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The Role of Nonprofit Organizations in the Public Policy Process:
Advocacy in a Post Recession Economy
by
Sharmaine McLaren
Submitted in partial fulfillment of the requirements
for the Master of Arts Degree
at
Union Institute & University
August 2015
2
ABSTRACT
The role nonprofit organizations (NPOs) play in the public policy process has
evolved over time. The nonprofit sector has grown, as the nation has grown, to become
the third largest employer, the largest governmental contractor, and one of the largest
collective political influences in United States. The demands placed upon the sector,
during and immediately following the recent economic recession were unprecedented,
as the sector experienced a simultaneous increase in demand for services and a
decrease in funding resources.
This study examines the role NPOs play in the public policy process, specifically sector
advocacy efforts following the 2007-09 economic recession, seeking to answer the
following research questions:
1. Does the size and/or capacity of an NPO impact advocacy efforts?
2. Do NPO’s understand the legal limitations of 501(c)(3) political engagement?
3. Are NPOs working independently or collaboratively in their political advocacy efforts?
The study provides a historical overview of the sector, including the findings of the
comprehensive study Strengthening Nonprofit Advocacy Project (SNAP), conducted by
Tuffs University, in 2002. A multi-year research project conducted to understand how
nonprofits use the public policy process. The study included 2735 randomly selected
501(c)(3) nonprofit organizations, who were asked to complete a qualitative written
survey. The survey yielded a 63.7% response rate.
Using the SNAP survey results as the basis for comparison, this study compares the
2002 survey results with a qualitative field study, conducted from February through
March of 2015. The field qualitative survey was conducted online, and distributed via url
link to 255 members of the Cincinnati Chapter of the Association of Fundraising
professionals (AFP). Only members employed by a 501(c)(3) organizations were
permitted to participate. The survey yielded a 15.2% response rate.
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TABLE OF CONTENTS
I. Title Page……………………………………………………………………………………. 1
II. Abstract …………….…………………………………………….………………………... 2
III. Table of Contents ………………………………..………………………………….…… 3
IV. Acknowledgements .……..…………………………………………………………...... 4
Introduction: Purpose and Significance of the Study…………………………………….. 5
Chapter 2 - Literature Review and Theoretical Foundation of the Study ………... 18
Chapter 3 – Research Method and Design …………………….…………………...…. 33
Chapter 4 – Findings and Analysis ……………………………………………………... 40
Chapter 5 - Conclusions and Recommendations …………………………………..... 48
References …..……………………………………………………………………………... 56
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ACKNOWLEDGEMENTS
This study would not have been possible without the assistance of numerous
nonprofit professionals, who validated the need for new information on this topic,
facilitated the research study, and encouraged the pursuit of this course of study.
First, to Meghan Cummings, Development Officer for the Women’s Fund of the
Greater Cincinnati Foundation (GCF) and immediate Past President of the Cincinnati
Chapter of the Association of Fundraising Professionals (AFP), with whom I initially
discussed the intent and focus of the study, for validating the need for this study and for
introducing me to Jason Lee, General Counsel and Director of Public Policy for AFP
National. I must also acknowledge Mr. Lee, for his personal introduction to the high-
ranking public policy professionals, who helped inform the study through personal
interviews, including: Neal Denton, Senior Vice President and Chief Government Affairs
Officer, YMCA USA, Chanelle Hardy, Senior Vice President Public Policy and Executive
Director, National Urban League Policy Institute, and Steve Taylor, Senior Vice
President and Counsel for Public Policy, United Way Worldwide. Lastly, the study could
not have been completed without the assistance of the AFP Cincinnati Chapter who
participated in the electronic survey, specifically, Sydney Schnurr, 2015 President of the
Cincinnati Chapter, who encouraged participation by publicizing the study in the chapter
newsletter, and championing the survey to chapter members.
Academically, acknowledgement and thanks to professor and thesis advisor
Asgar Zomorrodian, Ph.D., for his unfailing support throughout the study.
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INTRODUCTION
This study examines the role nonprofit organizations (NPOs) play in the public
policy process, specifically NPOs with a IRS 501(c)(3) tax-exempt designation. The
study includes a review of NPO advocacy efforts historically, sector trend predictions,
and through a qualitative field research study, examines 501(c)(3) advocacy efforts in a
post recession economy, a period to be defined for the purposes of this study as from
January 2007 through October 2009.
As a career nonprofit professional, this researcher’s knowledge of the sector was
experiential. Prior to this study, this researcher placed nonprofit involvement in the
public policy process into one of two categories: organizations, which rely on funding
support from the government in order to deliver services to the public, and
organizations, which seek to impact the legislative process on behalf of the public. In my
experience, the majority of NPOs purposely avoided involvement in the public policy
process for fear of their actions being labeled lobbying, and impacting their IRS tax-
exempt designation as a 501(c)(3) organization. Accurate or inaccurate, the belief that
any action taken to influence public policy would threaten 501(c)(3) exempt status was
considered fact among my peers. However, a myriad of forces affecting the nonprofit
sector in the recent economic recession, such as an increase in demand for services,
declines in privately funded support, and threats to chartable-giving tax codes left many
NPOs searching for solutions outside of their normal wheelhouse. Economic influences
left many NPOs with two primary choices, cut services, or learn how to impact the public
policy process as a means to accomplishing their missions.
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By 2009, 3 in 4 foundations experienced a 25% or larger decrease in their
endowment funds, resulting in a sector-wide decrease in grant awards. (Sheets,
Marcus, and Migliaccio, 2009, pp. 81-85) The recession resulted in state and federal
budget deficits, reverberating throughout the nonprofit sector for the next several years.
In Ohio, deficits resulted in the Govenor employing a two-year spending plan,
which slashed funding for local governments by 25% in fiscal 2012, (Luhby, 2011)
nearly three years after the period identified as the height of the recession. A decision
which impacted state-funded nonprofit service contractors statewide. The recession hit
the nonprofit sector from every funding source; those relying on individual donations
saw giving decrease due to job and personal investment losses, foundation giving
decreased due to losses in invested endowment funds, which impacted the number and
amount of disbursments, and governmental funding decreased due to budget deficits, at
the state and federal level.
Background, Purpose and Significance of the Study
In October of 2010, the Association for Research on Nonprofit Organizations and
Voluntary Organizations (ARNOVA), a United States based national and international
association that connects scholars, teachers, and practice leaders interested in
research on nonprofit organizations, (ARNOVA, 2015) convened a group of thirty
nonprofit scholars to explore public policies’ impact on the nonprofit sector. The
gathering focused on how public policy helps or harms the ability of organizations to
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fulfill their missions. (Thomas, 2011, p. 1) The ARNOVA group identified five areas of
new research needed to address concerns about public policies’ impact on nonprofits:
1. To understand different forms of nonprofit financing and their impact
2. To understand the effects of regulatory and tax policies on NPOs
3. To understand emerging models for forming and operating organizations
4. To understand the work of NPOs in advocacy, including the boundaries
between public policy advocacy and political engagement
5. What benefit (tangible and intangible) does the public expect from NPOs
Using those questions as a base, this study’s focus was further narrowed through
conversations with high-raking nonprofit leaders working within the field of public policy.
Leaders were asked to consider ARNOVA’s five areas of needed research, and of
those, which would yield the most valuable information to those working in the sector?
The conversations revealed that leaders working within the field considered
understanding the work of NPOs in advocacy, including the boundaries between public
policy advocacy and political engagement to be of paramount importance. In addition,
there was unanimous agreement that the government/nonprofit relationship is evolving,
requiring all nonprofit leaders to explore political engagement as a means of service
delivery and mission fulfillment. The nonprofit leaders reaffirmed one of the four
assumptions made by the ARNOVA group at the beginning of the symposium, that the
recent recession presented new challenges for sector leaders:
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• Due to current economic conditions, the needs for nonprofit services are
greater while resources decline. A combination of decreased charitable
giving, and state and federal budget deficits threatens service and
sustainability. (Thomas, 2011, p. 8)
The ARNOVA group identified three influences, currently necessitating an increase in
NPO engagement in the public policy process. During and after the recent recession,
NPOs who relied on private funding needed to diversify funding sources, and began to
look to the government for support. As governmental funding for social service
programs declined, the need for NPOs to defend government-supported programs
increased. And, in early 2009, the administration and congress began to make changes
in the tax code which affect charitable contributions to nonprofits. These converging
factors brought nonprofit advocacy efforts to the forefront of sector concerns.
The purpose of this study is to examine NPO advocacy efforts in a post
recession economy, to better understand how NPOs participate in political advocacy,
what factors influence participation in the public policy process, what myths are
prevalent among sector leaders regarding political advocacy, and how NPOs seek to
influence the public policy process. The study focused on three areas of information:
demographic, beliefs and assumptions, and level of political advocacy participation,
seeking to answer the following research questions:
1. Does the size and/or capacity of an NPO impact advocacy efforts?
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2. Do NPO’s understand the legal limitations of 501(c)(3) political engagement?
3. Are NPOs working independently or collaboratively in their political advocacy efforts?
Summary of Literature Review
Nonprofit organizations have been part of America’s cultural landscape since
before the nation was a republic. According to renowned scholar Robert H. Bremmer,
who literally wrote the book on American Philanthropy, the roots of today’s 501(c)(3)
nonprofit organizations can be traced back to 1894, with the formation of the first federal
income tax law granting tax exemption to organizations “founded and conducted solely
for charitable, religious, or educational purposes.” (Bremmer, 1988, p. 223) Beginning
with the first income tax exemption for charitable organizations, laws governing the
nonprofit sector in the United States have continued to evolve. Currently, there are
twenty-nine distinctly different 501(c) classifications of nonprofit organizations.(Internal
Revenue Service, Publication 557, 2015)
Early tax-exempt law centered around three principals; organizations which
operated specifically for charitable purposes should be exempt from paying Federal
income tax; the organizations’ income could not be used for the benefit of an individual
related to the organization or its principals; and to encourage individual giving, a tax
deduction should be granted for contributions to charitable organizations, which meet
the tax exempt criteria. The first of such laws, The Wilson-Gorman Tariff Act of 1894,
although declared unconstitutional the following year, included language, which would
provide the foundation for the charitable tax legislation governing NPOs today.
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(Arnsberger, 2008) This study examines the largest category of designated exempt
organizations, the 501(c)(3) IRS tax-exempt nonprofit.
501(c)(3) nonprofit organizations can be divided into three primary categories:
public charities, private foundations, and private operating foundations. The IRS broadly
defines charities based upon their funding sources, therefore a public charity receives
the bulk of its revenue, at least one-third, from the general public. The leadership of a
pubic charity must by rule of law maintain a governing board of non-related individuals.
Private foundations are often described as non-operating foundations, they have no
active programs or service delivery directives, and primarily support public works
through grants made to service or program charities. Private foundations have no
revenue or governance structure restrictions. Many private foundations have only a few,
or possibly one donor, often from a single family. The third category of 501(c)3s are the
least common, the private operating foundation, which may have active or service
delivery programs similar to those of public charities, but retain funding and governance
structures similar to private foundations, with the bulk of the revenue directed to the
foundation’s programs. (Arnsberger, 2008) NPOs, although defined under the same tax-
exempt status of 501(c)(3), vary greatly in mission focus, annual budget size, funding
sources, and in service delivery systems.
All 501(c)3s are strictly regulated in their activities, financial reporting, and
governance structures, and it is in these regulations that we find the seemingly blurred
lines involving participation in advocacy efforts and the public policy process. According
to the IRS, “no organization may qualify for section 501(c)3 status if a substantial part of
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its activities is attempting to influence legislation (commonly known as lobbying). A
501(c)3 organization may engage in some lobbying, but too much lobbying activity risks
loss of tax-exempt status.” (Service, IRS Publications Compliance Guide for 501c3
Public Charities, 2014) In reviewing the rule, the language is ambiguous at best.
Nonprofits may engage in “some” lobbying but “too much” could result in the loss of tax
exempt status, however, the IRS fails to define “some” or “too much,” which has created
a general lack of understanding as to exactly where the boundary between public policy
advocacy and political engagement is drawn. (Thomas, 2011)
In order to understand the importance of nonprofit advocacy, it is necessary to
examine the sector as a whole, its size, and scope, and impact as an employer and
contractor, as public advocate and political influence. This study will provide a look at
the sector overall, how the sector has evolved over time, and by using previously
published predictive research, sector trend analysis, and findings of an independent
qualitative field research study, will seek to produce conclusions and recommendations
which will provide new insight into nonprofit advocacy in a post recession economy.
According to Lester M. Salamon, contributing author of The Nonprofit Sector: a
Research Handbook, “the field of comparative nonprofit sector studies has grown from
one of widespread neglect to one of extensive contestation, with multiple definitions and
concepts of what the field encompasses competing for attention.” (Powell, 2006)
Salamon’s assertion mirrors this researcher’s findings. In review of the literature and
research available, it is apparent that to understand the nonprofit sector’s influence one
must examine the sector’s impact on the American cultural landscape.
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The nonprofit sector, the third largest employer and largest governmental
contractor in the United States, has become a major economic force, (Salamon, Holding
the Fort: Nonprofit Employment During a Decade of Turmoil, 2012) which must be
considered from a myriad of perspectives. As a social service provider, the nonprofit
sector assists government in providing services to the public, while often being the voice
of the minority, and those unable to speak for themselves. Since its inception, the
nonprofit sector has become one of the nation’s largest economic contributors in both
employment and service, and a major political force, both directly through advocacy,
and indirectly through citizen-driven legislative initiatives.
In the literature review section, we look at the development of the sector
historically, examining how the role nonprofit organizations play in the public policy
process has developed, through the lens of public advocate, economic force, and
political influence. Examining the foundation of the current 501(c) tax-exempt category
of nonprofit organizations, to isolate the differences between 501(c)3 and 501(c)4
designations, and define current legal limitations of advocacy efforts.
Once a firm background of the sector has been established, the study explores
research methodologies used in the evaluating the field of public administration, and by
examining contemporary scholarly opinion, compares qualitative and quantitative
methodologies, and how they are used in sector analysis. The review includes
contemporary research in the field, looking specifically at three previously conducted
research projects: the 2012 Johns Hopkins Nonprofit Listening Post Project, the 2009
Congressional Research Service Report: An Overview of the Nonprofit and Charitable
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Sector, and the 2002 Tufts University Strengthening Nonprofit Advocacy Project
(SNAP). Using these previously published studies as a basis for comparison, the study
examines newly collected information from a qualitative field research study conducted
by the researcher, of 501(c)(3) organizations in Cincinnati, Ohio, which was distributed
by the Association of Fundraising Professionals (AFP) in February and March 2015.
In the findings and analysis section, the study evaluates the impact of the recent
economic recession on the sector, to answer the following questions: Does the size
and/or capacity of an NPO impact advocacy efforts? Do NPO’s understand the legal
limitations of 501(c)(3) political engagement? And, are NPOs working collaboratively or
independently in their political advocacy efforts?
In conclusions and recommendations, the study examines previous scholarly
predictions surrounding the sector post recession, and using newly collected data, the
study informs NPO leaders with recommendations on how the sector may evolve as a
principal player in the public policy process, in a post recession economy.
