Content Brief: Nonprofit Management Independent Study
To: Richard Braunstein
From: Deborah Gangloff
October 3, 2007
Summary:
Taken together these readings give a good overview of the nonprofit landscape. The
history of nonprofits helps us to understand where we are today and how we got there.
Federal assistance for the welfare of its citizenry has not always been a given, and the
true age of comprehensive government responsibility was less than 50 years long. Further
readings five us an outline of societal needs and the need for nonprofits to provide
solutions that the government or market cannot alone provide, a case history on the tax
law as it refers to nonprofits and the good news that nonprofits are legally allowed to
lobby. Government-nonprofit relationships are a huge, perhaps a majority of the current
nonprofit sector, and much of this reading concerns different aspects of that landscape:
the inherent challenges for nonprofits that are funded by government contracts (cash
flow, the potential to alter methods and policies to better mesh with government
practices, the potential conflict in values and loss of ability for political advocacy, etc).
The Brinkerhoff article in particular helps us to understand the pervasive global nature of
government-nonprofit relationship, and their importance in efficient service delivery to
meet societal needs.
One theme that stands out is the tension and need for balance of power between the
public/private nature of charitable giving that emerging simultaneously with charitable
giving. When are dollars truly used for the public good vs. the danger of their use for
self-interest or empowerment of one group over another. It is interesting in the
Brinkerhoff article to note the difference between the way “public” is determined in the
US vs. EU.
I‟d like to know more about Robert Herman‟s thesis of the future of nonprofits and
whether they will assume an “industry” or “community” model. I am especially
interested in the fleshing out of his suggestion that foundations might be the catalyst to
organize nonprofits. He must mean foundations like Ford or Kellogg. The Ford
Foundation has recently (August 2007) launched an initiative to support artists, and this
may be the kind of thing he had in mind. It will be interesting to watch this unfold.
Already some smaller artist support organizations are experiencing the threat of funding
losses due to a diversion of dollars into the larger fund.
Another theme is the pervasiveness and importance of the government-nonprofit
relationship in the third sector. Throughout these readings, particularly those in the
handbook that predate our current circumstances, I kept thinking of both the war in Iraq
and globalization/outsourcing and the impact those two issues have on the nonprofit
world. The government-nonprofit world is changing. As the article from the Chronicle for
Philanthropy points out, the need to protect charitable dollars from use by terrorists can
have a negative impact on humanitarian effort, and even jeopardize innocent lives.
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Lastly, it is interesting to note the change in public/private partnerships from the Regan
era onward, and how nonprofits are rising to meet the challenge of diminishing federal
dollars through collaborative relationships. There is an inherent danger in such
partnerships, based in the fundamental need for balance of power. It is important that the
values of the nonprofit not be compromised in any significant way to bend to the interests
of a private sector partner. But as the examples in both the Drucker video and the SSIR
article show, successful partnerships are indeed more than the sum of their parts, and hold
optimistic promise for the future of the third sector and its service to people of the world.
Robert D. Herman and Associates. 2005. The Jossey-Bass Handbook of
Nonprofit Leadership and Management. Jossey-Bass: A Wiley
Company. (Please note that the book I have was published in 1994. Be mindful that
some statistics and perhaps some theories should be looked at in context of this
publication date).
Chapter 1: Historical Perspectives on Nonprofit Organizations; Peter Dobkin Hall
Pages 3-43
A history of the emergence and evolution of social service and philanthropy in the United
States from Colonial time to present day.
Brief Summary:
This gives us a clear understanding of the evolution of nonprofits. Looking at the whole
picture we come to understand that from the very beginning there has been a need for a
society to deliver various services to groups of citizens, and that there has always been a
need for balance between public and private interests.
In Colonial America social and civic needs were met by families and individuals.
Institutions that eventually developed for the public good, such as universities (Harvard)
were considered public. Benjamin Franklin introduced the idea of voluntary
organizations to the colonies after a visit England where he was exposed to the printers‟
guild and Freemasons. Voluntary groups in Philadelphia, soon copied elsewhere,
developed hospitals, library and fire departments. Voluntary groups such as Sons of
Liberty led the resistance against British rule.
The American Revolution was a watershed, showing the effectiveness of collective action
toward a shared goal. The voluntary institution of political parties was born from a
suspicion of too much power entrusted in the hands of a few, and the election of Thomas
Jefferson‟s Democratic Republican Party in 1800 was a milestone in the democratization
of governance in the United States. To balance this shift of power, conservatives invested
in public organizations to influence public opinion and policy.
1854 Franklin Pierce vetoed a bill that would have given federal aid to the needy, fearing
that it would set a precedent for government responsibility. Government would not play a
significant role in the welfare of the neediest until the New Deal of the Great Depression.
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The Industrial Age changed the landscape, and put the majority of wealth into the hands
of a few. Charities were formed to make up for the change in the quality of conditions in
citizens‟ lives. Relationships between business (private) and universities (public)
strengthened due to the need for educated, trained workers needed to operate business
enterprise. WWI established private/public partnerships with the New Era, laying the
groundwork for the New Deal. With the New Deal the government took responsibility for
the welfare of its citizens.
Post WW II saw the growth of nonprofits. Tax laws changed to encourage charitable
giving. Foundation flourished allowing the wealthy to avoid taxation yet maintain control
of their fortunes. The relationship between the government and universities became
permanently institutionalized to meet the needs of the Cold War. During the McCarthy
era in the 1950s charitable foundations came under scrutiny as potential beds of
communist support. They were found blameless, but it led to greater transparency in their
methods and governance.
