Leah Davis Mrs. Corbett AP Literature 10/30/11 Senior Project Essay Nonprofit organizations have a profound effect on the economy. The economy of today,however, is not a favorable environment for nonprofit organizations to flourish. Todayseconomy affects various nonprofit organizations in a plethora of ways. First of all, a nonprofit organization is defined as an organization that is set up to providea public service without the gain of a profit (dictionary.reference.com). In other words, anonprofit organization offers a service without charging patrons for the service. Theseorganizations have many obstacles that they must overcome in order to function successfully.One such interference would be financing the nonprofit organization. Since nonprofitorganizations operate without actually gaining a profit, in other words without charging for theservice provided, they have difficulty obtaining funds. Nevertheless, the necessary funds arepossible to receive if the correct approach is used. According to Husock the “Government mayboth fund and operate such programs” as nonprofit organizations (Husock 16). This is anexample of how nonprofit organizations acquire the assets that they need. Also, if a nonprofitorganization is failing, the government may take over the nonprofit organization and operate ituntil the nonprofit organization can function on its own. Borrowing is another way for nonprofitorganizations to gain needed funds. “Loans can be a tool that can help their nonprofit grow andsucceed” (Hogye 142). Nonprofit organizations are able to obtain loans just as a business can.
These loans go toward covering the costs or expanding the outreach of the nonprofitorganization. Although these are effective ways to fundraise, different options are available. As operative as government funding and loans are, alternatives to advance resources areaccessible. Philanthropy is another major way that nonprofits attain funding. Husock refers to aquote by Olasky which states that a method centered around government interference does not“[emphasize] the crucial role of truly compassionate individuals and groups in the long fightagainst poverty” (Husock 17). Where government help is a successful approach, voluntarism isconsidered a paramount strategy. When people volunteer, they give more than just money orsupplies, they give compassion. Donations provide a large portion of funding for nonprofitorganization. There is, however, another form of philanthropy used by some nonprofitorganizations called percentage philanthropy. This type of philanthropy is “when [donations are]derived from tax revenue but the decision is individual within legal restrictions” (Hogye 141).This is a reliable way for a nonprofit organization to acquire funding since it is in the form of atax. Taxpayers are also benefitted because, even though they are required to pay the tax, they areallowed to choose the amount that they are willing to pay. Even with numerous ways to enlargefunding, nonprofit organizations are affected by today’s weakening economy. Since nonprofit organizations cannot set a price on their service and they can only obtainfunds from outside help, these nonprofit organizations can only fair as well as the economy.Many nonprofit organizations “face challenges persuading middle-class people to give becausemany of them are still struggling with unemployment, declining housing values, and othereconomic woes” (“How Nonprofit Causes Fared in 2010”). People are unwilling to donate whenthe economy is declining. Therefore, if the economy is failing, so are the nonprofit organizations.Gose also declares “When grant discussions with Ford and Kellogg, longtime supporters of the
group, fell apart, the nonprofit organization decided to close rather than continue operating witha skeletal staff” (Gose 9). Not only are people unwilling to donate, grants also decline when theeconomy does. Some nonprofit organizations are even forced shut down when the economydwindles enough. Nevertheless, several nonprofit organizations find tactics to meddle throughthe tough economic situations. When economic times become problematic, not all nonprofit organizations dissolve.Many nonprofit organizationsmay join together to combat the troubles of a failing economy.Although, as Fioramonti states, “supporting such an alliance would require many foundations torethink their role in society and become not only more political, but also more critical of theproblems caused by our economic systems” (Fioramonti 42). It will take more than just joiningtogether for nonprofit organizations to survive the worsening economy. Nonprofit organizationswill have to be more aware of the problems that they actually face. Some organizations exchangemoney donations for donations of time. “Cash-poor, time-rich volunteers…have every right tobelieve that what they are doing is just as valuable as handing over cash. Indeed, the charityworld puts a cash value on volunteers time--$19.51 an hour...” (Kadlec 1). Since this time isvolunteered, nonprofit organizations do not necessarily have to pay these workers and aretherefore saving money. The organization is getting its service produced without spending asmuch, thus, time is as valuable, if not more so, as money. Even though nonprofit organizationsjoin together to help one another in a diminishing economy, they still have to compete with oneanother for the funds that they need. Nonprofit organizations assist each other during difficult times; however, they mustcontinue to contend for the funding of possible donors. Stiller suggests that, when it comes tophilanthropy, “The options are dizzying, and the results are difficult to evaluate” (Stiller 146).
Even in a failing economy, people still try to practice philanthropy. Although, these potentialphilanthropists must figure out which nonprofit organizations are the most worthy of theirdonations. Since these benefactors have to choose which nonprofit organization they prefercontribute to, the nonprofit organizations must contest with one another for the donations. Thereare various ways for nonprofit organizations to compete for the funds of donors, but some aremore beneficial than others. Hoye quotes Rinker in saying that, of all the methods to gainfunding, “Word of mouth is your best form of advertising” (Hoye 9). Nonprofit organizationsmust advertise their goals in order to have a chance to obtain funds. If they make current donorsfeel appreciated, those donors will tell other donors, and the chain of funding will reach the mosthospitable organizations. There are many effects of the economy on nonprofit organizations, yetnonprofit organizations also affect the economy. Many people are concerned with how the economy affects nonprofit organizations.Nonprofit organizations, however, affect the economy as well. Lombardi quotes Marsh saying,so many nonprofits have gone around with a tin cup in their hand without really thinking abouthow much they do give to the county, not only in the services they provide, but in terms of whatthey do for the economy.” (Lombardi 1). Several nonprofit organizations do not realize that theyare affecting the economy. Nonetheless, the revenue that they bring in to help their cause,because they are nonprofit organizations, is returned to the economy, in turn boosting theeconomy. According to Perry, “Public Allies…applications…[provide] a stipend and aneducation grant” (Perry 1). Nonprofit organizations receive applications from volunteers thatwant to be trained. Chosen applicants are presented with education grants and, even though thegrant money is not repaid directly by the applicants, the money will eventually recirculatethrough the economy. Also, any future jobs the applicants receive will add money flow into the
economy. Therefore, nonprofit organizations impact the economy just as the economy impactsthem. The economy is influenced strongly by nonprofit organizations.Nonprofit organizationsprovide services to society without charging for the product, however they still have costs. Thesenonprofit organizations face numerous complications attaining the assets that they need in orderto sustain themselves. Some of the ways that they overcome these difficulties are throughgovernment help, grants, and loans. Funding can also be provided through volunteerism. Anothertype of philanthropy is that of percentage philanthropy, in which funding comes through taxes.Although the donors can decided how much they want to provide for the tax. Another obstacleimposed on nonprofit organizations is that if the economy begins to fail, so do they. People areless willing to donate, and if they do donate it is not as much as when the economy is faring well.The grants received by nonprofit organizations also begin to dwindle. When this begins to occur,many nonprofit organizations may join together in order to survive. However, as these nonprofitorganizations start to unite they will have to alter their original goals. This can also includeaccepting donations of time over money donations. Even if nonprofit organizations venture tounify, they will still be forced to compete among themselves for funding. The best strategy fornonprofit organizations to influence donors to assist their cause is to prove how appreciative theyare for their donors. If the donors feel valued they will tell others to donate to the nonprofitorganization’s cause as well. Also, the nonprofit organizations affect the economy as much as theeconomy affects them. Nonprofit organizations increase the revenue supplemented to theeconomy through grants given to some volunteers. The funding that they receive is alsoimplemented once again into the economy. Nonprofit organizations are effected by today’seconomy and the economy is also influenced by these nonprofit organizations.