Statement of the Problem and Research Questions
The group of thirty nonprofit scholars and leaders, who convened to explore
public policies’ impact on the nonprofit sector at the 2010 ARNOVA Symposium,
suggested potential research projects, which could most benefit the sector. Among the
potential projects suggested was to more closely examine the types and levels of policy
advocacy nonprofits are engaged and to look at factors, which appear to support or
discourage advocacy activity among nonprofits designated by the IRS as 501(c)(3)
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exempt. (Thomas, 2011, p. 116) This study examines agency demographics, to
ascertain what factors if any, including NPO size, annual budget, leadership structure,
and/or mission-focus impact political advocacy participation? Members of the Cincinnati
Chapter, of the Association of Fundraising Professionals (AFP), an association of
professionals, which advance philanthropy by enabling people and organizations to
practice ethical and effective fundraising, (AFP, 2015), who work for NPOs with an IRS
Tax Exempt status of 501(c)(3), were surveyed in an effort to ascertain their current
knowledge and understanding of NPO legal limitations of participation in the public
policy process. The survey was announced, promoted, and completed electronically,
first in an initial email written and distributed by the current AFP President of the
Cincinnati chapter to members, and a second announcement for participation was
delivered via electronic newsletter, published by the Greater Cincinnati Chapter of AFP.
The survey was posted online using Google Forms survey tool. Participation was
encouraged throughout February and March of 2015, with a participation deadline of
March 31, 2015. Approximately 15% of the total potential participants responded,
mimicking similar study response ratios within this population. A complete overview of
prior research, including response ratios, will be provided in the findings and analysis
chapter.
NPOs, although defined under the same tax-exempt status of 501(c)(3) (IRS,
2014), vary greatly in mission focus, annual budget size, funding sources, and in service
delivery systems. Diversity is required in order to meet the needs of a diverse society,
but difficult to understand or quantify. Based upon these assumptions, this study sought
to examine NPO advocacy efforts, to better understand how NPO leaders participate in
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political advocacy, what factors (size, budget, or mission) influence these decisions,
what myths are prevalent among sector leaders, and how NPOs are seeking to
influence the public policy process. The field research study focuses on three primary
areas of information; demographic, beliefs and assumptions, and best practices, in
answer to the following three research questions:
1. Does the size and/or capacity of an NPO impact advocacy efforts?
2. Do NPOs understand the legal limitations of 501(c)(3) political engagement?
3. Are NPOs working collaboratively in their political advocacy efforts?
The study examines the role nonprofit organizations (NPO’s) play in the public policy
process, and how that role is evolving within the sector, examining NPOs as contractor,
advocate, and as a political influence. As the role of the NPOs gains importance within
the public policy process, so does the need for sector leadership to interpret,
understand, and provide direction, which will best utilize the newly gained policymaking
power of the NPO.
Potential Ethical Concerns of the Study
Research ethics are defined as an application of moral standards to decisions
made in planning, conducting, and reporting study results. (McNabb, 2008, p. 20)
J. Mitchell (Mitchell, 1998) identified four ethical principles, which shape morality in
public administration research: truthfulness, thoroughness, objectivity, and relevance.
The truthfulness principle simply stated means it is unethical for researchers to
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purposely be dishonest in any aspect of the study, from the study’s stated purpose to
reporting results without bias.(McNabb, 2008, pp. 20-21) The thoroughness principle
requires researchers to be thorough in their research design, and ethically obligated to
include key concept definitions, appropriate selection of samples, participants, or groups
with full descriptions, to identify the limitations of the research design, and a full
description of the analysis design, and that all study finding be reported, regardless of
whether or not they support the proposed theory or hypothesis. The Objectivity principle
requires researchers to remain objective throughout the process, and lastly the
relevance principal states “research in a democracy has a moral responsibility to be
understandable to people and be useful.” (McNabb, 2008, p. 22)
In addition to the ethical considerations within the field of public administration,
this study also adheres to Union Institute & University’s Institutional Review Board (IRB)
requirements (Union Institute & University, 2014) The IRB reviews all university
research involving human subjects, by university students and by university employees
(faculty and staff). Union Institute & University will not approve or support research
involving human subjects, which does not meet IRB guidelines and has not received
approval from Union Institute & University’s IRB, as follows:
The IRB’s policies and procedures are guided by the Code of Federal
Regulations Title 45 CFR Part 46, “Protection of Human Subjects” (Revised June
23, 2005), of the U.S. Department of Health and Human Services (HHS), the
National Institutes of Health (NIH), the Office for Human Research Protections
(OHRP) or any other successor office, and The Belmont Report: Ethical
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Principles and Guidelines for the Protection of Human Subjects of Research.
(Union Institute & University, 2014)
In addition to the above ethical considerations, this study was conducted via the
internet to eliminate personal bias, and/or inference in the data collection process.
Research Method: Qualitative v. Quantitative Research Methods
According to Kaifeng Yang, and collaborating authors Vache Gabrielian and
Susan Spice, (Miller and Yang, 2008) “Qualitative methods often serve as an umbrella
term for a variety of methods and techniques that could not for various reasons be
quantified, situations and/or group behaviors which cannot be illustrated effectively
through data analysis alone. It is for this reason that “qualitative methods have become
part of the mainstream in political science and public administration.” (McNabb, 2008, p.
xxiii) Choosing the correct research methodology lies with the objective of the study, the
question, and/or problem the research seeks to analyze. “Quantitative research involves
the use of numbers to describe things.” (McNabb, 2008, p. 9) Statistical analysis of
collected data is used to establish differences or similarities based upon measured
responses, assigned specific values. Qualitative research is explanatory, can occur
through many different means, open-ended survey questions seeking personal opinion,
focus groups, individual or group interviews, and seeks to understand influences,
environments, and phenomenon based upon participant subjective opinions. Upon
reviewing considerations, the qualitative research method was the logical choice of
research methodology for this study, as ascertaining beliefs and assumptions regarding
nonprofit participation in the public policy process was a stated research goal.
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Chapter Two
LITERATURE REVIEW AND THEORETICAL FOUNDATION OF THE STUDY
In order to understand the role nonprofit organizations (NPOs) currently play in
the development of public policy, it is necessary to review the development of the
sector, and the major influences, which helped to shape the sector, as we know it today.
The nonprofit sector can trace its concept to the Elizabethan period, and the Poor Law
of 1601 (Powell, 2006, p. 91), which formalized a national system of charitable relief to
be paid for by levying property taxes, ideals carried to Plymouth by the first settlers.
American philanthropy, which gave birth to the nonprofit sector, can trace its
roots to Europe but settlers of the new world relied on private and religious institutions
for support, with the goal of founding communities “being better than, instead of like or
different from, the ones they had known.”(Bremmer, 1988, p. 6) Early Americans,
theoretically opposed to government taxation, laid the foundation of the nonprofit sector
of today, by adhering to the “principle of improving social conditions through voluntary
associations.” (Bremmer, 1988, p. 18) The voluntary system of charitable works
continued to evolve with the formation of charitable foundations and trusts, but it was
not until the 1930’s and Roosevelt’s New Deal, did government seek to regulate support
for the citizenry.
According to noted scholar, Peter Dobkin Hall, the terms we use to describe the
nonprofit sector and nonprofit organizations are, “neologisms,” (Hall, 2006, p. 32) coined
after the Second World War, by political scientists, economists, and lawmakers, to
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describe and classify organizations based upon their intent and purposes, for tax and
regulatory reasons. Classified in the 1954 Internal Revenue Code, specifically 501(c)(3),
and 501(c)(4) designated organizations, with the broader 501(c) classifications
extending to include education, religious, and political advocacy organizations, which
benefit from varying degrees of tax exemption. After World War II, income and social tax
and spending policies transformed the domain of philanthropy, which resulted in
unprecedented grown of tax-exempt organizations, more than doubling the number of
fully or partially exempt entities by 1950, and more than twenty-fold by 1968 with more
than a quarter million reporting under the 501(c) designation. (Hall, 2006, pp. 50-52)
Nonprofit Advocacy and the Government: Friends or Foes
What is advocacy? In order to understand advocacy, as it pertains to the
nonprofit sector, we must first seek to understand the relationship between NPOs and
the government. According to Dennis R. Young, noted scholar on the subject of
nonprofit-governmental relations, advocacy, in one form or another has been part of
American society since we formed a collective society, “nonprofit activity supplementary
to government predates the U.S. republic.” (Boris, 2006, p. 42) A complex relationship
with a single defining thread, the desire to provide for the citizenry. Governments and
nonprofit organizations (NPOs) with a common mission, which simultaneously binds
them and places them at odds. Advocacy, as it pertains to the NPO/Government
relationship must be viewed through overlapping influences.
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Economically, the nonprofit sector’s relationship with government has evolved,
now including service provider of principal, as well as supplemental services, as
contractor for the government. As this role has evolved so has the relationship, with the
modern welfare state, also known as public assistance programs, evidence of this shift.
Politically, the sector represents nearly a third of the national workforce as an employer,
a large number when added to the number of under-served minority populations for
which the sector advocates as their representative to the legislature. A significant
portion of NPOs financial resources are derived either directly or indirectly from
government funds, either delivered in the form of pass-through state grants or direct-
service reimbursement for contacted services. Does this new partnership impact
political engagement? Or, as some would suggest, is the current relationship where
nonprofits perform critical functions in delivering services the perfect solution? In the
next section we will review contemporary literature on nonprofit advocacy and the role
the NPO/Government relationship plays in 501(c)(3) advocacy. (Berry, 2003)
As mentioned earlier, advocacy, in the terms of a collective group of people
petitioning the government on behalf of the larger population need, predates the
Republic and is as intrinsic to the American value system as the freedom of speech.
According to Mary R. Hamilton, in her article titled Democracy and Public Service,
“It is fair to say that public service and democracy are both antithetical and
complementary. There is also no generally accepted theory or model of public
administration for American democratic government. Neither the United States
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Constitution nor other documents related to the founding of the nation provide a
model for an administrative component. The Constitution specifies a goal of
providing for the common defense and producing other public goods, but it says
little or nothing about contemporary issues such as providing for the social,
economic, and physical well-being of the populace.” (Box, 2007, pp. 3-20)
Although the underlying relationship between NPOs and government has changed little
over time, the role advocacy plays in the public policy process has shifted dependent
upon prevailing theories of governance. American philanthropy until the Great
Depression was primarily the work of the wealthy. The private foundation of today owes
its roots to the nation’s elites, who exercised significant influence on policy development
and implementation. It was not until the late nineteenth century that political leanings
began to shift power away from the elites in an attempt to reduce their influence. In the
19st
Century, a new model of public administration was born, beginning with the
Pendleton Act, passed in 1883, establishing the first civil service in the United States.
The system of merit based-promotion and employment helped to usher in a new era of
political neutrality. (Kettl, 2009, p. 208)
The 20th
century, the New Deal, and World War II solidified the need for a new
relationship between government and the people. Scarcity and need propelled
government to assume a proactive approach to providing societal needs. Trust in
government and civil service remained the national tenor until the 1960s, when issues
abroad resulted in countrywide distrust, and protest led to major reforms. (Box, 2007,
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pp. 70-71) As the nation struggled under its own weight, to reduce its size and
streamline processes, the nonprofit sector was called to assist the government as social
service provider. Outsourcing service to the citizenry served two purposes, it provided
for the needs of the public, while allowing government to reduce the number of
departments and employees. A system which continues to be debated, with those
calling for less government applauding efforts to shrink through outsourcing, while
others see the approach as erosion of democracy in the name of efficiency. (Box, 2007,
pp. 4-12)
According to a report by the Aspen institute , a global forum founded in 1950 to
leverage the power of leaders to improve the human condition, a study completed in
2002, shows the landscape of the nonprofit sector has shifted in recent times,
responding to new social and political dynamics. Influences including an ever-increasing
diversity of peoples and cultures, immediate accessibility to information through
emerging technologies, downsizing and the development of a global marketplace
present opportunities and challenges for nonprofit organizations. These converging
factors offer potential for new nonprofit-governmental partnership models, and potential
new revenues resources for the historically underfunded nonprofit sector, but
simultaneously result in additional challenges for the sector, such as for-profit
businesses competing with nonprofits for service delivery contracts, and pressure for
nonprofits to remain true to their mission in a competitive economic environment.
((NSSG), 2002) In the study of nonprofit-governmental relations, in the United States,
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three predominate theories exist, Supplementary, Complementary, and Adversarial with
each representing a distinct relationship structure and purpose.
In the Supplementary theory, nonprofits fulfill public needs, which are not
supplied by the government, thereby supplementing the public service offerings of the
government. In the supplementary model, private support of public services are only
offered to augment governmental support, with the government maintaining primary
responsibility for providing public needs, with these supplemented funds being raised
through voluntary collective means. According to Young, Burton Weisbrod first
presented the supplementary model of nonprofit-government relations in 1977. (Dennis
R. Young, 1995, p. 34) The theory posits that given the democratic policymaking
process, governments must consider the preferences of the majority when choosing
levels, types, and qualities of services, which serves the citizenry well if their
preferences are homogeneous. The citizens’ whose needs fall outside the norm or
median range of service preferences, are then addressed by nonprofit organizations
willing to supplement governmentally supplied services with additional services, to serve
those minority preferences. The supplementary theory of nonprofit-government relations
is similar in terms of advocacy as the Free Market theory of economics.
The Free Market theory assumes that in a given market the people will have
knowledge of all competitive strategies available and given that knowledge will always
make the choice that will produce the most positive results for the most people.
(VanHorn, 2001, pp. 27-31) The theory posits that tending to the needs of the minority is
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not a market driver because the theory is based on all people having access to all
information and opportunities available. Free market economic theory asserts the
government is only responsible for the needs of the majority, supporting the theory that
nonprofit/nongovernmental organizations should supplement social services by tending
to the needs of the minority.
The Complementary theory of nonprofit-governmental relations sees the two
entities as partners, NPOs working with the government, to compliment each other, in
delivering service to the public. In the complementary relationship, nonprofits and the
government have a direct relationship with one another. According to noted scholar
Lester Salamon, a principal proponent of the partnership relationship, this theory posits
that government should finance public services, while nonprofits deliver the services,
thereby complimenting each other in servicing the citizenry. Salamon asserts the
nonprofit sector has long been a “hidden subcontinent on the social landscape of
American Life,” (Salamon, The State of Nonprofit America, 2012, p. 4) in which we rely
on nonprofit organizations to handle critical public needs. A necessary partnership,
between NPOs and the government, originated in the 1960’s, is responsible for the
tremendous growth of the sector over the last fifty years. (Salamon, The State of
Nonprofit America, 2012, pp. 3-5)
The complementary theory has gained prominence in today’s society primarily
due to an ever-growing government, and multi-layered bureaucracy. In the span of just
over 50 years, from 1962 to 2007, the number of governmental employees grew from
25
just over 5 million to nearly 20 million (Kettl, 2009, p. 62) and with a governmental
structure of that size, costs and inefficiencies are unavoidable, specifically in the
delivery of social services. Therefore, it is often cheaper for governments to contract out
certain services, than it is for them to administer them internally. In addition to the cost
of labor, which is a primary consideration in service delivery, the private or nonprofit
sector may be better informed or educated on the issue or service to be delivered. The
last and final justification for the complementary theory of nonprofit-governmental
relations is that nonprofits do not operate from a profit-making position. The goal of the
nonprofit is mission-based as opposed to profit or political motivations, therefore there
are fewer reasons to compromise on service or lower the costs to increase profits.