1969 brought the Tax Reform Act and a 501 ( c ) 3 group was formed. Analysis
determined that the nonprofit groups formed a cohesive sector with significant impact on
economic and social aspects of American life. Regan and Bush cut back on federal
funding, encouraging private funding to take up the slack (though the federal government
was the largest funder of nonprofits). Nonprofits rose to a new level of sophistication and
professionalism due in part to technology.
Detailed Summary:
Colonial Era
Nonprofits, as we know them today, are a relatively new institutional form, with 90% of
those that exist today developed post-World War II. In the turbulent years of the colonies
English law was held suspect, and wasn‟t adopted in any significant way until after the
1790s. Colonists had few trained lawyers and no legal ability to charter organizations.
Instead, much of the work of social service and civic responsibilities of nonprofits today
fell to families and the populace in Colonial America. Families were required by law to
provide their children with literacy and religious training and to prepare them for a craft
or occupation. Colonial governments relied on citizens for the building of roads, militia
and the care of the poor.
Under British law all corporations were considered delegations of public authority,
empowered to do the public‟s business. The institutions funded by English
philanthropists for charitable purposes, such as Harvard, were considered public.
By the mid-1700s political, economic and legal conditions became favorable to the
development of voluntary organizations and private philanthropy. Benjamin Franklin
visited England in 1720 to study printing processes and became involved in London‟s
voluntary associations which became models for his „club for mutual improvement”, the
Junto, upon his return to the colonies. A religious revival swept the colonies 1740-1760,
“The Great Awakening”, encouraging popular liberty and resulting in the formation of
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groups such as the Committee of Correspondence and Sons of Liberty, volunteer
organizations that took the lead in resisting British rule.
The power of organized collective action led to organizations for broader public
purposes. By the 1760s Franklin and his associates had formed a subscription library,
volunteer fire company, academy and hospital. These served as models for other
colonies.
The American Revolution was a watershed that educated Americans to both their
common purposes and interests and the value of collection action to pursue their interests
and address their needs. Some Americans, however, were wary of organizations
becoming too powerful. Among them was Thomas Jefferson who believed that
organizations, like government, should be limited in their power and privilege.
Corporations began to be chartered in 1790 as delegations of public authority, not private
organizations, and were seen to restrict the growth of private action. A division between
the north and south began to appear, with the south emerging as favoring public
institutions and restricting private organizations to a greater degree than the north. The
status of voluntary and private charities in the new territories to the west reflected the rift
felt between the north and south. The mix of settlers from both the north and the south
resulted in the establishment of organizations that were neither clearly private nor public.
This difference in view regarding the organization of private institutions led to the
development of political parties. The Federalists formed the Society of the Cincinnati, an
association of Continental Army officers headed by George Washington. This sparked
enormous controversy due to its aristocratic nature and the fact that membership was
passed through primogeniture. Opponents of this group, headed by Thomas Jefferson,
eventually formed the Democratic Republican Party to counter the conservative Society
of the Cincinnati.
Jefferson‟s election to the presidency in 1800 was considered a victory for the people and
had an enormous impact on the direction philanthropy was to take in this country. The
ousted conservative party turned to voluntary associations, such as schools, churches,
professional societies and others, as a platform to influence public opinion. This resulted
in a series of struggles between the two parties, culminating New Hampshire‟s efforts to
take over Dartmouth College. Daniel Webster, representing the trustees of the college,
successfully pleaded the case to the Supreme Court. The case fundamentally redefined
the nature of the corporation, transforming it from the delegation of public power over
which the state could exercise control to a private contract protected from government
interference. This case expanded the Bill of Rights to include collective action as well as
individuals, and created a clearly defined distinction between public and private sectors.
Court rulings on charities and trusts came later, in 1844 when the Girard Will case
determined the right of the individual to create charitable trusts and corporations to
administer them.
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1835: Establishment of Smithsonian Institution affirmed the tradition of public
philanthropy: private funds devoted to public purposes through public instrumentalities.
1854: Congress passed bill that would set aside 10 million acres of federal land for the
benefit of the insane. It was vetoed by President Franklin Pierce who felt that it would set
a dangerous precedent, obligating the federal government to provide care for the nation‟s
poor and infirm. It was accepted as standard practice for the government and affirmed the
importance of the role of private charity. It would not be until the Great Depression of the
1930s before the federal government took significant responsibility to care for the
nation‟s needy.
Civil War: establishment of the United States Sanitary Commission: private organization
that assumed responsibility for providing medical to the Union Army.
Post Civil War: from 1865 on occurred an important movement for collaboration
between universities and the business sector. There was a need for private businesses
capable of operating on a national scale as well as the infrastructure needed to sustain this
effort. An expansion of business required an increasing number of educated and trained
manpower, which required the expansion of universities.
1874: Harvard was successful in its argument for tax exempt status by citing Harvard‟s
benefit to society. This raised the ceiling on tax exempt limits and expanded the number
of organizations that could claim tax exempt status (though private universities were still
popular only in the northeast).
Last decades of 19c saw growth in private philanthropy and charities: hospitals,
museums, symphonies, libraries, social welfare organizations, private clubs, professional
societies, labor unions, fraternal organizations, volunteer fire departments, etc. Churches
became active in social causes.
Late 19c: Industrialization changed the landscape. Money and power was concentrated in
the hands of a few. People no longer enjoyed equality of conditions. Andrew Carnegie,
who felt that if capitalism is to be self-renewing people had to have access to equality of
opportunity, advanced “proactive philanthropy”. Feeling (along with peers such as
Rockefeller) that giving money to institutions such as libraries and universities didn‟t
address the heart of the problem, developed a new kind of charitable structure – the grant
making foundation. The purpose was to study conditions and make findings available to
the public and influential citizens who could mobilize to affect change. Community
Chests and Community Foundations were formed to broaden and democratize the base of
charitable giving.
