; or how much exactly is going to hurricane Harvey relief, or Breast Cancer research? Yes, I think non-profits are having image problems. Yes, I think politics are dirty, and so is the for profit businesses at times (remember the housing crisis; how much of that is linked to for profit businesses putting their profits ahead of people). In summary, my thoughts are that money does sometimes equal corruption, but money still does good. I still give my money to charity, to various non-profit organizations, but I’m careful. I do my research. Yes, I also give my time, and continue to volunteer through my church, and my community; After all, it’s the American way.
So what have I concluded from all of this? Are Non-Profits better than For-Profit businesses? It seems both have problems: Management issues, corruption, etc. But the heart of what a non-profit does is what keeps us human, inspired, and very generous. With 1.5 MILLION Non-Profit Organizations generating over 350 BILLION in contributions, it’s a big business. Non-profits impact not only our Economics, but us in every dimension of Sociology, Business, Religion, and Government, making it very relevant to my Interdisciplinary Studies.
For ways to help you choose a non-profit or check the record of a non-profit, visit sites like Charity Navigator, Guide Star, Charity Watch, Give Well, and Great Non-Profits. All of the above offer reviews and ratings of many non profits. There’s even a Ted Talk on how to pick a non-profit, and countless internet sites willing to give you advice. In today’s times, non-profits are a crucial part of natural disaster recovery, research into fighting disease, and providing a better way for under privileged. So do give…. as the old saying goes, give as much as you can, as often as you can.
For a list of sources please use the hot links provided within, or view a summarized list here: Google Drive link.