The last most prominent theory in the analysis of nonprofit-governmental
relations is the Adversarial view. In this theory, nonprofits take on the role of watchdog
and adopt an additional directive, to influence the government to make changes in
public policy and/or to maintain accountability to the public. As with most things, the
sword cuts both ways, as government attempts to influence nonprofit organizations, by
regulating their services, and choosing to respond or not respond to their advocacy
initiatives. As Dennis Young explains, “The adversarial view does not posit any specific
relationship between the levels of nonprofit and governmental activity. For example,
nonprofits can advocate for smaller or more efficient government operations, or they
can advocate for new programs and regulations that would increase government
activity.” (Boris, 2006, p. 33)
26
Unlike the supplemental and complimentary theories of nonprofit-governmental
relations, the adversarial theory promotes an advocacy role for nonprofits in public
policymaking, and the role of governmental control over nonprofit organizations. The
adversarial theory has only recently been explored as a separate theory. Many scholars
see nonprofit advocacy and governmental efforts to regulate nonprofits as one aspect of
complementary theory. Nonprofits and government are often collaborators in passing
legislation or changing public attitudes. However, as Young illustrates, new literature
proposes there is also a third way of characterizing the relationship between nonprofit
organizations and government, as adversaries in policymaking and service delivery,
with the primary difference being the added role of citizen advocate.
Young looks to economic theory to illustrate the adversarial relationship, by citing
Weisbrod's theory of government failure. Weisbrod asserts, “In heterogeneous
communities, where minority views are not well reflected in public policy, minorities will
organize themselves on a voluntary collective basis, not only to provide public services
for themselves but also to press government to more adequately serve their interests.”
(Boris, 2006, p. 39)
The Economics of Nonprofit Advocacy
Scholars agree the nonprofit sector is becoming an important player in the
delivery of social services in the United States. The rationale for this increase is simple,
the government is too large to effectively ascertain the needs of its citizenry making
provision of services challenging at best. Therefore, government allocates direct service
27
to private organizations, both nonprofit and for profit, with specialization of service within
a specific area of societal needs, and knowledge of constituency, based upon
geographic location and specialization.
Examining the NPO as service provider for the government is primarily examined
using the Principal-agent theory of economics. In this theory, the nonprofit is not seen
as a supplemental service delivery system for services. To apply the business model of
principal-agent theory to the NPO-governmental relationship, “the nonprofit’s public is to
the nonprofit what owners are to the firm (the principals) and what the people are to
their democratic (representative and responsive) government – its ultimate sovereign,
beneficiary, and assessor of value added (its principals).” (Bryce, 2012, p. xiii)
The most recent scholarly work published on this theory, by Herrington Bryce,
published in 2012, breaks down the theory into key concepts, which include; the Public
Policy Process, “The” or “Its” Public, Social Capital Assets, Cognitive Social Capital,
Principal-Agent, Agents and Stewards, Contracts, Trust, Unspecified Contracts, and
Shirking, and uses these concepts to demonstrate the theory through a principal/agent
paradigm across public purposes. This perspective offers a set of strategic positioning
implications for nonprofit organizations in the public policy arena. The author presents
the theory from an interdisciplinary perspective, looking at the subject from current
theoretical assumptions from law, economics, public policy, political and sociology and
puts forth the argument that the theory presented is universally applicable, regardless of
a nonprofit’s mission focus and asserts that this theory is applicable to NPO’s as well as
28
for profit businesses because they not only discharge humanitarian action on behalf of
the American public, they generate public concern, shape the debate, shape the
formulation of policies and how they will be discharged, this elevates the NPO from
contractor for the government to social change agent. (Bryce, 2012, p. 2)
Although not the first to apply the principal-agent theory to the NPOs, Bryce’s
expansion on the theory explains by identifying why the principal-agent theory is
significant to NPOs and how it differs from other theories on the subject. The NPO,
Bryce asserts, has a competitive advantage over governments or private firms, in the
public policy process for many reasons. The first being public opinion, as although many
for-profit corporations maintain the ability to provide services to the citizenry, they do so
for profit. The perception that profit is primary in for-profit enterprise and mission is
primary for NPOs, both the citizenry and the ruling government is likely to view the
NPOs motives more favorably, if all other factors of delivery are equal. The next factor
hinges on the transactional cost of the contract. According to Bryce, the primary motives
of each entity again play a primary role in preference, and as the NPO’s motive is not to
make a profit, the assumption is the NPO will deliver the service for a lower cost than
the for-profit organization. Bryce’s assumption is reinforced by the findings by Corts and
Singh (Corts and Singh, 2004), Gulati (Gulati, 1995), and Schwartz and Watson
(Watson, 2004). These scholars view the NPO as an economic and legal entity, which is
independent of productive economic activity although their purpose is societal rather
than individual benefit or profit. (Bryce, 2012, pp. 33 -111)
29
The Principal-agent theory, when used to look at NPOs rather than for-profit
organizations, offers a solution to traditional public administration’s problems in
delivering services to the public. Nonprofit organizations are specialized, with a specific
mission focus, normally addressing the needs of their mission constituency within a
designated geographic area and demographic. The specialization of NPOs makes them
the best organizations to serve these specific constituents, because in principal-agent
theory the focus is on information, and how having and using information is necessary
in service delivery, both problem areas for government/public administration (Kettl,
2009, pp. 102-105). However, not all political scholars believe the Principal-agent theory
is the only way to view the nonprofit-governmental relationship.
Angela Eikenberry explores an alternative approach in her essay titled “Nonprofit
Organizations, Philanthropy, and Democracy” (Box, 2007, pp. 169-193). Eikenberry
agrees with the majority of scholarly opinion, regarding the increasing importance of
nonprofits as social service providers. However, she asserts that public administrators
need to look beyond Principal-agent theory when defining their relationship with
nonprofit organizations and consider the democratic implications of relying on nonprofits
to provide these services, charging that the Principal-agent theory is inadequate, as it
focuses too largely on the administrative process as opposed to the implications to
democracy. Eikenberry cites accountability as the primary source of concern because
nonprofit service providers are only loosely accountable to the elected officials who
approve and administer the programs, thereby creating a much narrower view of the
role nonprofits play in society. (Box, 2007) Regardless of the ongoing theoretical dialog
30
on the pros and cons of the principal-agent theory, most political scholars agree on one
truth that as the population grows so does the government, and as the government
grows its capacity to know the needs of the public diminishes.
The Politics of Nonprofit Advocacy
Looking at the nonprofit organization as a political influence is best illustrated in
the third edition of Van Horn’s Politics and Public Policy. Van Horn and his collaborators
divide public policy into political domains, which examine policy development through
the roles of people and institutions (VanHorn, 2001). According to the authors, the
framework of domain politics is segmented into six domains, including Boardroom,
Bureaucratic, Cloakroom, Chief Executive, Courtroom, and Living-room politics, and
examines the process through the actors involved. These actors represent the principal
influencers within the six policy domains. The nonprofit organization (NPO) influences
through political party affiliation in several of these domains: Cloakroom politics or
policymaking by legislators, who are influenced through NPO lobbying efforts;
Courtroom politics, where NPOs may influence through judicial orders in response to
interest groups and lastly through Living-room politics, where public opinion influences
through media with predominate party affiliation within a region, which may impact
media coverage in tone and frequency.
According to the authors’, each of these domains “implies a different arena of
combat, a different set of participants, and different rules of conduct,” (Horn, 2001, p.
21) which also implies different outcomes. The theory breakdowns each domain by its
31
principal actors, common issue characteristics, and common policy outcomes, i.e., in
living room politics mass media and public opinion are the principal actors, revolving
around common issues involving high salience, high conflict, and manifest costs issues,
and normally results in a change in policy, responsiveness or innovation. Van Horn’s
assertions differs from traditional scholarly literature on public policy, which assumes
that issues proceed orderly from agenda to policy formation and adoption, a theory
which discounts the influence of private business, interest groups and the influence of
media and public opinion.
Cloakroom politics is the most divergent from traditional public policy literature, in
that it posits that the majority of American policymaking takes place in the venues
outside the House and Senate. (Horn, 2001, p. 121) The second strongest argument
Van Horn asserts that governments cannot make decisions without the consent of
legislatures. (Horn, 2001, p. 152) Considering most NPO lobbying efforts center on the
legislature, and public opinion and private interest influence legislatures, NPO are
political influencers. Political party affiliation is extremely important in legislative
influence; if the majority party agrees with the mission goals of the lobbying NPO little
lobbying is necessary, whereas if the reverse is true the same NPO must increase
lobbying efforts to gain support from an opposing party majority.
Courtroom politics looks at how judges influence public policy through the
governing of constitutional and administrative law. As many judicial seats are elected
rather than appointed party affiliation plays a role in this aspect of politics with majority
32
party penetration in the judiciary and impacting the effectiveness of NPO/interest
groups.
The last domain to illustrate the NPO, as a political influence is Living-room
politics, which is the political discourse of America’s living rooms. Today, more than
ever, grassroots movements are shaping the political landscape. The increase in
communication facilitated by the Internet is swaying public opinion, and mobilizing
people on policy issues. Social-media has become one of the most cited influences in
American politics today. Previously limited by funding, the 21st
Century NPO may
employ low to no cost mechanisms to influence, such as email marketing, blogs, and
online forums making lobbying efforts affordable to even the smallest NPOs.
In November 2008, New York Magazine’s John Heilemann led a panel at the
Web 2.0 Summit in San Francisco on “The Web and Politics.” Heilemann compared the
disruptive role the Internet played in the 2008 election to the role television played in the
1960 election of John F. Kennedy. In both cases, use of the new medium for political
influence swung the election towards the winning candidate, even though in 2007 the
winning party was not in majority. (Arrington, 2008).
One summit respondent identified three influences currently in play necessitating
an increase in NPO engaged in the public policy process; during and after the most
recent recession, NPOs who relied on private funding needed to diversify funding
sources, and began to look to the government for support, as governmental funding for
social service programs declined the need for NPOs to defend the government
33
supported programs increased, and in early 2009, the administration and congress
began to make changes in the tax code which affect charitable contributions to
nonprofits. These converging factors have brought nonprofit advocacy to the forefront of
sector concerns.
Chapter Three
RESEARCH DESIGN AND METHOD
According to Kaifeng Yang, and collaborating authors Vache Gabrielian and
Susan Spice, (Miller and Yang, 2008) “Qualitative methods often serve as an umbrella
term for a variety of methods and techniques that could not for various reasons be
quantified. Examples of these reasons are inability to formulate fuzzy concepts, small
number of observations, study of unique events, and losing essence in coding the
situation. Specifically, qualitative methods are often used to indicate three related
concepts:(1) qualitative research epistemologies that are nonpositivistic; (2) qualitative
research strategies that aim more toward interpreting or revealing meanings rather than
generalizing causal relationships; and (3) qualitative research techniques that are not
operationalized with numbers.” (Miller, 2008, p. 142) Upon reviewing considerations, the
qualitative research method was the logical choice of research methodology.
As stated above, qualitative research is best employed in epistemologies, which
are nonpositivistic. In order to understand what epistemologies are nonpositivistic, we
must compare the positivistic perspective, which assumes “that there is a clear
separation between the researcher and the research participants because the
34
researcher does not influence the participants’ behavior” (Miller, 2008, p. 144) with the
nonpositivistic perspective, which assumes the position that the researcher will always
influences the participant because if “the participants know they are participating, their
behaviors are affected and become less authentic .” (Miller, 2008, p. 144) The
qualitative research method was applicable to this study because the researcher is also
a nonprofit professional, and member of the group being surveyed. The nonpositivistic
approach was necessary, as the principal researcher is also a sector participant.
Participant experience will then influence the questions asked within the study.
The second reason to employ a qualitative research strategy in this study was
the goal of interpreting and/or revealing meaning in answers to study questions, rather
than generalizing causal relationships. The goal of the study is to provide new
information to the nonprofit sector, specifically to professionals working within the field,
which will assist nonprofit organizations in successfully utilizing the public policy process
as a means to fulfilling their social service missions. Opinions on the current relationship
between NPOs and the public policy process may only be expressed in narrative open-
ended answers and not quantifiable with data analysis alone.
The qualitative method of research is also more applicable to this study’s design
due to the information it is intended to produce; emergent, and improvisational, which
allows for openness meaning. As recommended in hard-to-study settings (NPOs) and
groups (advocacy groups and nongovernmental social service providers), ambiguous
phenomena and will include open-ended questions, which are goaled to be
35
interpretative and subjective and for these reasons, this study used a qualitative
methodology. Although a qualitative research design is the most prevalent in the study
of public administration, there are many criticisms of qualitative research. Despite its
strengths, qualitative inquiry is not without its limitations. The four most common
criticisms were itemized in a journal published The British Journal of Sociology in 1984:
1. Too subjective, purists assert qualitative studies are too impressionistic, as it
relies upon the participants’ perspective rather than hard data.
2. Difficult to replicate, as the researcher is the main research instrument,
duplicating a study is practically impossible unless the same research, same
participants, the same in scope and time period observed.
3. Problems of generalization, as qualitative research studies are not supposed
be representative of a larger population studies may yield restricted conclusions.
4. Lack of transparency, since qualitative research is largely interpretative and
conducted through non-mathematical methods (e.g., interviewing) articulating
procedures such as sample selection, collection and analysis of data are difficult.
Despite these criticisms, the qualitative research method was chosen for this study
based upon the following considerations:
1. No preset hypothesis, the study did not seek to prove or disprove a theory, rather to
allow hypothesis and conclusions to evolve as the study developed.
36
2. Participant opinion was necessary therefore narrative questions were employed.
3. Participant experience within the study subject matter was variable dependent upon
agency demographics, therefore holistic descriptions of the 2007-09 economic
recession phenomenon were necessary to study varying levels of impact.