Early 20c: Large bureaucratic institutions guided by scientifically trained experts would
be most efficient mechanism for achieving social, economic and political goals of reform.
WWI: experiment in public/private partnership. Herbert Hoover, as Secretary of
Commerce, developed “New Era” acknowledging the interdependence of all Americans
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and promoting voluntary cooperation that would lead to a new social and economic order.
This formed the basis for FDR‟s New Deal, National Recovery Association.
1943: income taxation became universal. The New Deal increased the tax burdens for
corporations and the wealthy and provided major incentives for large scale giving.
WWII encouraged closer ties between business and government. Business leaders and
government had common stake in stabilization of domestic and international economic
stability.
Post WWII: Government fueled growth of private nonprofits through incentives and
direct grants and contracts: 12,500 in 1940, 50,000 in 1950, 309,000 in 1967, 790,000 in
1977 and just under 1 million by 1989. 80 fold increase in 40 years, compared with a 7
fold increase in business (473,000 to 3,000,000) in the same time period.
It was preferable for the government to encourage private organizations to address the
increasing needs of the American welfare state rather than establish a vast bureaucracy to
deliver cultural, educational, health and social services. Government became the largest
source of revenue for charitable tax-exempt organizations in the field of culture,
education, health and social welfare.
Tax policies designed to channel post-war increases in individual and corporate income
into savings, investment and charitable giving coincided with the aging of the founders of
many of the great 19c industrial fortunes. Foundations increased: 203 in 1929 to 2,058 in
1959 (w/assets $1 million +). Foundations allowed the wealthy to avoid taxation and
maintain control of their enterprises.
Role of government in university funding became permanent in effort to defend peace.
Established National Science Foundation, National Institute of Health, the GI Bill(1944,
1952), National Defense Act (1958), Hospital Construction Act (1945) and, through the
1960s, numerous efforts focused on arms, space exploration and the War on Poverty.
1950s: Government starts to scrutinize tax structure of charitable tax exempt
organizations looking for loop holes. Coincided with career-building politicians rooting
out communists. Era of “Red Scare”.
1952: Select (Cox) Committee of House of Representatives investigated educational and
philanthropic foundations and found no basis for accusations.
1954: Congressman Carrol Reece pushed for another investigation. Again, no pro-
communist activity was found. But study found that vast private fortunes incorporated as
perpetual charitable trusts were a potential threat as concentrated power, were not
regulated and were not transparent.
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Foundation leaders prepared for potential future threats by creating public records of their
activities and increasing transparency. Foundation News and the Foundation Library
Center were established.
1959: Senate Finance Committee recommended liberalization of tax code provisions
affecting unlimited deductions for charitable contributions. There was some opposition,
due to fear that bill would encourage proliferation of foundations and too large a portion
of the economy would be captured here.
1965: Department of Treasury recommended changes in rules governing foundations,
particularly prohibitions against business dealings between donors and foundations, limits
on foundations‟ control of voting in business they control, restrictions on deductibility of
donor-controlled gifts, regulations of the number of donors and their families that could
sit on governing boards.
1969: Congress begins hearings on tax exempt organizations. Foundation leaders
appeared and vigorously resisted proposed changes – was a misjudgment.
1969: Tax Reform Act passed, though it would take years to figure out how to apply it.
John D. Rockefeller III recognized the shifting landscape and took a proactive role,
advocating for public/private partnerships. He formulated the Commission on
Foundations and Private Philanthropy (the Peterson Commission) in advance of critic
Senator Vance Hartke‟s suggestion in 1973 that such a thing be done. This led to a
Committee on Tax Incentives, chaired by Wilbur Mills and supported by Rockefeller.
501 ( c ) 3 Group was made up of several members of the Committee on Tax Incentives
and a loose network of lawyers and top officials of national donee organizations, retained
Harvard professor Martin S. Feldstein to conduct a general analysis of rationale of current
tax treatment and effect on private philanthropy.
Feldstein found a strong connection between giving and tax incentives and made a
compelling case for special tax treatment for nonprofits. The committee was reconvened
and a competent and well-balanced group was empanelled under the chairmanship of
John Filer. This group, with the aid of top ranking experts, was given a broad mandate to
examine every aspect of charitable tax-exempt organizations. The group gave substance
to the idea that “charitable tax exempt organizations comprised a coherent and cohesive
sector of American political, economic and social life.” Their report was published by the
Department of Treasury in 1977 and laid the groundwork for “establishing organizations
that could give unified expression to common interests.”
A group of Filer Commission members formed a private group, “Independent Sector”
(IS) to serve the charitable world and to present its interests to the public.
Ronald Regan cut back on federal spending and encouraged nonprofits and voluntary
groups to “take up the slack”. Regan, followed by George Bush, promoted efforts to
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stimulate higher levels of private giving. Regan established a “Task Force on Private
Initiatives” and Bush established “Thousands Points of Light”.
1980: The federal government was the largest single source of nonprofit revenue and
Regan‟s budget proposals would cripple the organizations the President hoped to
strengthen. Hospitals either became for-profit or competed with for-profits. Many became
hybrids. By 1980 almost all small voluntary hospitals ceased to exist.
Meanwhile, fundraising efforts became more sophisticated and organizations reached a
new level of professionalism, due in part to improved technology.
The Regan era meant fewer federal dollars but increased corporate dollars, often
channeled to programs with high visibility that improved the corporation‟s status or
public image. Marketing tie-ins and sponsorships with schools and education initiatives
also increased.