Data Collection and Analysis
In an attempt to ensure the study yielded new and valuable information within the
nonprofit sector, leaders in the area of public policy within the nonprofit sector were
consulted before study questions drafted or posed. Jason Lee, General Counsel and
Director of Public Policy for the Association of Fund Raising Professionals (AFP), a
membership organization representing more than 30,000 members in 235 chapters
throughout the world, which works to advance philanthropy through advocacy, research,
education, and certification programs (AFP, 2015), confirmed the impetus theory which
prompted this study. The role of NPO as social service contractor, advocate, and
political influence is evolving and NPOs have the potential to become a powerful
political force in the future. To validate this assumption, Mr. Lee suggested consulting
other sector leaders. Conversations with nonprofit leaders working in the field of public
policy affirmed a consensus that the sector was evolving and the need for new research
in the field. As early as 2003, scholars in the field reported trends, which reinforce a
sector-wide evolution of importance. Jeffrey Berry, noted “As essential as nonprofits are
today, current trends suggest that they are going to grow even more significant in the
years to come,” in his sector analysis, designating the 21st
century as “The Age of
Nonprofits.” (Berry, 2003, p. 2)
37
In 2007, in the most recently published quantitative analysis, the sector showed
unprecedented growth, “nonprofit organizations employed close to 13.5 million paid
workers” representing over 10% of the U.S. workforce, placing it as the third largest
industry. (Salamon, The State of Nonprofit America, 2012, p. 8) If we add the estimated
4.5 million volunteer workers annually, the nonprofit sector labor force swells to nearly
over 18 million annually, the largest workforce of any industry in the United States. In
addition to being the nation’s largest employer, the sector holds economic sway as well,
representing revenues of over $1.7 trillion dollars, with over $85 billion represented just
in the social services segment of the sector, nonprofits are funding 70% of all social
services in the U.S. In addition to employer and economic force, the sector also acts as
a tremendous political influence, by identifying social inequities and bringing those issue
to the public, seeking to protect human rights by being the voice of social, political,
environmental, and ethical concerns. Salamon asserts that the nonprofit sector acts as
“a critical social safety valve, permitting aggrieved groups to bring their concerns to the
broader public attention and to rally to improve their circumstances.” (Salamon, The
State of Nonprofit America, 2012, pp. 3-12)
The importance of NPOs, across sectors, cannot be ignored, “after adjusting for
inflation, revenues for nonprofits grew by 144% between 1977 and 1997 while the
nation’s economy grew at just 81%.” (Berry, 2003, p. 10) Until recently, scholars and
economic theorists consider the market economy, as it pertains to the business and
governmental sectors, with businesses producing and distributing goods and services,
and governments as regulators and lawmakers, ensuring social justice. However, as the
38
nonprofit sector continues to grow, so does its influence, adding a new player to the
national economy and political landscape. Using previously published sector research,
including the following projects: the 2012 Johns Hopkins Nonprofit Listening Post
Project, the 2009 Congressional Research Service Report: An Overview of the
Nonprofit and Charitable Sector, and the 2002 Tufts University Strengthening Nonprofit
Advocacy Project (SNAP), a qualitative research study was created. Data obtained in
these historical studies was used to identify recurring themes and new insights.
The Field Study Research Project
A field research study, titled Survey: Nonprofit Advocacy in a Post Recession
Economy was conducted in February and March of 2015 to examine Nonprofit
Organizations, (NPOs) advocacy efforts in order to better understand how NPO leaders
participate in political advocacy, and whether advocacy efforts changed as a result of
the recent economic recession. The questions of the study were derived using the
comprehensive study Strengthening Nonprofit Advocacy Project (SNAP), a multi-year
research project conducted by Tuffs University in 2002, to understand how nonprofits
use the public policy process, as a historical reference. SNAP included 2735 randomly
selected 501(c)(3) nonprofit organizations, who were asked to complete a qualitative
written survey. The SNAP survey yielded a 63.7% response rate. Using the SNAP
survey results as the basis for comparison, this study compares those results with a
qualitative field study, conducted from February through March of 2015. The survey was
conducted online and distributed to 255 members of the Cincinnati Chapter of the
Association of Fundraising professionals (AFP), of those, only members employed with
39
a 501(c)(3) organization were permitted to participate. The survey yielded a 15.2%
response rate. This field research study was divided into three areas of information:
demographics, advocacy efforts, and collaboration and was conducted via the internet,
utilizing Google survey and analytics survey tool. The survey was distributed to potential
participants in February 2015, with a completion deadline of March 31, 2015.
Participants were pre-qualified for participation by being current members of the
Association of Fundraising Professionals (AFP), Cincinnati, Ohio chapter, and employed
with a 501(c)(3) nonprofit organization, and was endorsed by the leadership of the
Cincinnati Chapter of AFP. The participant pool was diverse in both the type of nonprofit
organization (small, medium, large, mission or service driven), and in the perspective of
the participants, as all employees were welcome, both leadership and staff were polled.
The diversity of the survey participants helped to validate the responses, and insure the
information collected was not influenced by mission focus. The study was qualitative,
included open-ended questions, interpretative and subjective, to encourage openness.
The survey was distributed to participants electronically in an email written by the
AFP Chapter President. Potential participants were directed to the survey Url:
https://docs.google.com/forms/d/1SCj-iBd6dmkLEjrV4HW6QGEzzxnmnl--
hn7XLjlyNXU/viewform?c=0&w=1, to access and complete the online form. Participation
was anonymous, as no personal identifying information was collected, and as
participation was voluntary, consent was implied by completing the survey. The
researcher had no direct contact with participants. Using Google Forms, survey
40
responses were collected and tabulated automatically and electronically, thereby
eliminating personal interpretation of responses based on unwritten cues, i.e., voice
inflection, etc., often cited as a criticism of qualitative research. Survey results were
generated automatically by the survey application to insure data collection integrity.
The field study was divided into three sections:
 Demographic: including NPO annual budget, staff size, and breakdown,
mission, and number of constituents served.
 Advocacy Efforts: including questions to ascertain NPO Leaders understanding
of the legal limitations of 501(c)(3) political engagement, the number and size of
501(c)(3)s with active initiatives.
 Collaboration: the number and size of NPOs working collaboratively in order to
affect change at the policy level.
Using an electronic distribution system for the survey provided two distinct advantages:
data collection was independent of the researcher thereby reducing incidence of
inference or personal bias, and participants completed surveys independent of the
researcher, eliminating the possibility of data tampering in the collection process.
Chapter Four
FINDINGS AND ANALYSIS
The goal of the 2015 field research study was to examine NPO advocacy in a
post recession economy. Historical analysis as a point of reference was necessary. The
point of reference chosen for the study was the SNAP overview of findings, published in
May 2002, by Tuffs University Professor, Jeffrey M. Berry, (Berry, Strengthening
41
Nonprofit Advocacy Project (SNAP) Overview of Findings, 2002), and his subsequent
book on the topic, A Voice for Nonprofits, published with David F. Arons, in 2003.
(Berry, 2003)
Conducted as a multi-year project by Tuffs University, OMB Watch, and Charity
Lobbying in the Public Interest (CLPI) the goal of the project was to understand how to
motivate more public policy participation by United States nonprofits. The project was
conducted using three different research strategies:
1. In 2000, January to June, written surveys were mailed to 2735 randomly
selected charities with a 501(c)(3) designation, which filed IRS 990 form in the
previous year. Excluded from the selection were hospitals, universities, and
private foundations.
2. From September 2000 to February 2001, 45 telephone interviews were
conducted with executive directors who had responded to the written survey.
3. From February to September 2001, 17 focus groups of executive directors and
board members were held.
For purposes of the field study comparison, only the findings yielded through the initial
SNAP mailed survey were included. The SNAP 2002 report concluded the following:
 Although there is a broad understanding of some of the general laws and
regulations governing policy participation, there are two major misconceptions,
which dramatically impact NPO participation; 50% of NPOs believe they are
prohibited from lobbying if a portion of their budget comes from federal funds,
and 43% believe they could not sponsor a forum featuring candidates for office.
42
 There are persistent barriers to NPO participation in the public policy process,
including annual budget size, organizational infrastructure, staff size and skill
level, and access to technology.
 There is an even larger gap in understanding of federal lobbying laws and rules
governing NPOs, specifically surrounding how much lobbying violates IRS limits
on tax exempt 501(c)(3) nonprofit organizations.
Using similar questions, regarding agency demographics, understanding the rules, and
participation in the public policy process, a field study was conducted from February 1,
2015 through March 31, 2015, the following is an overview of the survey data.
Field Research Study Data
The survey was conducted online and distributed to 255 members of the
Cincinnati Chapter of the Association of Fundraising professionals (AFP), of those, only
members employed with a 501(c)(3) organization were permitted to participate. The
survey yielded a 15.2% response rate. The study was divided into three areas of
information: demographics, advocacy efforts, and collaboration. The survey was
distributed to potential participants on February 1, 2015, with a completion deadline of
March 31, 2015. Participants were pre-qualified by being current members of the
Association of Fundraising Professionals (AFP), Cincinnati, Ohio chapter. Respondents
were diverse in the types of NPOs represented, as employees of small, medium, and
large NPOs responded. In mission focus, direct or indirect service, arts and culture as
well as Health and Human Services, and in individual perspective, as all employees
were welcome to participate, leadership and staff, with no differentiation data collected.
43
Demographic Data Summary
 68.4% of respondents work for NPOs with annual budgets in excess of $1M
 28.9% of respondents work for NPOs with 25 to 50 employees, with the next
largest group being 21.1% with 1 to 5 employees
 23.7% of respondents work for NPOs with a designated Public Affairs Director
 26.3% of respondents work for NPOs with 30+ board members
 44.7% of respondents work for Health and Human Services NPOs
 76.3% of respondents work for NPOs which serve 1000+ individuals
 23.7% of respondents work for NPOs which receive 50% or more of their funding
from individuals, with 71.3% receiving 5% to 30% from individual donations
 All respondents work for NPOs which receive a percentage of their funding from
private foundation support, with 15.8% receiving 50% or more from foundations
 50% of respondents work for NPOs which receive 0% of their funding from
governmental funds
 73.7% of respondents answered YES to the question, “Did the recent economic
recession impact your fundraising efforts?”
The demographic information yielded by the respondents was very much in line with the
SNAP survey demographics, with one noticeable difference: In 2002, 82% of the
respondents reported receiving the majority of their funding from individuals, as
opposed to 71.3% reporting less than 30% of funding from individual donations in 2015.
In the narrative question section of the 2015 field study, respondents were asked “if you
answered yes to the question, ‘Did the recent economic recession impact your
44
fundraising efforts?’ please explain how your fundraising efforts were impacted?” Loss
of funding was the predominate reason cited, below is a sampling of those responses:
 “The economic crisis left people with few funds in their banks, which they were
less likely to share with us.”
 “Our governmental grant dollars were cut, each year, resulting in a 30% decline
in previously anticipated funding.”
 “The recession simultaneously increased the demand for services while
decreasing dollars raised in support of these services.”
 “We hired a fulltime development director to solicit private funding to offset
decreases in state and federal funding due to budget cuts.”
 “Government funding decreased, the number and size of individual gifts
decreased, foundation support became harder to secure.”
Advocacy Data Summary
As predicted by Jeffrey M. Berry, in 2003, “current trends suggest that they [NPOs] are
going to grow even more significant in the years to come.” (Berry, A Voice for
Nonprofits, 2003, p. 2) Prior to the economic recession of 2007-09, scholars of public
administration were noticing (Berry, A Voice for Nonprofits, 2003, p. 3) a governmental
trend of nonprofits being called upon to deliver critical services to the populace, “Indeed,
the modern welfare state has largely been subcontracted to nonprofits.” The ever-
increasing influence of the nonprofit sector was further analyzed in The Johns Hopkins
Listening Post Project. A joint project of the Center for Civil Society Studies at the Johns
Hopkins Institute for Policy Studies in cooperation with The Alliance for Children and
45
Families, Alliance for Nonprofit Management, The National Council of Nonprofits and
several other nonprofit organizations, formed to study the impact of the recent recession
on the nonprofit sector. (Salamon, Recession Pressures on Nonprofit Jobs, 2010)
In early April 2010, the Listening Post Project conducted a nationwide survey of 1100
NPOs, asking to report on their experiences over the previous six months, from October
2009 through March 2010. Of the 1100 NPOs solicited, 526 organizations responded,
yielding a 46% response rate, which according to the author “is quite high for the
nonprofit field, particularly in a time of economic hardship.” (Salamon, Recession
Pressures on Nonprofit Jobs, 2010, p. 2) Two key findings were derived:
1. The financial battering and increased demands nonprofits are experiencing in the
current recession are taking a serious toll on both their crucial human resources and
their ability to deliver vital programs and services, and yet,
2. Nonprofits have displayed enormous resilience and a strong commitment to their
critical missions in the face of lingering recession, with more organizations holding
employment steady or actually adding staff, though many of these are finding it difficult
to maintain existing services.
Considering NPOs have been challenged to do more with less, it is not hard to
understand why Lester M. Salamon titled the first chapter in his 2012 book, “The
Resilient Sector.” (Salamon, The State of Nonprofit America, 2012, p. 3) However, one
must ask what part of that resiliency is owed to NPO advocacy efforts? According to the
SNAP survey, in 2002, NPOs were not using the public policy process to their
46
advantage, most NPO leaders had limited knowledge of the 501(c)(3) legal limitations to
lobbying, and not one of the NPO respondents surveyed correctly answered all of the
questions pertaining to advocacy, and the rules governing participation in the public
policy process. In an effort to see if this reported resiliency was due to a greater
understanding of the laws regarding lobbying, the 2015 survey posed similar questions
included in the 2002 SNAP survey. Below is a summary of that data:
 60.5% of respondents answered “Somewhat” to the question, “Are you familiar
with the current IRS rules regarding 501(c)(3) advocacy?”
 15.8% answered yes to the question “Are you familiar with the current IRS rules
regarding 501(c)(3) advocacy?”
 63.2% of respondents answered “No” incorrectly to the question, “Under current
IRS regulations can your organization support or oppose federal legislation.”
 84% of respondents answered “No” incorrectly to the question, “Under current
IRS regulations, can your organization lobby if a portion of your annual budget is
derived from federal funds.”
 65.8% of respondents answered “No” incorrectly to the question, “Under current
IRS regulations, can your organization sponsor a forum or candidate debate for
elected office?”
As reported in the 2002 SNAP survey overview, the percentage of incorrectly answered
questions has increased over time, indicating NPO know less in 2015 about the rules
governing their advocacy efforts. Incorrect responses increased from 50% to 84% of
respondents who believe they cannot lobby if a portion of their annual budget is derived
47
from federal funds, with an increase from 43% in 2002 to 65.8% in 2015, of respondents
who believe they could not sponsor a forum or debate featuring candidates for office.
Collaboration Data Summary
The final section of the 2015 field survey focused on collaboration. The 2002
SNAP survey did not include a specific section on how organizations accomplished their
advocacy efforts. The following is a summary of those findings:
 86% of respondents report they do participate in the public policy process,
however, 78% of that participation is considered “Grassroots” lobbying, i.e.,
organizing public support.
 84% of respondents report NPO capacity as being the primary reason their
efforts to impact public policy are not more robust, with 50% of respondents
reporting paid staff of 11 or fewer employees, and 87% of respondents with less
than $1M annually unable to employ technology, i.e., email, social media, in their
advocacy efforts.
Capacity was also found to be an issue in the 2015 field study, as NPOs reported
similar circumstances in advocacy efforts, below is a summary of those findings:
 81.6% of respondents answered “No” to the question, “Does your NPO
participate in mobilization efforts to engage the public in political advocacy?”
 15.8% of respondents report having a designated staff person responsible for
government relations
 60.5% of respondents cite agency capacity, (staff or budget limitations) as the
primary barrier to participation in the public policy process
48
 21.1% of respondents cite fear of losing their IRS 501(c)(3) status as the primary
barrier to participation in the public policy process
 55.3% of respondents have not used social media in their advocacy efforts
 13.2% of respondents answered YES to the question “Were your organization’s
advocacy efforts impacted by the recent economic recession.”
 65.8% of respondents reported belonging to a coalition of like-minded NPOs
 Of the 65.8% of NPOs belonging to a coalition, 42.1% of those coalitions lobby
on behalf of its member agencies
 31.6% of respondents who answered YES to belonging to a coalition, reported
the coalition had a separate 501(c)(4) IRS designated organization which
performs lobbying activities on behalf of member agencies
 86.8% of respondents answered NO to the question, “Do your board members
lobby legislators on behalf of your mission?”
 76.3% of respondents do not participate in a coordinated “Lobby Day” to
advocate to legislators on behalf of their mission.
As indicated in the 2002 SNAP survey, the 2015 field study affirmed the majority of
NPOs do not participate in organized efforts to impact the public policy process.
Chapter Five
CONCLUSIONS AND RECOMMENDATIONS
The purpose of this study was to examine the role nonprofit organizations
(NPOs) play in the public policy process in a post recession economy, specifically NPOs
with a IRS 501(c)(3) tax designation. A fundraiser working in the nonprofit sector
49
throughout the economic downturn, this researcher experienced declining individual
gifts, in numbers of donors and gift amount, reduction in the number and amounts of
private foundation grants, and nonprofit agency endowment losses due to investment
losses. A simultaneous increase in the demand for services, due to the economic
downturn, placed greater demands on nonprofit agencies, now with fewer resources.
Exacerbating both influences, declining funds and increased demands were additional
challenges surrounding the tax codes governing charitable giving. Nonprofit leaders,
previously uninvolved in efforts to impact public policy, began to look at participation in
the process as not only potentially beneficial, but possibly inevitable.
Intrigued by the ARNOVA symposium’s identified areas of new research needed
to address concerns about public policies’ impact on nonprofits, this study focuses on
one of the five areas identified: To understand the work of NPOs in advocacy, including
the boundaries between public policy advocacy and political engagement. The study
included a review of NPO advocacy efforts historically, sector trend predictions
beginning in 2002, and a qualitative field research study, designed to answer the
following research questions:
1. Does the size and/or capacity of an NPO impact advocacy efforts?
2. Do NPO’s understand the legal limitations of 501(c)(3) political engagement?
3. Are NPOs working independently or collaboratively in their political advocacy efforts?
50
In 2003, Jeffery M. Berry predicted, “The role of nonprofits in providing health
and human services will continue to grow because of fundamental changes in the
American system of welfare. Over the last 40 years welfare has moved largely from a
system of income maintenance to a system of social services.” (Berry, Empowering
Nonprofits, 2003) Berry’s prediction was confirmed by noted scholar, Lester M.
Salamon, in 2012, “Nonprofit organizations are service providers: they deliver much of
the hospital care, higher education, social services, cultural entertainment, employment
and training, low-income housing, community development, and emergency aid
available in this country.” (Salamon, The State of Nonprofit America, 2012, p. 11)
Considering the size and scope of the nonprofit sector today, economic theorist
Herrington J. Bryce, proposes that nonprofits may indeed have a competitive advantage
in service delivery, “often the agent of contractual choice by governments and even
firms in the public policy process.” (Bryce, 2012, p. xiii) In nearly every instance, Berry’s
predictions regarding the nonprofit sector have proved accurate, with one noted
exception, the role nonprofits play in the public policy process. Findings in both the 2002
SNAP study, and the 2015 qualitative field research study conducted by this researcher
confirm nonprofit organizations have made little progress in their participation in the
public policy process, and in some cases knowledge and assumptions surrounding
nonprofit political advocacy efforts have decreased over time. In examining the results
of both surveys, it appears the 2007-09 economic recession, although necessitating a
more active response in political advocacy, resulted in greater demand on staff with
fewer resources, which created barriers to public policy participation by NPOs.
51
Side by Side: Participation and Assumptions 2002 SNAP Survey and 2015 Field Study
QUESTION
2002
SNAP
Survey*
2015
Field
Study
Does your agency participate in political adovocacy efforts - answered yes 86% 42.1%
Are you familiar with the current IRS rules governing NPOs political
advocacy - answered somewhat 30% 60.5%
Can your organization support or oppose federal legislation - answered yes
(correct assumption) 72% 63.2%
Can your organization take a political position without referencing specific
legislation- answered yes (correct assumption) 82% 39.5%
Can your organization use federal funds to lobby - answered no (correct
assumption) 94% 84.2%
Can your organization endorse a candidate for office - answered no (correct
assumption) 87% 100%
Can your organization lobby if a percentage of your budget comes from
federal funds - answered yes (incorrect assumption) 50% 84%
Can your organization sponsor a forum or debate featuring candidates for
office - answered yes (incorrect assumption) 43% 68.5%
Can your organziation speak with elected officials about pubic policy issues -
answered yes (correct assumption) 91% 73.7%
*Source: Strengthening Nonprofit Advocacy Project (SNAP) Overview of Findings, 2002
A cursory view of the survey results shows dramatic decreases in involvement in
political advocacy efforts and in understanding the legal limitations of lobbying for NPOs
with a 501(c)(3) IRS designation, from 2002 to 2015. Political engagement is down by
more than 50% and less than a third of respondents reporting a clear understanding of
NPO rights to participate in the public policy process, or if they are entitled to engage
legislators in pursuit of their mission directives.
52
Decreases in participation levels and levels of understanding regarding political
advocacy were evident when comparing 2002 and 2015 survey responses. To ensure
comparison viability and sampling integrity between the 2002 SNAP survey, the 2015
field study included respondent demographic questions regarding agency size, mission
focus, and revenue sources.
Side by Side: Respondent Demographics 2002 SNAP Survey and 2015 Field Study
QUESTION
2002
SNAP
Survey*
2015
Field
Study
Annual Budget size of $1M and above 71% 68.4%
Total paid staff 11 or less 50% 45.80%
Mission focus: Health and Human Services 48% 44.7%
Percentage of annual revenue from individuals 25% 23.5%
Does your organization have a specific person designated to political
advocacy and/or government relations - answered No 73% 84.2%
Does your organziation participate in direct lobbying with legislators -
answered No 69% 76.3
Is your organization a member of a coalition - answered Yes 53% 65.8%
*Source: Strengthening Nonprofit Advocacy Project (SNAP) Overview of Findings, 2002
A review of both surveys illustrates similar attributes in both sample populations, with
two note worthy decreases, more organizations in 2015 do not having a person
designated to political advocacy efforts, or participate in direct lobbying with legislators,
which may be attributed to advocacy in a post recession economy, and the challenge of
additional service demands and reduced funding. The 2015 field research study
addressed this potential impact directly with multiple choice and narrative questions.
53
In 2009 the Johns Hopkins Listening Post Project distributed an economic
downturn survey to 1,411 organizations, of which 363 responded. (Salamon, Impact of
the Economic Recession on Nonprofits, 2009) According to the report, 80% of
responding organizations reported fiscal stress during the recession, with nearly 40%
considering the fiscal stress to be severe. Over 50% of those surveyed reported
declines in revenue, increased costs, and significant losses to endowment funds, statics
similar to responses given in the 2015 field study regarding recession impact.
Recession Impact 2015 Field Study Results
QUESTION Yes No
Not
Applicable*
Did the recent economic recession impact your fundraising efforts
73.7% 26.3% 0%
Was your organization's advocacy efforts impact by the recent
economic recession?
13.2% 44.7% 42.1%
*Not applicable as organization does not participate in advocacy
In addition to multiple choice, respondents to the 2015 field study were also given an
opportunity to explain how their fundraising and advocacy efforts were impacted by the
recession. Narrative responses varied slightly but overwhelmingly respondents sighted
increases in demands for services with simultaneous decreases in funding as the
primary impact of the recession on their fundraising efforts. However, narrative
responses to impacts on advocacy efforts were minimal and surprising in the number of
respondents which did not feel the question was applicable to their organization, which
reflects back to a similar assumption mentioned in the 2002 SNAP survey findings
regarding policy participation, “Many executive directors felt that spending time on
54
lobbying detracted from doing the work they should or must be doing – such as
fundraising, dealing with staff issues, and day-to-day crisis.” And, the report continues,
“even when charities engage in policy they do not think of themselves as influencing.”
(Berry, Strengthening Nonprofit Advocacy Project (SNAP) Overview of Findings, 2002)
Further reinforcing the ARNOVA groups’ assumption that a greater understanding of
how NPOs participate in political advocacy and the SNAP survey’s assertion that there
is a general lack of knowledge among NPOs regarding their rights to participate in the
public policy process. These findings included, is there a role for NPOs in the public
policy process in a post recession economy?
Returning to the original research questions, has this study helped to better
understand what factors impact NPO advocacy efforts? Do NPO’s understand the legal
limitations of 501(c)(3) political engagement? Are NPOs working collaboratively in their
advocacy efforts? Yes, no, and possibly. As with all research, this study has yielded
new questions along with new understanding. In both the 2002 SNAP survey and the
2015 field study, a correlation can be drawn between agency capacity (annual budget,
staff size, and financial resources) and participation in the public policy process. Larger
NPOs can afford to employ a designated staff person to handle government affairs and
coordinate advocacy efforts. However, agency capacity has little impact within a sector
which lacks specific knowledge regarding legal limitations, and the rights of public policy
participation of 501(c)(3) nonprofit organizations. There is evidence that NPOs are
working collaboratively in their advocacy efforts, increasing by 12.8% from 2002 to
55
2015. However, when over 42% of the 2015 survey respondents say they do not
participate in advocacy therefore the question is not applicable, alarm bells sound.
In the 21st
century, the nonprofit sector has become a principal player in the
nation’s economy, as an employer, governmental contractor, and advocate. However, if
the sector is to become a principal player the political arena barriers to NPO
participation must be addressed. Based upon a thorough review of literature and
prevailing theories on the topic and completion of a field research study, the research
reveals the following recommendations regarding the role NPOs play in the political
policy process in a post recession economy:
1. The lack of understanding and education regarding the rules governing NPO
participation in the public policy process must be corrected. Courses/training, covering
specific rules for each classification of the IRS 501 designations, should be created and
made available at low or no cost to nonprofit organizations.
2. Nonprofits nationally need to join together to amend and clarify IRS rules regarding
lobbying limitations, working to effectively remove ambiguous language and establish
national guidelines based upon annual revenue or tax classification.
3. The nonprofit sector as a whole needs to establish a national advocacy network,
working specifically to champion public policies impacting nonprofit organizations, such
as changes to tax laws governing charitable and rules regarding lobbying limitations.
56
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Arnsberger, P. (2008, Winter). A History of the Tax-Exempt Sector: An SOI Perspective.
Retrieved from Internal Revenue Service: http://www.irs.gov/pub/irs-soi/tehistory.pdf
Arrington, M. (2008, November 7). The Internet as a Force in Politics. Retrieved from
TechCrunch: http://techcrunch.com/2008/11/07/the-internet-as-a-force-in-politics-
obama-would-not-have-won-without-the-internet/
Berry, J. M. (2003). A Voice for Nonprofits. Washington D.C.: The Brookings Institute.
Berry, J. M. (2003). Empowering Nonprofits. Harvard University, Kennedy School of
Government. Washington, DC: Urban Seminar Series on Children's Health and Safety
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Berry, J. M. (2002). Strengthening Nonprofit Advocacy Project (SNAP) Overview of
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Boris, E. T. (2006). Nonprofits & Government: Collaboration or Conflict. Washington
DC: The Urban Institute Press.
Box, R. C. (2007). Democracy and Public Administration. Armonk: M.E. Sharpe.
Bremmer, R. H. (1988). American Philanthropy (Second ed.). Chicago: The University
of Chicago Press.
Bryce, H. J. (2012). Players in the Public Policy Process: Nonproits as Social Capital
and Agents. New York, New York: Palgrave Macmillan.
Debra Sheets, M. M. (2009). Foundation Giving and the Nonprofit Sector: Turning
Economic Downturn into Opportunity. Journal of the American Society on Aging , 33 (3),
81-85.
Dennis R. Young, R. S. (1995). Economics for Nonprofit Managers. New York: The
Foundation Center.
Gerston, L. N. (2008). Public Policymaking in a Democratic Society (Second Edition
ed.). Armonk, New York: M.E. Sharpe, Inc.
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Contractural Choice in Alliance. Academy of Management Journal , 38 (1), 85-113.
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Hall, P. D. (2006). A Historical Overview of Philanthropy, Voluntary Associations, and
Nonprofit Organizations, in the Unted States, 1600-2000. In W. w. Powell, The Nonprofit
Sector: A Research Handbook (pp. 32-65). New Haven: Yale University Press.
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DC: CQ Press.
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The Role of Nonprofit Organizations in the Pubic Policy Process Advocacy in a Post Recession Economy

  • 1. The Role of Nonprofit Organizations in the Public Policy Process: Advocacy in a Post Recession Economy by Sharmaine McLaren Submitted in partial fulfillment of the requirements for the Master of Arts Degree at Union Institute & University August 2015
  • 2. 2 ABSTRACT The role nonprofit organizations (NPOs) play in the public policy process has evolved over time. The nonprofit sector has grown, as the nation has grown, to become the third largest employer, the largest governmental contractor, and one of the largest collective political influences in United States. The demands placed upon the sector, during and immediately following the recent economic recession were unprecedented, as the sector experienced a simultaneous increase in demand for services and a decrease in funding resources. This study examines the role NPOs play in the public policy process, specifically sector advocacy efforts following the 2007-09 economic recession, seeking to answer the following research questions: 1. Does the size and/or capacity of an NPO impact advocacy efforts? 2. Do NPO’s understand the legal limitations of 501(c)(3) political engagement? 3. Are NPOs working independently or collaboratively in their political advocacy efforts? The study provides a historical overview of the sector, including the findings of the comprehensive study Strengthening Nonprofit Advocacy Project (SNAP), conducted by Tuffs University, in 2002. A multi-year research project conducted to understand how nonprofits use the public policy process. The study included 2735 randomly selected 501(c)(3) nonprofit organizations, who were asked to complete a qualitative written survey. The survey yielded a 63.7% response rate. Using the SNAP survey results as the basis for comparison, this study compares the 2002 survey results with a qualitative field study, conducted from February through March of 2015. The field qualitative survey was conducted online, and distributed via url link to 255 members of the Cincinnati Chapter of the Association of Fundraising professionals (AFP). Only members employed by a 501(c)(3) organizations were permitted to participate. The survey yielded a 15.2% response rate.
  • 3. 3 TABLE OF CONTENTS I. Title Page……………………………………………………………………………………. 1 II. Abstract …………….…………………………………………….………………………... 2 III. Table of Contents ………………………………..………………………………….…… 3 IV. Acknowledgements .……..…………………………………………………………...... 4 Introduction: Purpose and Significance of the Study…………………………………….. 5 Chapter 2 - Literature Review and Theoretical Foundation of the Study ………... 18 Chapter 3 – Research Method and Design …………………….…………………...…. 33 Chapter 4 – Findings and Analysis ……………………………………………………... 40 Chapter 5 - Conclusions and Recommendations …………………………………..... 48 References …..……………………………………………………………………………... 56
  • 4. 4 ACKNOWLEDGEMENTS This study would not have been possible without the assistance of numerous nonprofit professionals, who validated the need for new information on this topic, facilitated the research study, and encouraged the pursuit of this course of study. First, to Meghan Cummings, Development Officer for the Women’s Fund of the Greater Cincinnati Foundation (GCF) and immediate Past President of the Cincinnati Chapter of the Association of Fundraising Professionals (AFP), with whom I initially discussed the intent and focus of the study, for validating the need for this study and for introducing me to Jason Lee, General Counsel and Director of Public Policy for AFP National. I must also acknowledge Mr. Lee, for his personal introduction to the high- ranking public policy professionals, who helped inform the study through personal interviews, including: Neal Denton, Senior Vice President and Chief Government Affairs Officer, YMCA USA, Chanelle Hardy, Senior Vice President Public Policy and Executive Director, National Urban League Policy Institute, and Steve Taylor, Senior Vice President and Counsel for Public Policy, United Way Worldwide. Lastly, the study could not have been completed without the assistance of the AFP Cincinnati Chapter who participated in the electronic survey, specifically, Sydney Schnurr, 2015 President of the Cincinnati Chapter, who encouraged participation by publicizing the study in the chapter newsletter, and championing the survey to chapter members. Academically, acknowledgement and thanks to professor and thesis advisor Asgar Zomorrodian, Ph.D., for his unfailing support throughout the study.