The face of philanthropic leadership changed, from white, male Protestants of northern
European dissent to a more diverse population. Local economies changed. By 1990 core
businesses were less likely to be locally owned and top executives were less likely to
have personal ties to communities
Chapter 2: Nonprofit Organizations and Social Institutions by Jon Van Til,
Pages 44 – 64
Brief Summary:
Author looks at ways in which nonprofits form an important part of the institutional life
of society. He defines “institution” as an aspect of society that relates to meaning in a
special way. An institution organizes meaning and makes clear to those who live in a
society what it is their society values most highly.
The author outlines the various needs of society and how nonprofits meet those needs,
making clear that nonprofits fill a vital role and touch almost every citizen‟s life.
The third sector rose as a response to societal disquiet and need. It is a question that
requires revisiting: are nonprofits positive tools of the democratic process, or tax-free
businesses in disguise?
Detailed Summary:
The author uses the example of choosing to go fishing vs. choosing to volunteer time to
teach children to fish, or to donate resources to help children learn to fish. In choosing to
spend time helping others you may give up of your time or some money, but your effort
has a greater reach and has a greater impact. Presumably it would be more personally
gratifying as well. “Such is the transformational power of the individual act of giving: it
allows us to do things we would have done only for ourselves, and makes the same action
into something that benefits others as well.” (p.45). There are examples, such as Hitler,
where this kind of focus may be perverted.
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Organization scholar Henry Mintzberg (1980) identifies the variety of roles played by
successful executives including directing, motivating, coordinating, innovating, serving
as external spokesman and gladiator, and managing crisis. To be effective it is necessary
to realize that the organization is linked in a myriad of ways to the world around it.
According to sociologist Talcott Parsons an organization must meet 4 challenges if it is to
survive:
1) The need to meet basic life challenges;
2) The need to meet goals shared by others;
3) The need to secure resources adequate for sustainability;
4) The need to relate to other organizations as each organization pursues its particular
tasks.
The author describes the following categories or “sectors” in society to provide for the
above:
1) Family and community structures to meet basic needs for meaning and support;
2) Political institutions emerge to define and articulate public goals;
3) Economic constitutions exist to develop resources;
4) Social institutions exist to harmonize the various activities of organizations.
He explains the four main sectors to accomplish societal tasks:
1) Corporations and businesses make most of our products and hire our labor – provide
80% of payroll;
2) Government provides military capacity and addresses various ancillary and welfare
needs and meets about 13% of our national payroll;
3) Voluntary and nonprofit organizations address a number of educational, charitable and
membership purposes and meets approximately 7% of payroll as well as providing
valuable voluntary effort, and;
4) Households and other informal organizations perform the majority of home
management and child care tasks, usually with no cash transfer.
The above comprises what the author calls the organization‟s “environmental field”. To
be successful the nonprofit administrator must be knowledgeable about and understand
the environmental field. His essay divides this field up into its component parts for more
detailed examination. He points out that the “basic cultural carriers” (p. 47) in any society
are the family, the church and the school.
Family:
1992: Rise of “family values” as factor in political election. The notion of “family” as
institutional force in society is being fundamentally reshaped (increase in single parent
homes, etc). Decline in strong family until can mean increase in responsibility for
nonprofits, providing services that were formerly provided by the family.
Religion:
Are themselves members of the nonprofit community. Guide followers in appropriate
behavior, attitudes and thought, which are generational. Nonprofit administrators must
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recognize the role religious institutions play in the community and their interactions with
each other. They relay underlying values of a community.
Education:
Formal and informal (mass media, community associations, etc – any way in which
individuals seek to learn)
Enormous potential for social responsibility and activism if such were taught and
promoted.
Current picture is dismal: outcomes in formal education are in decline, measured
aptitudes are falling, and students in other countries are out-performing our own.
Nonprofits may be increasingly called on to assist.
Social and Demographic Conditions:
Electoral participation declines and living standards stagnate. Connectedness of
individuals, particularly youth, is in decline.
Challenges we face: poverty, racism, alienation and incapacity. The author examines
each, below:
Poverty and Economic Malaise
Living standards for most Americans have ceased to grow. People living in many
economically disadvantaged urban areas live in “third world” conditions. Poverty is on
the increase and 1 in 5 American children live below the poverty level. Consumer
confidence and employer confidence is shaken.
Racism:
1 in 5 Americans is in what is considered a minority group. 1 in 8 Americans are African
American. A significant percentage of minority populations are forced into
multigenerational undereducation, unemployment, and societal alienation, with few
opportunities for upward mobility.
Alienation:
Instability of job market, decline of religion and disintegration of community can leave
individuals feeling disconnected. Alienation is multiple: from society, from others, from
self, and ultimately from meaning itself. (p. 51) Cynicism runs deep and is increasing.
Incapacity:
As society becomes more complex an increasing number of individuals find themselves
incapacitated, either physically (auto accident, etc.) or mentally (fetal alcohol syndrome,
etc). Individuals are being left behind through no fault of their own.
Government, Politics and Law:
Government institutions (incl. political parties, framework of laws, etc) affect daily work
of nonprofit managers, both directly (decides which nonprofits receive tax deductions,
which will receive contracts) and indirectly (by its choice of which services to provide).
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Welfare Mix:
Government‟s choice of support of social service programs affect size and scale of
nonprofit sector. More limited government translates to a larger nonprofit sector. The
welfare mix is the combination of 1) which services the government will provide; 2)
which services nonprofits will provide, and; 3) which services the economic marketplace
will provide.
Government provides two levels of service to Americans (and they are always under
pressure to change): 1) poverty relief: Aid to Families with Dependent Services, Food
Stamps, Medicaid, and; 2) aid to those who are no longer able to work because of age:
Social Security, Medicare. There is a stigma attached to the former.
Certification: Government determines which nonprofit‟s donors‟ gifts are tax deductible.
Government can advance those nonprofits of which it approves.