  • 5. 5 INTRODUCTION This study examines the role nonprofit organizations (NPOs) play in the public policy process, specifically NPOs with a IRS 501(c)(3) tax-exempt designation. The study includes a review of NPO advocacy efforts historically, sector trend predictions, and through a qualitative field research study, examines 501(c)(3) advocacy efforts in a post recession economy, a period to be defined for the purposes of this study as from January 2007 through October 2009. As a career nonprofit professional, this researcher’s knowledge of the sector was experiential. Prior to this study, this researcher placed nonprofit involvement in the public policy process into one of two categories: organizations, which rely on funding support from the government in order to deliver services to the public, and organizations, which seek to impact the legislative process on behalf of the public. In my experience, the majority of NPOs purposely avoided involvement in the public policy process for fear of their actions being labeled lobbying, and impacting their IRS tax- exempt designation as a 501(c)(3) organization. Accurate or inaccurate, the belief that any action taken to influence public policy would threaten 501(c)(3) exempt status was considered fact among my peers. However, a myriad of forces affecting the nonprofit sector in the recent economic recession, such as an increase in demand for services, declines in privately funded support, and threats to chartable-giving tax codes left many NPOs searching for solutions outside of their normal wheelhouse. Economic influences left many NPOs with two primary choices, cut services, or learn how to impact the public policy process as a means to accomplishing their missions.
  • 6. 6 By 2009, 3 in 4 foundations experienced a 25% or larger decrease in their endowment funds, resulting in a sector-wide decrease in grant awards. (Sheets, Marcus, and Migliaccio, 2009, pp. 81-85) The recession resulted in state and federal budget deficits, reverberating throughout the nonprofit sector for the next several years. In Ohio, deficits resulted in the Govenor employing a two-year spending plan, which slashed funding for local governments by 25% in fiscal 2012, (Luhby, 2011) nearly three years after the period identified as the height of the recession. A decision which impacted state-funded nonprofit service contractors statewide. The recession hit the nonprofit sector from every funding source; those relying on individual donations saw giving decrease due to job and personal investment losses, foundation giving decreased due to losses in invested endowment funds, which impacted the number and amount of disbursments, and governmental funding decreased due to budget deficits, at the state and federal level. Background, Purpose and Significance of the Study In October of 2010, the Association for Research on Nonprofit Organizations and Voluntary Organizations (ARNOVA), a United States based national and international association that connects scholars, teachers, and practice leaders interested in research on nonprofit organizations, (ARNOVA, 2015) convened a group of thirty nonprofit scholars to explore public policies’ impact on the nonprofit sector. The gathering focused on how public policy helps or harms the ability of organizations to
  • 7. 7 fulfill their missions. (Thomas, 2011, p. 1) The ARNOVA group identified five areas of new research needed to address concerns about public policies’ impact on nonprofits: 1. To understand different forms of nonprofit financing and their impact 2. To understand the effects of regulatory and tax policies on NPOs 3. To understand emerging models for forming and operating organizations 4. To understand the work of NPOs in advocacy, including the boundaries between public policy advocacy and political engagement 5. What benefit (tangible and intangible) does the public expect from NPOs Using those questions as a base, this study’s focus was further narrowed through conversations with high-raking nonprofit leaders working within the field of public policy. Leaders were asked to consider ARNOVA’s five areas of needed research, and of those, which would yield the most valuable information to those working in the sector? The conversations revealed that leaders working within the field considered understanding the work of NPOs in advocacy, including the boundaries between public policy advocacy and political engagement to be of paramount importance. In addition, there was unanimous agreement that the government/nonprofit relationship is evolving, requiring all nonprofit leaders to explore political engagement as a means of service delivery and mission fulfillment. The nonprofit leaders reaffirmed one of the four assumptions made by the ARNOVA group at the beginning of the symposium, that the recent recession presented new challenges for sector leaders:
  • 8. 8 • Due to current economic conditions, the needs for nonprofit services are greater while resources decline. A combination of decreased charitable giving, and state and federal budget deficits threatens service and sustainability. (Thomas, 2011, p. 8) The ARNOVA group identified three influences, currently necessitating an increase in NPO engagement in the public policy process. During and after the recent recession, NPOs who relied on private funding needed to diversify funding sources, and began to look to the government for support. As governmental funding for social service programs declined, the need for NPOs to defend government-supported programs increased. And, in early 2009, the administration and congress began to make changes in the tax code which affect charitable contributions to nonprofits. These converging factors brought nonprofit advocacy efforts to the forefront of sector concerns. The purpose of this study is to examine NPO advocacy efforts in a post recession economy, to better understand how NPOs participate in political advocacy, what factors influence participation in the public policy process, what myths are prevalent among sector leaders regarding political advocacy, and how NPOs seek to influence the public policy process. The study focused on three areas of information: demographic, beliefs and assumptions, and level of political advocacy participation, seeking to answer the following research questions: 1. Does the size and/or capacity of an NPO impact advocacy efforts?
  • 9. 9 2. Do NPO’s understand the legal limitations of 501(c)(3) political engagement? 3. Are NPOs working independently or collaboratively in their political advocacy efforts? Summary of Literature Review Nonprofit organizations have been part of America’s cultural landscape since before the nation was a republic. According to renowned scholar Robert H. Bremmer, who literally wrote the book on American Philanthropy, the roots of today’s 501(c)(3) nonprofit organizations can be traced back to 1894, with the formation of the first federal income tax law granting tax exemption to organizations “founded and conducted solely for charitable, religious, or educational purposes.” (Bremmer, 1988, p. 223) Beginning with the first income tax exemption for charitable organizations, laws governing the nonprofit sector in the United States have continued to evolve. Currently, there are twenty-nine distinctly different 501(c) classifications of nonprofit organizations.(Internal Revenue Service, Publication 557, 2015) Early tax-exempt law centered around three principals; organizations which operated specifically for charitable purposes should be exempt from paying Federal income tax; the organizations’ income could not be used for the benefit of an individual related to the organization or its principals; and to encourage individual giving, a tax deduction should be granted for contributions to charitable organizations, which meet the tax exempt criteria. The first of such laws, The Wilson-Gorman Tariff Act of 1894, although declared unconstitutional the following year, included language, which would provide the foundation for the charitable tax legislation governing NPOs today.
  • 10. 10 (Arnsberger, 2008) This study examines the largest category of designated exempt organizations, the 501(c)(3) IRS tax-exempt nonprofit. 501(c)(3) nonprofit organizations can be divided into three primary categories: public charities, private foundations, and private operating foundations. The IRS broadly defines charities based upon their funding sources, therefore a public charity receives the bulk of its revenue, at least one-third, from the general public. The leadership of a pubic charity must by rule of law maintain a governing board of non-related individuals. Private foundations are often described as non-operating foundations, they have no active programs or service delivery directives, and primarily support public works through grants made to service or program charities. Private foundations have no revenue or governance structure restrictions. Many private foundations have only a few, or possibly one donor, often from a single family. The third category of 501(c)3s are the least common, the private operating foundation, which may have active or service delivery programs similar to those of public charities, but retain funding and governance structures similar to private foundations, with the bulk of the revenue directed to the foundation’s programs. (Arnsberger, 2008) NPOs, although defined under the same tax- exempt status of 501(c)(3), vary greatly in mission focus, annual budget size, funding sources, and in service delivery systems. All 501(c)3s are strictly regulated in their activities, financial reporting, and governance structures, and it is in these regulations that we find the seemingly blurred lines involving participation in advocacy efforts and the public policy process. According to the IRS, “no organization may qualify for section 501(c)3 status if a substantial part of
  • 11. 11 its activities is attempting to influence legislation (commonly known as lobbying). A 501(c)3 organization may engage in some lobbying, but too much lobbying activity risks loss of tax-exempt status.” (Service, IRS Publications Compliance Guide for 501c3 Public Charities, 2014) In reviewing the rule, the language is ambiguous at best. Nonprofits may engage in “some” lobbying but “too much” could result in the loss of tax exempt status, however, the IRS fails to define “some” or “too much,” which has created a general lack of understanding as to exactly where the boundary between public policy advocacy and political engagement is drawn. (Thomas, 2011) In order to understand the importance of nonprofit advocacy, it is necessary to examine the sector as a whole, its size, and scope, and impact as an employer and contractor, as public advocate and political influence. This study will provide a look at the sector overall, how the sector has evolved over time, and by using previously published predictive research, sector trend analysis, and findings of an independent qualitative field research study, will seek to produce conclusions and recommendations which will provide new insight into nonprofit advocacy in a post recession economy. According to Lester M. Salamon, contributing author of The Nonprofit Sector: a Research Handbook, “the field of comparative nonprofit sector studies has grown from one of widespread neglect to one of extensive contestation, with multiple definitions and concepts of what the field encompasses competing for attention.” (Powell, 2006) Salamon’s assertion mirrors this researcher’s findings. In review of the literature and research available, it is apparent that to understand the nonprofit sector’s influence one must examine the sector’s impact on the American cultural landscape.
  • 12. 12 The nonprofit sector, the third largest employer and largest governmental contractor in the United States, has become a major economic force, (Salamon, Holding the Fort: Nonprofit Employment During a Decade of Turmoil, 2012) which must be considered from a myriad of perspectives. As a social service provider, the nonprofit sector assists government in providing services to the public, while often being the voice of the minority, and those unable to speak for themselves. Since its inception, the nonprofit sector has become one of the nation’s largest economic contributors in both employment and service, and a major political force, both directly through advocacy, and indirectly through citizen-driven legislative initiatives. In the literature review section, we look at the development of the sector historically, examining how the role nonprofit organizations play in the public policy process has developed, through the lens of public advocate, economic force, and political influence. Examining the foundation of the current 501(c) tax-exempt category of nonprofit organizations, to isolate the differences between 501(c)3 and 501(c)4 designations, and define current legal limitations of advocacy efforts. Once a firm background of the sector has been established, the study explores research methodologies used in the evaluating the field of public administration, and by examining contemporary scholarly opinion, compares qualitative and quantitative methodologies, and how they are used in sector analysis. The review includes contemporary research in the field, looking specifically at three previously conducted research projects: the 2012 Johns Hopkins Nonprofit Listening Post Project, the 2009 Congressional Research Service Report: An Overview of the Nonprofit and Charitable
  • 13. 13 Sector, and the 2002 Tufts University Strengthening Nonprofit Advocacy Project (SNAP). Using these previously published studies as a basis for comparison, the study examines newly collected information from a qualitative field research study conducted by the researcher, of 501(c)(3) organizations in Cincinnati, Ohio, which was distributed by the Association of Fundraising Professionals (AFP) in February and March 2015. In the findings and analysis section, the study evaluates the impact of the recent economic recession on the sector, to answer the following questions: Does the size and/or capacity of an NPO impact advocacy efforts? Do NPO’s understand the legal limitations of 501(c)(3) political engagement? And, are NPOs working collaboratively or independently in their political advocacy efforts? In conclusions and recommendations, the study examines previous scholarly predictions surrounding the sector post recession, and using newly collected data, the study informs NPO leaders with recommendations on how the sector may evolve as a principal player in the public policy process, in a post recession economy. Statement of the Problem and Research Questions The group of thirty nonprofit scholars and leaders, who convened to explore public policies’ impact on the nonprofit sector at the 2010 ARNOVA Symposium, suggested potential research projects, which could most benefit the sector. Among the potential projects suggested was to more closely examine the types and levels of policy advocacy nonprofits are engaged and to look at factors, which appear to support or discourage advocacy activity among nonprofits designated by the IRS as 501(c)(3)
  • 14. 14 exempt. (Thomas, 2011, p. 116) This study examines agency demographics, to ascertain what factors if any, including NPO size, annual budget, leadership structure, and/or mission-focus impact political advocacy participation? Members of the Cincinnati Chapter, of the Association of Fundraising Professionals (AFP), an association of professionals, which advance philanthropy by enabling people and organizations to practice ethical and effective fundraising, (AFP, 2015), who work for NPOs with an IRS Tax Exempt status of 501(c)(3), were surveyed in an effort to ascertain their current knowledge and understanding of NPO legal limitations of participation in the public policy process. The survey was announced, promoted, and completed electronically, first in an initial email written and distributed by the current AFP President of the Cincinnati chapter to members, and a second announcement for participation was delivered via electronic newsletter, published by the Greater Cincinnati Chapter of AFP. The survey was posted online using Google Forms survey tool. Participation was encouraged throughout February and March of 2015, with a participation deadline of March 31, 2015. Approximately 15% of the total potential participants responded, mimicking similar study response ratios within this population. A complete overview of prior research, including response ratios, will be provided in the findings and analysis chapter. NPOs, although defined under the same tax-exempt status of 501(c)(3) (IRS, 2014), vary greatly in mission focus, annual budget size, funding sources, and in service delivery systems. Diversity is required in order to meet the needs of a diverse society, but difficult to understand or quantify. Based upon these assumptions, this study sought to examine NPO advocacy efforts, to better understand how NPO leaders participate in
  • 15. 15 political advocacy, what factors (size, budget, or mission) influence these decisions, what myths are prevalent among sector leaders, and how NPOs are seeking to influence the public policy process. The field research study focuses on three primary areas of information; demographic, beliefs and assumptions, and best practices, in answer to the following three research questions: 1. Does the size and/or capacity of an NPO impact advocacy efforts? 2. Do NPOs understand the legal limitations of 501(c)(3) political engagement? 3. Are NPOs working collaboratively in their political advocacy efforts? The study examines the role nonprofit organizations (NPO’s) play in the public policy process, and how that role is evolving within the sector, examining NPOs as contractor, advocate, and as a political influence. As the role of the NPOs gains importance within the public policy process, so does the need for sector leadership to interpret, understand, and provide direction, which will best utilize the newly gained policymaking power of the NPO. Potential Ethical Concerns of the Study Research ethics are defined as an application of moral standards to decisions made in planning, conducting, and reporting study results. (McNabb, 2008, p. 20) J. Mitchell (Mitchell, 1998) identified four ethical principles, which shape morality in public administration research: truthfulness, thoroughness, objectivity, and relevance. The truthfulness principle simply stated means it is unethical for researchers to
  • 16. 16 purposely be dishonest in any aspect of the study, from the study’s stated purpose to reporting results without bias.(McNabb, 2008, pp. 20-21) The thoroughness principle requires researchers to be thorough in their research design, and ethically obligated to include key concept definitions, appropriate selection of samples, participants, or groups with full descriptions, to identify the limitations of the research design, and a full description of the analysis design, and that all study finding be reported, regardless of whether or not they support the proposed theory or hypothesis. The Objectivity principle requires researchers to remain objective throughout the process, and lastly the relevance principal states “research in a democracy has a moral responsibility to be understandable to people and be useful.” (McNabb, 2008, p. 22) In addition to the ethical considerations within the field of public administration, this study also adheres to Union Institute & University’s Institutional Review Board (IRB) requirements (Union Institute & University, 2014) The IRB reviews all university research involving human subjects, by university students and by university employees (faculty and staff). Union Institute & University will not approve or support research involving human subjects, which does not meet IRB guidelines and has not received approval from Union Institute & University’s IRB, as follows: The IRB’s policies and procedures are guided by the Code of Federal Regulations Title 45 CFR Part 46, “Protection of Human Subjects” (Revised June 23, 2005), of the U.S. Department of Health and Human Services (HHS), the National Institutes of Health (NIH), the Office for Human Research Protections (OHRP) or any other successor office, and The Belmont Report: Ethical
  • 17. 17 Principles and Guidelines for the Protection of Human Subjects of Research. (Union Institute & University, 2014) In addition to the above ethical considerations, this study was conducted via the internet to eliminate personal bias, and/or inference in the data collection process. Research Method: Qualitative v. Quantitative Research Methods According to Kaifeng Yang, and collaborating authors Vache Gabrielian and Susan Spice, (Miller and Yang, 2008) “Qualitative methods often serve as an umbrella term for a variety of methods and techniques that could not for various reasons be quantified, situations and/or group behaviors which cannot be illustrated effectively through data analysis alone. It is for this reason that “qualitative methods have become part of the mainstream in political science and public administration.” (McNabb, 2008, p. xxiii) Choosing the correct research methodology lies with the objective of the study, the question, and/or problem the research seeks to analyze. “Quantitative research involves the use of numbers to describe things.” (McNabb, 2008, p. 9) Statistical analysis of collected data is used to establish differences or similarities based upon measured responses, assigned specific values. Qualitative research is explanatory, can occur through many different means, open-ended survey questions seeking personal opinion, focus groups, individual or group interviews, and seeks to understand influences, environments, and phenomenon based upon participant subjective opinions. Upon reviewing considerations, the qualitative research method was the logical choice of research methodology for this study, as ascertaining beliefs and assumptions regarding nonprofit participation in the public policy process was a stated research goal.