Regulation: 1) Certification; 2) can regulate provisions of contracts between government
and nonprofits. Important community values lie behind the regulations.
Nonprofits and the Economy:
Economic order: regional, national and global;
Productivity, distribution and globalization.
Productivity: “Growth” when economy grows, people are optimistic. Nonprofits are
directly influenced by levels of charitable giving and magnitude of problem.
Distribution: How society distributes its wealth. Industrial revolution: reductions in
patterns of equality until 1980. Since then wealthy have increased income while the poor
and working class have lost ground. In addition, society blames poor for their plight, and
for issues such as increased crime, etc.
Globalization, including mass media:
On-rushing global economy/transnationalization of economic life: 1) reduces prospect of
world war; 2) creates single financial market that makes all national economies
interdependent, and; 3) creates potential for international problem solving. Media
globalization has advantages and disadvantages: news of both good works and abuses
become widely known very quickly.
Major Players on Nonprofit Stage:
Nonprofit sector is called “Third Sector”
Givers: those who give of their time and money. Join with others to meet their and
others‟ perceived needs. Reasons for giving: true altruism, self-satisfaction, “strings
attached – to promote a cause, or money laundering.
Intermediaries: link money and time of donors with the needs of the organizations
themselves: consultants, trainers, counselors and program officers.
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Regulators: State agencies of taxation, nonprofit organizations that serve as sector
monitors (Better Business Bureau, etc), program evaluators, and congressional
subcommittees.
Nonprofit and Charitable Organizations
Nonprofits number over 1 million and employ 10% of country‟s workforce, working in
three main areas of activity: service, advocacy and member benefits.
Beneficiaries include:
1) those who directly receive services;
2) those in whose name the nonprofit advocates;
3) members who receive direct member benefits;
4) staff members employed by the nonprofit organizations;
5) those who enjoy benefits as consumers or customers;
6) members of the general public who enjoy a higher quality of life due to the work of the
nonprofit
Historian Rudolph Bauer (p.62) states that those involved with nonprofit organizations
have different perspectives depending on their roles: volunteers see themselves as
providers of a charitable service, the board might see the organization as a political
institution and staff see the organization as a business.
Chapter 3: The Legal Framework of the Nonprofit Sector in the United States by
Thomas Silk, pages 65 – 82.
Summary:
This is a clear and nicely laid out case study of a fictional nonprofit organization titled
Planet Water, a California-based environmental group that works for clean oceans. The
author takes us from its informal beginnings as a work of passion by its founders to
incorporation and growth, to a complex organization that offers delivery of services and
programs, retail and branding/licensing enterprises, for-profit ventures, advocacy and
lobbying and regranting. Step by step the author explains the tax categories and
requirements of each step, with options for alternative steps. Using this one example the
author is able to make complex tax issues understandable in a way that might be more
difficult in another format.
Chapter 15: Managing the Challenges of Government Contracts by Steven Rathgeb
Smith, pages 325 – 341
Increasingly services are provided to communities by government contracts to nonprofit
organizations. Nonprofits are on the front lines dealing with monumental issues such as
AIDS, homelessness, etc. When federal funding decreases state and local funding
generally increase to meet the need.
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Government contracting requires the nonprofit to acquire facility with governmental
budgeting practices, rate setting, cost-reimbursements, etc. While often lucrative and
sustaining, dealing with government contracts presents a complicated set of challenges
for a nonprofit. By its nature it often forces a nonprofit to a higher level of formalization
and professionalism, and forces the organization to focus on long-term strategic issues.
Growth of contracting creates patterned relationships and expectations between
government and nonprofit agencies:
1) accepted means of resolving disputes;
2) regularized patterns of interaction between government and nonprofit;
3) mutually dependent and marked by continuity;
4) usually sustained and dominated by powerful party
Challenges of government contract work often include cash delivery. Sometimes costs of
the program were underestimated. Cash-flow problems are inherent, chronic and are to be
expected. Contract renewal is often uncertain.
Nonprofits competitive for government contracts often seek to enlarge their constituency
by: engaging an affiliate organization to help with fundraising, community support and
visibility; altering the composition of the board; joining community organizations such as
the Chamber of Commerce; or altering the rules of membership.
Contracting changes the nonprofit‟s disinterest in government policies and practices, and
they often need to increase their political visibility and support.
Summary: The rise of widespread government contracting has remade nonprofit
management and expanded services. The nonprofit must take on some of the
characteristics of the government for a good systems fit. The nonprofit management
becomes politicized and is now part of the government‟s public service system. There are
public/private dimensions to the relationship. The nonprofit will face cash-flow and
contract renewal issues, and must plan accordingly to survive.
Chapter 10: Nonprofit Lobbying by Bob Smucker, pages 208 – 226
18% of charitable giving comes from the private sector and 31% comes from the
government. Lobbying by nonprofits is allowed under the law. Federal law and
regulations provide more lobbying leeway than most nonprofits need or want. Of the
6,600 nonprofits that elected to come under the law allowing lobbying, only 2 spent the
maximum allowed ($1 million).
Organizations who are considering lobbying should be familiar with:
1) the law;
2) the legislative process
3) the government relations committee
Law: Section 1307 of Public Law 94-455 recognizes lobbying as proper for nonprofits.
Internal Revenue Code Section 4911 and 501 ( h ) contain information on how much may
be spent on lobbying and what is required when electing to come under the provision.
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If there is no expenditure of funds, there is no lobbying.
“Direct lobbying” is the communications an organization has about legislation 1) with
legislators or government officials and 2) with its own members.
“Grass roots lobbying” is any attempt to influence legislators by affecting the opinion of
the general public.
If you don‟t choose to be part of the lobby law you may use no substantial part of
activities to influence legislation.