  • 18. 18 Chapter Two LITERATURE REVIEW AND THEORETICAL FOUNDATION OF THE STUDY In order to understand the role nonprofit organizations (NPOs) currently play in the development of public policy, it is necessary to review the development of the sector, and the major influences, which helped to shape the sector, as we know it today. The nonprofit sector can trace its concept to the Elizabethan period, and the Poor Law of 1601 (Powell, 2006, p. 91), which formalized a national system of charitable relief to be paid for by levying property taxes, ideals carried to Plymouth by the first settlers. American philanthropy, which gave birth to the nonprofit sector, can trace its roots to Europe but settlers of the new world relied on private and religious institutions for support, with the goal of founding communities “being better than, instead of like or different from, the ones they had known.”(Bremmer, 1988, p. 6) Early Americans, theoretically opposed to government taxation, laid the foundation of the nonprofit sector of today, by adhering to the “principle of improving social conditions through voluntary associations.” (Bremmer, 1988, p. 18) The voluntary system of charitable works continued to evolve with the formation of charitable foundations and trusts, but it was not until the 1930’s and Roosevelt’s New Deal, did government seek to regulate support for the citizenry. According to noted scholar, Peter Dobkin Hall, the terms we use to describe the nonprofit sector and nonprofit organizations are, “neologisms,” (Hall, 2006, p. 32) coined after the Second World War, by political scientists, economists, and lawmakers, to
  • 19. 19 describe and classify organizations based upon their intent and purposes, for tax and regulatory reasons. Classified in the 1954 Internal Revenue Code, specifically 501(c)(3), and 501(c)(4) designated organizations, with the broader 501(c) classifications extending to include education, religious, and political advocacy organizations, which benefit from varying degrees of tax exemption. After World War II, income and social tax and spending policies transformed the domain of philanthropy, which resulted in unprecedented grown of tax-exempt organizations, more than doubling the number of fully or partially exempt entities by 1950, and more than twenty-fold by 1968 with more than a quarter million reporting under the 501(c) designation. (Hall, 2006, pp. 50-52) Nonprofit Advocacy and the Government: Friends or Foes What is advocacy? In order to understand advocacy, as it pertains to the nonprofit sector, we must first seek to understand the relationship between NPOs and the government. According to Dennis R. Young, noted scholar on the subject of nonprofit-governmental relations, advocacy, in one form or another has been part of American society since we formed a collective society, “nonprofit activity supplementary to government predates the U.S. republic.” (Boris, 2006, p. 42) A complex relationship with a single defining thread, the desire to provide for the citizenry. Governments and nonprofit organizations (NPOs) with a common mission, which simultaneously binds them and places them at odds. Advocacy, as it pertains to the NPO/Government relationship must be viewed through overlapping influences.
  • 20. 20 Economically, the nonprofit sector’s relationship with government has evolved, now including service provider of principal, as well as supplemental services, as contractor for the government. As this role has evolved so has the relationship, with the modern welfare state, also known as public assistance programs, evidence of this shift. Politically, the sector represents nearly a third of the national workforce as an employer, a large number when added to the number of under-served minority populations for which the sector advocates as their representative to the legislature. A significant portion of NPOs financial resources are derived either directly or indirectly from government funds, either delivered in the form of pass-through state grants or direct- service reimbursement for contacted services. Does this new partnership impact political engagement? Or, as some would suggest, is the current relationship where nonprofits perform critical functions in delivering services the perfect solution? In the next section we will review contemporary literature on nonprofit advocacy and the role the NPO/Government relationship plays in 501(c)(3) advocacy. (Berry, 2003) As mentioned earlier, advocacy, in the terms of a collective group of people petitioning the government on behalf of the larger population need, predates the Republic and is as intrinsic to the American value system as the freedom of speech. According to Mary R. Hamilton, in her article titled Democracy and Public Service, “It is fair to say that public service and democracy are both antithetical and complementary. There is also no generally accepted theory or model of public administration for American democratic government. Neither the United States
  • 21. 21 Constitution nor other documents related to the founding of the nation provide a model for an administrative component. The Constitution specifies a goal of providing for the common defense and producing other public goods, but it says little or nothing about contemporary issues such as providing for the social, economic, and physical well-being of the populace.” (Box, 2007, pp. 3-20) Although the underlying relationship between NPOs and government has changed little over time, the role advocacy plays in the public policy process has shifted dependent upon prevailing theories of governance. American philanthropy until the Great Depression was primarily the work of the wealthy. The private foundation of today owes its roots to the nation’s elites, who exercised significant influence on policy development and implementation. It was not until the late nineteenth century that political leanings began to shift power away from the elites in an attempt to reduce their influence. In the 19st Century, a new model of public administration was born, beginning with the Pendleton Act, passed in 1883, establishing the first civil service in the United States. The system of merit based-promotion and employment helped to usher in a new era of political neutrality. (Kettl, 2009, p. 208) The 20th century, the New Deal, and World War II solidified the need for a new relationship between government and the people. Scarcity and need propelled government to assume a proactive approach to providing societal needs. Trust in government and civil service remained the national tenor until the 1960s, when issues abroad resulted in countrywide distrust, and protest led to major reforms. (Box, 2007,
  • 22. 22 pp. 70-71) As the nation struggled under its own weight, to reduce its size and streamline processes, the nonprofit sector was called to assist the government as social service provider. Outsourcing service to the citizenry served two purposes, it provided for the needs of the public, while allowing government to reduce the number of departments and employees. A system which continues to be debated, with those calling for less government applauding efforts to shrink through outsourcing, while others see the approach as erosion of democracy in the name of efficiency. (Box, 2007, pp. 4-12) According to a report by the Aspen institute , a global forum founded in 1950 to leverage the power of leaders to improve the human condition, a study completed in 2002, shows the landscape of the nonprofit sector has shifted in recent times, responding to new social and political dynamics. Influences including an ever-increasing diversity of peoples and cultures, immediate accessibility to information through emerging technologies, downsizing and the development of a global marketplace present opportunities and challenges for nonprofit organizations. These converging factors offer potential for new nonprofit-governmental partnership models, and potential new revenues resources for the historically underfunded nonprofit sector, but simultaneously result in additional challenges for the sector, such as for-profit businesses competing with nonprofits for service delivery contracts, and pressure for nonprofits to remain true to their mission in a competitive economic environment. ((NSSG), 2002) In the study of nonprofit-governmental relations, in the United States,
  • 23. 23 three predominate theories exist, Supplementary, Complementary, and Adversarial with each representing a distinct relationship structure and purpose. In the Supplementary theory, nonprofits fulfill public needs, which are not supplied by the government, thereby supplementing the public service offerings of the government. In the supplementary model, private support of public services are only offered to augment governmental support, with the government maintaining primary responsibility for providing public needs, with these supplemented funds being raised through voluntary collective means. According to Young, Burton Weisbrod first presented the supplementary model of nonprofit-government relations in 1977. (Dennis R. Young, 1995, p. 34) The theory posits that given the democratic policymaking process, governments must consider the preferences of the majority when choosing levels, types, and qualities of services, which serves the citizenry well if their preferences are homogeneous. The citizens’ whose needs fall outside the norm or median range of service preferences, are then addressed by nonprofit organizations willing to supplement governmentally supplied services with additional services, to serve those minority preferences. The supplementary theory of nonprofit-government relations is similar in terms of advocacy as the Free Market theory of economics. The Free Market theory assumes that in a given market the people will have knowledge of all competitive strategies available and given that knowledge will always make the choice that will produce the most positive results for the most people. (VanHorn, 2001, pp. 27-31) The theory posits that tending to the needs of the minority is
  • 24. 24 not a market driver because the theory is based on all people having access to all information and opportunities available. Free market economic theory asserts the government is only responsible for the needs of the majority, supporting the theory that nonprofit/nongovernmental organizations should supplement social services by tending to the needs of the minority. The Complementary theory of nonprofit-governmental relations sees the two entities as partners, NPOs working with the government, to compliment each other, in delivering service to the public. In the complementary relationship, nonprofits and the government have a direct relationship with one another. According to noted scholar Lester Salamon, a principal proponent of the partnership relationship, this theory posits that government should finance public services, while nonprofits deliver the services, thereby complimenting each other in servicing the citizenry. Salamon asserts the nonprofit sector has long been a “hidden subcontinent on the social landscape of American Life,” (Salamon, The State of Nonprofit America, 2012, p. 4) in which we rely on nonprofit organizations to handle critical public needs. A necessary partnership, between NPOs and the government, originated in the 1960’s, is responsible for the tremendous growth of the sector over the last fifty years. (Salamon, The State of Nonprofit America, 2012, pp. 3-5) The complementary theory has gained prominence in today’s society primarily due to an ever-growing government, and multi-layered bureaucracy. In the span of just over 50 years, from 1962 to 2007, the number of governmental employees grew from
  • 25. 25 just over 5 million to nearly 20 million (Kettl, 2009, p. 62) and with a governmental structure of that size, costs and inefficiencies are unavoidable, specifically in the delivery of social services. Therefore, it is often cheaper for governments to contract out certain services, than it is for them to administer them internally. In addition to the cost of labor, which is a primary consideration in service delivery, the private or nonprofit sector may be better informed or educated on the issue or service to be delivered. The last and final justification for the complementary theory of nonprofit-governmental relations is that nonprofits do not operate from a profit-making position. The goal of the nonprofit is mission-based as opposed to profit or political motivations, therefore there are fewer reasons to compromise on service or lower the costs to increase profits. The last most prominent theory in the analysis of nonprofit-governmental relations is the Adversarial view. In this theory, nonprofits take on the role of watchdog and adopt an additional directive, to influence the government to make changes in public policy and/or to maintain accountability to the public. As with most things, the sword cuts both ways, as government attempts to influence nonprofit organizations, by regulating their services, and choosing to respond or not respond to their advocacy initiatives. As Dennis Young explains, “The adversarial view does not posit any specific relationship between the levels of nonprofit and governmental activity. For example, nonprofits can advocate for smaller or more efficient government operations, or they can advocate for new programs and regulations that would increase government activity.” (Boris, 2006, p. 33)
  • 26. 26 Unlike the supplemental and complimentary theories of nonprofit-governmental relations, the adversarial theory promotes an advocacy role for nonprofits in public policymaking, and the role of governmental control over nonprofit organizations. The adversarial theory has only recently been explored as a separate theory. Many scholars see nonprofit advocacy and governmental efforts to regulate nonprofits as one aspect of complementary theory. Nonprofits and government are often collaborators in passing legislation or changing public attitudes. However, as Young illustrates, new literature proposes there is also a third way of characterizing the relationship between nonprofit organizations and government, as adversaries in policymaking and service delivery, with the primary difference being the added role of citizen advocate. Young looks to economic theory to illustrate the adversarial relationship, by citing Weisbrod's theory of government failure. Weisbrod asserts, “In heterogeneous communities, where minority views are not well reflected in public policy, minorities will organize themselves on a voluntary collective basis, not only to provide public services for themselves but also to press government to more adequately serve their interests.” (Boris, 2006, p. 39) The Economics of Nonprofit Advocacy Scholars agree the nonprofit sector is becoming an important player in the delivery of social services in the United States. The rationale for this increase is simple, the government is too large to effectively ascertain the needs of its citizenry making provision of services challenging at best. Therefore, government allocates direct service
  • 27. 27 to private organizations, both nonprofit and for profit, with specialization of service within a specific area of societal needs, and knowledge of constituency, based upon geographic location and specialization. Examining the NPO as service provider for the government is primarily examined using the Principal-agent theory of economics. In this theory, the nonprofit is not seen as a supplemental service delivery system for services. To apply the business model of principal-agent theory to the NPO-governmental relationship, “the nonprofit’s public is to the nonprofit what owners are to the firm (the principals) and what the people are to their democratic (representative and responsive) government – its ultimate sovereign, beneficiary, and assessor of value added (its principals).” (Bryce, 2012, p. xiii) The most recent scholarly work published on this theory, by Herrington Bryce, published in 2012, breaks down the theory into key concepts, which include; the Public Policy Process, “The” or “Its” Public, Social Capital Assets, Cognitive Social Capital, Principal-Agent, Agents and Stewards, Contracts, Trust, Unspecified Contracts, and Shirking, and uses these concepts to demonstrate the theory through a principal/agent paradigm across public purposes. This perspective offers a set of strategic positioning implications for nonprofit organizations in the public policy arena. The author presents the theory from an interdisciplinary perspective, looking at the subject from current theoretical assumptions from law, economics, public policy, political and sociology and puts forth the argument that the theory presented is universally applicable, regardless of a nonprofit’s mission focus and asserts that this theory is applicable to NPO’s as well as
  • 28. 28 for profit businesses because they not only discharge humanitarian action on behalf of the American public, they generate public concern, shape the debate, shape the formulation of policies and how they will be discharged, this elevates the NPO from contractor for the government to social change agent. (Bryce, 2012, p. 2) Although not the first to apply the principal-agent theory to the NPOs, Bryce’s expansion on the theory explains by identifying why the principal-agent theory is significant to NPOs and how it differs from other theories on the subject. The NPO, Bryce asserts, has a competitive advantage over governments or private firms, in the public policy process for many reasons. The first being public opinion, as although many for-profit corporations maintain the ability to provide services to the citizenry, they do so for profit. The perception that profit is primary in for-profit enterprise and mission is primary for NPOs, both the citizenry and the ruling government is likely to view the NPOs motives more favorably, if all other factors of delivery are equal. The next factor hinges on the transactional cost of the contract. According to Bryce, the primary motives of each entity again play a primary role in preference, and as the NPO’s motive is not to make a profit, the assumption is the NPO will deliver the service for a lower cost than the for-profit organization. Bryce’s assumption is reinforced by the findings by Corts and Singh (Corts and Singh, 2004), Gulati (Gulati, 1995), and Schwartz and Watson (Watson, 2004). These scholars view the NPO as an economic and legal entity, which is independent of productive economic activity although their purpose is societal rather than individual benefit or profit. (Bryce, 2012, pp. 33 -111)