Elements required for lobbying communication:
Direct: 1) refer to specific legislation, and; 2) reflect a point of view on its merits.
Grass roots: the above plus: encourage recipients to contact legislators and provide
legislators‟ contact information.
To make any public announcement without a call to action is not grass roots lobbying.
Summary:
To get started in lobbying: 1) know the lobbying process; 2) organize a government
relations committee; 3) set up a legislative network; 4) know the law governing lobbying
by nonprofits. It helps to have a staffer or volunteer who knows the process.
The 1976 lobbying law provides the freedom for more lobbying by nonprofits than they
will probably ever need.
Conclusion: Preparing for the Future of Nonprofit Management by Robert D.
Herman, p 616- 625
In the future will nonprofit organizations build more cooperative or more competitive
sectors? Will future nonprofit sectors be more like a community or an industry?
“Community”: Collectivity of philanthropic organizations and their leaders that has a
shared identity and individually differentiated roles, yet capacity and mechanisms to
integrate actions.
“Industry”: Collectivity of organizations that has shared identity and capacity and
mechanism to act jointly to achieve benefits in self-interest of the organizations that
comprise the industry.
On a local level nonprofit organizations often work more collaboratively than not.
Analysis indicates that more competitiveness is probable for nonprofits in the future, but
that is perhaps not the most desirable outcome.
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Promoting this cooperation among nonprofits may be the ideal role for foundations,
perhaps through the partnering of community foundations and corporate giving programs.
This will take multi-level and multi-year commitment from foundations. To work three
things must happen:
1) grantmakers must commit multi-year funding;
2) process must be available to any nonprofit;
3) process must be developed and approved by all who participate.
Meeting the Collaboration Challenge: Developing Strategic Alliances
Between Nonprofit Organizations and Businesses. Peter F. Drucker,
Foundation for Nonprofit Management
Video
Examines 5 collaborative and successful public/private partnerships. The idea is that the
whole is greater than the sum of the parts and through collaboration we can accomplish
things that we would not be able to accomplish individually. Passion and enthusiasm are
integral to the process.
1) Fox Cities Children‟s Museum and Roxanne‟s Doll Shoppe
Museum was given a large doll collection and had no expertise with which to handle it.
The president of the board contacted the owner of a local doll retail store for help. She
became volunteer curator of the collection, and also took over the operation of the
museum store for a percentage of gross. The store had been failing and at the time of
filming had an increase of 70% in revenue.
2) CityYear and Timberland
Collaboration of a youth service community group (environmental) and Timberland,
manufacturer of boots and clothing. CityYear inspired Timberland and the vision came to
be owned by both organizations. Grew from simple donation of product to true
collaboration to make the world a better place. Timberland didn‟t want to give only
money, but wanted to be involved in the process. Staff became involved (given 40 hours
per year to work on CityYear projects), they share a building. Together they have grown
CityYear. Timberland gives money, volunteer time and product.
3) Starstep/General Mills/Glory Foods
Starstep serves African American community in Minneapolis, mostly high school age and
older. They put together a partnership with General Mills and Glory Foods to create a
food production plant that would employ and benefit Starstep clients. Starstep was
looking for a Fortune 500 partner and wanted a project that would be economically
impactful. A General Mills executive stated that collaboration takes hard work, trust and
shared values – what do we want? We want this!
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4) Salvation Army Golden Diners and Bill‟s Restaurant
The Salvation Army was looking for a solution to a problem. Men were reluctant to take
part in their elder meals program. They didn‟t like the environment or the lack of food
choices. The Army and Bill‟s collaborate, allowing their diners to eat at the restaurant,
from a specially prepared menu any time from 8:30 – 3 pm. The diners have a special
card, and are expected to pay $3 and tip for the meal. The Salvation Army pays the rest of
the tab. The restaurant wins because the restaurant is always full. The owner said he
wished he had more restaurants and a bigger parking lot to accommodate the need. The
Army wins because it is successfully serving more of its clients. Diners may eat with
friends or members of their family who choose from the regular menu. The Army had
been turned down by several restaurants before finding Bill‟s. Now they have been
approached by several other restaurants who wish to participate.
5) Boston‟s Museum of Science and Intel
The Boston Science Museum was looking for a way to engage children through
technology. Intel was looking for a way to integrate into the community in a meaningful
way, through technology. Their collaboration created “Computer Clubhouse” bringing
dynamic learning through technology to underserved children. The museum provides the
space and expertise to work with children. Intel provides software, product and program
consulting, technical assistance and funding. The program has expanded to several states,
with a goal to create 100 Computer Clubhouses throughout the country.
Article: Government-Nonprofit Relations in Comparative Perspective:
Evolutions, Themes and New Directions by Jennifer M. Brinkerhoff and
Derick W. Brinkerhoff.
Government, nonprofits and markets are often stereotyped but are all linked. Do they
together provide services that they are not able to provide independently? Is the question
ever asked, “How do they serve democracy?” Is that important? For example, if a
nonprofit service provider uses non-union labor to provide a product at a lower cost to its
clients, does that fulfill its mission?
Looks at both national and international conditions. The article is an overview for the
Symposium on Government-Nonprofit Relations in Comparative Perspective. It defines
our current government-nonprofit landscape, identifies themes and discusses new and
evolving trends.
Part I
Though government, market and nonprofit are often stereotyped, they are all linked and
interrelated. Question: How to governments and nonprofits interact and do their
interactions provide responsive, accountable and efficient solutions that no one sector can
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address independently. To be considered in addition to public service delivery:
democracy, citizenship, representation, equity, and values regarding the boundary
between state and society.
It is widely accepted that societal problems cannot be solved by governments alone, and
there is a growing role for the nonprofit sector. Government-nonprofit interaction will
increase in this century. Governance is increasingly looked at in the ways it addresses
citizens individually and in groups, and how those organized groups within society
address issues. A new dominant paradigm for governance has emerged in the US and
globally: market forces are relied on to solve societal problems, pushing for an efficient
government whose main role is to support private and voluntary action with a minimum
of interference. The controlling state gives way to the facilitator, partner state.
Implementation of this paradigm include reforms and have significantly increased
intergovernmental and cross-sectoral relationships. As a result, new horizontal
relationships among the private, public and nonprofit sectors have emerged.
The nonprofit sector has grown as nonprofits play a more prominent role in public life.
The increase in government-nonprofit relations derives from a series of failures
associated with each sector: government, market, contract, voluntary and political,
particularly regarding service delivery. Nonprofits have a good track record in service
delivery and are even viewed as more honest and trustworthy than either the market or
government.
Government-nonprofit relations have been examined in a variety of ways;
Vulnerabilities of nonprofits (Kramer1981, p. 265): 1) institutionalism; 2)goal
displacement or the displacement of ends by mean such as fundraising; 3) minority rule,
and; 4) ineffectuality. Voluntary failures (Salamon 1987): 1) philanthropic insufficiency;
2) philanthropic particularism; 3) philanthropic paternalism, and; 4) philanthropic
amateurism. These failures parallel market and government failures.
Assessment of the general state of government-nonprofit relations at the national level
(Coston 1998) include relationship types: repression, rivalry and competition (where
government resists institutional pluralism) and cooperation, complementarity and
collaboration (where government accepts institutional pluralism). Identification and
review of these types can help identify where nonprofit participation will be most
effective.
Najam‟s (2000) model incorporates the potential for both service delivery and advocacy
and identifies four relationship types: cooperation where the governments and NGOs
share similar ends and means; confrontation where both ends and means are dissimilar;
complimentarity where the ends are similar but the means differ; and co-optation, where
governments and NGOs pursue similar means but toward different ends.
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Gidron et al (1992) identify four models; 1) government dominant (govt both the funder
and deliverer of services); 2) third sector dominant; 3) dual, where government and
nonprofit operate separately with little interaction, and; 4) collaborative where two
sectors operate with a high level of overlap.
Young (2000) distinguishes three alternative views: 1) nonprofits operate separately as
supplements to government; 2) nonprofits work as complements to government in a
partnership, or; 3) nonprofits and government are engaged in an adversarial relationship.
His study shows that these models may emerge sequentially and can coexist at any one
time.
Comparing Government-Nonprofit Relations: Themes from the Symposium
Part II
What do we seek from the nonprofit sector?
Nonprofits originally were accountable to beneficiaries and/or members and individual
donors who sought value based services in addition to tangible benefits. The landscape
for nonprofits has grown significantly more complex and nonprofits are now assessed not
only by their former constituents, but by government, the media and the general public.
As nonprofits enter into relationships with government, they must balance the often
conflicting needs of government and their original constituents. Nonprofits political roles
need to be reexamined when they enter into a relationship with the government. There is
a possible conflict between material and value-based benefits.
Jennifer Brinkerhoff gives us a framework for understanding partnerships between
governments and nonprofits. Partnerships differ from other typed of relationships in two
ways: the maintenance of each partner‟s identity and mutuality. Relationship types are
dynamic and encompass partnership, contracting, extension and co-optation or gradual
absorption. Advantages of partnerships with nonprofits are numerous. Contributions to
partnerships are believed to produce a value-added beyond what either organization could
achieve on its own.
Bouget and Prouteau examine the case of the Directives on Equal Treatment and Anti-
Discrimination of the European Union (EU). The case demonstrates nonprofits ability to
affect change and advocating policy based on the values of their stakeholders. In this case
surpranational networks among nonprofits formed to lobby the EU to combat racism. The
nonprofits served as watchdogs to government policy.
Goldsmith analyzed business associations in Africa to address nonprofits‟ contribution to
advocacy and representation.
Derick Brinkerhoff examined a donor and government initiated effort to facilitate
nonprofits in support of service delivery by examining Family Group Practice
Associations (FGPA) in Kazakhstan and Kyrgyzstan, primary health care service
providers.
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Brainard and Siplon looked at the use of the Internet in comparing traditional and radical
health advocacy nonprofits. They found that the internet made geography inconsequential
and therefore expands a feeling of belonging among members and allows the nonprofit to
meet a variety of specialized needs. However, they uncovered tensions in nonprofits
attempting to address conflicting demands and expectations.
Warin looked at France and nonprofit associations combating social exclusion.
Nonprofits have a good track record of reaching excluded populations and linking them
to services or delivering services tailored to their needs. Warin compares the methods of
both faith based and secular organizations.
Musso et al looked at faith based nonprofit organizations in Los Angeles who reached out
to socially excluded groups in order to engage them in the community council movement.
Features of government-nonprofit interactions
The increasing range and multiple facets of government-nonprofit relations
There is greater variety and complexity in government-nonprofit relations than is
generally recognized.
One most often cited relationship is partnership. J. Brinkerhoff argues that partnership
rhetoric is overused.
Many articles demonstrate that government-nonprofit relations can simultaneously
encompass multiple objectives including service delivery, policy advocacy and
constituency/beneficiary empowerment.
Nonprofits often imitate characteristics of government as they struggle for the best way to
fit and successfully function in the relationship.
The impact of origins.
The origins of the government-nonprofit relationship can influence the nature of the
interactions between the two. When governments initiate the relationship the relationship
is often top-down, with non-profit clearly defined as service provider. When non-profits
initiate the relationship interactions tend to be bottom-up, with emphasis on policy
advocacy and constituency empowerment.
Relationship dynamism
Government-nonprofit relationships are dynamic and evolve and change.
Impact of government-nonprofit relations
Impact is significant in the quality of public service delivery, public policies, degree of
social exclusion, expression of public values and the building of social capital. The
impact may vary in degree and timetable for impact (beginning slowly and growing over
time.) How relations are structured and operationalized can affect success.
Sectors – government as well as private – can blur as they increasingly interact.
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What is public, what is private?
Market and state, public and private is generally understood in examining the
components of social life. Adding the third sector complicates and confuses things, since
they are so different: service provider organizations, religious organizations, membership
organizations and social clubs. All are perceived as working for the “public good”.
Social and political cultures have some impact on determining whether a government-
nonprofit organization fits in the public or private sector. Each culture has different
boundaries for public and private, especially in regard to governance. The pluralist model
at work in the United States operates on the assumption that the public good is an
aggregation of private interests. In the corporatist model used in Europe and other parts
of the world the State, in partnership with selected societal actors, takes the lean in
defining the public interest. In both models the role of the government-nonprofit
organization is to serve as a bridge between the public and private good. Interpretation of
public and private influences how we view government-nonprofit organizations. We
judge them based on our values and whether we see them promoting the public interest or
captured by private influence.
New and Evolving Trends
Mentioned above: blurring of the sectors; pressures from a variety of stakeholders;
sometimes contradictory, sometimes simultaneous demand for values-based as well as
material benefits; tension between service delivery and political roles; influence of
technology; rise of supranational spheres of government-nonprofit interaction; and
simultaneous interaction of governments and nonprofits at multiple levels can encourage
parallel structures and isomorphism (nonprofits taking on characteristics of government);
There is an increase in sharing paradigms and policy ideas within and across nations.
Local-level problem solving is also robust.
The growth and diversity of government-nonprofit relationships guarantee that these
relationships will take on many forms and their complexity is not likely to diminish.
Nonprofits contributions of values, social capital and civic engagement may become
increasingly important in an increasingly changing, global and technological world.
The Chronicle of Philanthropy, September 6, 2007
International Aid Groups Balk at Latest Federal Anti-Terror Screening
Plan by Ian Wilhelm, p 27 & 29
US Agency for International Development has postponed plans to implement “Partner
Vetting System”, a program to screen nonprofit organizations for ties to terrorists. Under
the proposal nonprofit agencies and companies that receive federal aid would have to
provide personnel information – social security numbers, telephone numbers,
nationalities, email addresses and birth dates - for all employees, executives, trustees and
people hired as subcontractors.
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Leading the resistance against the program is Samuel A. Worthington, president of
InterAction, a Washington based coalition of 160 charities. The Agency plans to
implement the program after it meets with critics to ameliorate their concerns.
Current regulations require organizations to vet personnel on their own and certify that no
one associated with the organization appears on terrorist watch lists.
Charity aid workers feel that the vetting system would put an administrative burden on
them and possibly put lives in danger. The program would be exempt from the Privacy
Act (a 1974 law that prevent law-enforcement authorities from maintaining files on
Americans not suspected of a crime). Workers would not know if they “passed‟ or
“failed” the screening, and could not challenge accusations of wrong-doing.
There is no real evidence that federal money has fallen into terrorists hands. People who
criticize the agency for leniency state that screening has to be more vigorous and the
threat is real. Charity workers fear, as stated above, for workers‟ safety and of the
administrative burden. They also wish to avoid the perception that they are associated
with national security agencies, and that it would damage American foreign policy by
emboldening authoritarian governments.
Stanford Social Innovation Review, Fall ’07, Vol 5, No 4
Creating High Impact Nonprofits by Heather McLeon Grant and Leslie
R. Crutchfield, p 32 – 41.
Study of 12 high impact nonprofits showing that real social change happens through
partnerships. Internal organization and management isn‟t as important as the work they
do outside their own organizations in building relationship and partnerships. The key is to
concentrate on impact rather than process. This article supports the Drucker video.
Myths of nonprofit management:
1) Perfect management: Not necessary, adequate management is necessary, but is not
sufficient for creating significant social impact;
2) Brand-name awareness: Some groups in the study have name recognition, but a few
hardly focus on marketing.
3) Breakthrough new idea: Some have radical new ideas, but other tweak old ideas until
they are successful.
4) Textbook mission statement: All have compelling mission statements, but few spend
time on them – most are too busy living them.
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5) High ratings on conventional metrics: Some don‟t score well because they don‟t
adhere to some metrics such as overhead ratios .
6) Large budgets: Size doesn‟t correlate with impact.
Practices of high-impact nonprofits:
They mobilize every sector of society: government, business, nonprofits and the public –
to be a force for good. These patterns emerged in the study of the 12:
1) Service and advocate: They do not succeed on service delivery alone, but add policy
advocacy to acquire government resources and change legislation.
2) Make markets work: tapping into the power of self-interest and the laws of economics
is more effective that appealing to pure altruism. They find way to work with companies
to “do good while doing well”.
3) Inspire evangelists: Build strong communities of supporters to help them achieve their
goals.
4) Nurture nonprofit networks: Help their peers succeed and build networks of nonprofit
allies.
5) Master the art of adaptation: Respond to changing circumstances with innovation and
modify tactics as needed to achieve success.
6) Share leadership; Distribute leadership throughout organization and throughout
external nonprofit networks, empowering others to lead.
The organizations:
America‟s Second Harvest
Center on Budget and Policy Priorities
CityYear
Environmental Defense
The Exploratorium
Habitat for Humanity International
The Heritage Foundation
National Council of La Raza
Self-Help
Share Our Strength
Teach for America
YouthBuild USA
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