  • 29. 29 The Principal-agent theory, when used to look at NPOs rather than for-profit organizations, offers a solution to traditional public administration’s problems in delivering services to the public. Nonprofit organizations are specialized, with a specific mission focus, normally addressing the needs of their mission constituency within a designated geographic area and demographic. The specialization of NPOs makes them the best organizations to serve these specific constituents, because in principal-agent theory the focus is on information, and how having and using information is necessary in service delivery, both problem areas for government/public administration (Kettl, 2009, pp. 102-105). However, not all political scholars believe the Principal-agent theory is the only way to view the nonprofit-governmental relationship. Angela Eikenberry explores an alternative approach in her essay titled “Nonprofit Organizations, Philanthropy, and Democracy” (Box, 2007, pp. 169-193). Eikenberry agrees with the majority of scholarly opinion, regarding the increasing importance of nonprofits as social service providers. However, she asserts that public administrators need to look beyond Principal-agent theory when defining their relationship with nonprofit organizations and consider the democratic implications of relying on nonprofits to provide these services, charging that the Principal-agent theory is inadequate, as it focuses too largely on the administrative process as opposed to the implications to democracy. Eikenberry cites accountability as the primary source of concern because nonprofit service providers are only loosely accountable to the elected officials who approve and administer the programs, thereby creating a much narrower view of the role nonprofits play in society. (Box, 2007) Regardless of the ongoing theoretical dialog
  • 30. 30 on the pros and cons of the principal-agent theory, most political scholars agree on one truth that as the population grows so does the government, and as the government grows its capacity to know the needs of the public diminishes. The Politics of Nonprofit Advocacy Looking at the nonprofit organization as a political influence is best illustrated in the third edition of Van Horn’s Politics and Public Policy. Van Horn and his collaborators divide public policy into political domains, which examine policy development through the roles of people and institutions (VanHorn, 2001). According to the authors, the framework of domain politics is segmented into six domains, including Boardroom, Bureaucratic, Cloakroom, Chief Executive, Courtroom, and Living-room politics, and examines the process through the actors involved. These actors represent the principal influencers within the six policy domains. The nonprofit organization (NPO) influences through political party affiliation in several of these domains: Cloakroom politics or policymaking by legislators, who are influenced through NPO lobbying efforts; Courtroom politics, where NPOs may influence through judicial orders in response to interest groups and lastly through Living-room politics, where public opinion influences through media with predominate party affiliation within a region, which may impact media coverage in tone and frequency. According to the authors’, each of these domains “implies a different arena of combat, a different set of participants, and different rules of conduct,” (Horn, 2001, p. 21) which also implies different outcomes. The theory breakdowns each domain by its
  • 31. 31 principal actors, common issue characteristics, and common policy outcomes, i.e., in living room politics mass media and public opinion are the principal actors, revolving around common issues involving high salience, high conflict, and manifest costs issues, and normally results in a change in policy, responsiveness or innovation. Van Horn’s assertions differs from traditional scholarly literature on public policy, which assumes that issues proceed orderly from agenda to policy formation and adoption, a theory which discounts the influence of private business, interest groups and the influence of media and public opinion. Cloakroom politics is the most divergent from traditional public policy literature, in that it posits that the majority of American policymaking takes place in the venues outside the House and Senate. (Horn, 2001, p. 121) The second strongest argument Van Horn asserts that governments cannot make decisions without the consent of legislatures. (Horn, 2001, p. 152) Considering most NPO lobbying efforts center on the legislature, and public opinion and private interest influence legislatures, NPO are political influencers. Political party affiliation is extremely important in legislative influence; if the majority party agrees with the mission goals of the lobbying NPO little lobbying is necessary, whereas if the reverse is true the same NPO must increase lobbying efforts to gain support from an opposing party majority. Courtroom politics looks at how judges influence public policy through the governing of constitutional and administrative law. As many judicial seats are elected rather than appointed party affiliation plays a role in this aspect of politics with majority
  • 32. 32 party penetration in the judiciary and impacting the effectiveness of NPO/interest groups. The last domain to illustrate the NPO, as a political influence is Living-room politics, which is the political discourse of America’s living rooms. Today, more than ever, grassroots movements are shaping the political landscape. The increase in communication facilitated by the Internet is swaying public opinion, and mobilizing people on policy issues. Social-media has become one of the most cited influences in American politics today. Previously limited by funding, the 21st Century NPO may employ low to no cost mechanisms to influence, such as email marketing, blogs, and online forums making lobbying efforts affordable to even the smallest NPOs. In November 2008, New York Magazine’s John Heilemann led a panel at the Web 2.0 Summit in San Francisco on “The Web and Politics.” Heilemann compared the disruptive role the Internet played in the 2008 election to the role television played in the 1960 election of John F. Kennedy. In both cases, use of the new medium for political influence swung the election towards the winning candidate, even though in 2007 the winning party was not in majority. (Arrington, 2008). One summit respondent identified three influences currently in play necessitating an increase in NPO engaged in the public policy process; during and after the most recent recession, NPOs who relied on private funding needed to diversify funding sources, and began to look to the government for support, as governmental funding for social service programs declined the need for NPOs to defend the government
  • 33. 33 supported programs increased, and in early 2009, the administration and congress began to make changes in the tax code which affect charitable contributions to nonprofits. These converging factors have brought nonprofit advocacy to the forefront of sector concerns. Chapter Three RESEARCH DESIGN AND METHOD According to Kaifeng Yang, and collaborating authors Vache Gabrielian and Susan Spice, (Miller and Yang, 2008) “Qualitative methods often serve as an umbrella term for a variety of methods and techniques that could not for various reasons be quantified. Examples of these reasons are inability to formulate fuzzy concepts, small number of observations, study of unique events, and losing essence in coding the situation. Specifically, qualitative methods are often used to indicate three related concepts:(1) qualitative research epistemologies that are nonpositivistic; (2) qualitative research strategies that aim more toward interpreting or revealing meanings rather than generalizing causal relationships; and (3) qualitative research techniques that are not operationalized with numbers.” (Miller, 2008, p. 142) Upon reviewing considerations, the qualitative research method was the logical choice of research methodology. As stated above, qualitative research is best employed in epistemologies, which are nonpositivistic. In order to understand what epistemologies are nonpositivistic, we must compare the positivistic perspective, which assumes “that there is a clear separation between the researcher and the research participants because the
  • 34. 34 researcher does not influence the participants’ behavior” (Miller, 2008, p. 144) with the nonpositivistic perspective, which assumes the position that the researcher will always influences the participant because if “the participants know they are participating, their behaviors are affected and become less authentic .” (Miller, 2008, p. 144) The qualitative research method was applicable to this study because the researcher is also a nonprofit professional, and member of the group being surveyed. The nonpositivistic approach was necessary, as the principal researcher is also a sector participant. Participant experience will then influence the questions asked within the study. The second reason to employ a qualitative research strategy in this study was the goal of interpreting and/or revealing meaning in answers to study questions, rather than generalizing causal relationships. The goal of the study is to provide new information to the nonprofit sector, specifically to professionals working within the field, which will assist nonprofit organizations in successfully utilizing the public policy process as a means to fulfilling their social service missions. Opinions on the current relationship between NPOs and the public policy process may only be expressed in narrative open- ended answers and not quantifiable with data analysis alone. The qualitative method of research is also more applicable to this study’s design due to the information it is intended to produce; emergent, and improvisational, which allows for openness meaning. As recommended in hard-to-study settings (NPOs) and groups (advocacy groups and nongovernmental social service providers), ambiguous phenomena and will include open-ended questions, which are goaled to be
  • 35. 35 interpretative and subjective and for these reasons, this study used a qualitative methodology. Although a qualitative research design is the most prevalent in the study of public administration, there are many criticisms of qualitative research. Despite its strengths, qualitative inquiry is not without its limitations. The four most common criticisms were itemized in a journal published The British Journal of Sociology in 1984: 1. Too subjective, purists assert qualitative studies are too impressionistic, as it relies upon the participants’ perspective rather than hard data. 2. Difficult to replicate, as the researcher is the main research instrument, duplicating a study is practically impossible unless the same research, same participants, the same in scope and time period observed. 3. Problems of generalization, as qualitative research studies are not supposed be representative of a larger population studies may yield restricted conclusions. 4. Lack of transparency, since qualitative research is largely interpretative and conducted through non-mathematical methods (e.g., interviewing) articulating procedures such as sample selection, collection and analysis of data are difficult. Despite these criticisms, the qualitative research method was chosen for this study based upon the following considerations: 1. No preset hypothesis, the study did not seek to prove or disprove a theory, rather to allow hypothesis and conclusions to evolve as the study developed.
  • 36. 36 2. Participant opinion was necessary therefore narrative questions were employed. 3. Participant experience within the study subject matter was variable dependent upon agency demographics, therefore holistic descriptions of the 2007-09 economic recession phenomenon were necessary to study varying levels of impact. Data Collection and Analysis In an attempt to ensure the study yielded new and valuable information within the nonprofit sector, leaders in the area of public policy within the nonprofit sector were consulted before study questions drafted or posed. Jason Lee, General Counsel and Director of Public Policy for the Association of Fund Raising Professionals (AFP), a membership organization representing more than 30,000 members in 235 chapters throughout the world, which works to advance philanthropy through advocacy, research, education, and certification programs (AFP, 2015), confirmed the impetus theory which prompted this study. The role of NPO as social service contractor, advocate, and political influence is evolving and NPOs have the potential to become a powerful political force in the future. To validate this assumption, Mr. Lee suggested consulting other sector leaders. Conversations with nonprofit leaders working in the field of public policy affirmed a consensus that the sector was evolving and the need for new research in the field. As early as 2003, scholars in the field reported trends, which reinforce a sector-wide evolution of importance. Jeffrey Berry, noted “As essential as nonprofits are today, current trends suggest that they are going to grow even more significant in the years to come,” in his sector analysis, designating the 21st century as “The Age of Nonprofits.” (Berry, 2003, p. 2)
  • 37. 37 In 2007, in the most recently published quantitative analysis, the sector showed unprecedented growth, “nonprofit organizations employed close to 13.5 million paid workers” representing over 10% of the U.S. workforce, placing it as the third largest industry. (Salamon, The State of Nonprofit America, 2012, p. 8) If we add the estimated 4.5 million volunteer workers annually, the nonprofit sector labor force swells to nearly over 18 million annually, the largest workforce of any industry in the United States. In addition to being the nation’s largest employer, the sector holds economic sway as well, representing revenues of over $1.7 trillion dollars, with over $85 billion represented just in the social services segment of the sector, nonprofits are funding 70% of all social services in the U.S. In addition to employer and economic force, the sector also acts as a tremendous political influence, by identifying social inequities and bringing those issue to the public, seeking to protect human rights by being the voice of social, political, environmental, and ethical concerns. Salamon asserts that the nonprofit sector acts as “a critical social safety valve, permitting aggrieved groups to bring their concerns to the broader public attention and to rally to improve their circumstances.” (Salamon, The State of Nonprofit America, 2012, pp. 3-12) The importance of NPOs, across sectors, cannot be ignored, “after adjusting for inflation, revenues for nonprofits grew by 144% between 1977 and 1997 while the nation’s economy grew at just 81%.” (Berry, 2003, p. 10) Until recently, scholars and economic theorists consider the market economy, as it pertains to the business and governmental sectors, with businesses producing and distributing goods and services, and governments as regulators and lawmakers, ensuring social justice. However, as the
  • 38. 38 nonprofit sector continues to grow, so does its influence, adding a new player to the national economy and political landscape. Using previously published sector research, including the following projects: the 2012 Johns Hopkins Nonprofit Listening Post Project, the 2009 Congressional Research Service Report: An Overview of the Nonprofit and Charitable Sector, and the 2002 Tufts University Strengthening Nonprofit Advocacy Project (SNAP), a qualitative research study was created. Data obtained in these historical studies was used to identify recurring themes and new insights. The Field Study Research Project A field research study, titled Survey: Nonprofit Advocacy in a Post Recession Economy was conducted in February and March of 2015 to examine Nonprofit Organizations, (NPOs) advocacy efforts in order to better understand how NPO leaders participate in political advocacy, and whether advocacy efforts changed as a result of the recent economic recession. The questions of the study were derived using the comprehensive study Strengthening Nonprofit Advocacy Project (SNAP), a multi-year research project conducted by Tuffs University in 2002, to understand how nonprofits use the public policy process, as a historical reference. SNAP included 2735 randomly selected 501(c)(3) nonprofit organizations, who were asked to complete a qualitative written survey. The SNAP survey yielded a 63.7% response rate. Using the SNAP survey results as the basis for comparison, this study compares those results with a qualitative field study, conducted from February through March of 2015. The survey was conducted online and distributed to 255 members of the Cincinnati Chapter of the Association of Fundraising professionals (AFP), of those, only members employed with
  • 39. 39 a 501(c)(3) organization were permitted to participate. The survey yielded a 15.2% response rate. This field research study was divided into three areas of information: demographics, advocacy efforts, and collaboration and was conducted via the internet, utilizing Google survey and analytics survey tool. The survey was distributed to potential participants in February 2015, with a completion deadline of March 31, 2015. Participants were pre-qualified for participation by being current members of the Association of Fundraising Professionals (AFP), Cincinnati, Ohio chapter, and employed with a 501(c)(3) nonprofit organization, and was endorsed by the leadership of the Cincinnati Chapter of AFP. The participant pool was diverse in both the type of nonprofit organization (small, medium, large, mission or service driven), and in the perspective of the participants, as all employees were welcome, both leadership and staff were polled. The diversity of the survey participants helped to validate the responses, and insure the information collected was not influenced by mission focus. The study was qualitative, included open-ended questions, interpretative and subjective, to encourage openness. The survey was distributed to participants electronically in an email written by the AFP Chapter President. Potential participants were directed to the survey Url: https://docs.google.com/forms/d/1SCj-iBd6dmkLEjrV4HW6QGEzzxnmnl-- hn7XLjlyNXU/viewform?c=0&w=1, to access and complete the online form. Participation was anonymous, as no personal identifying information was collected, and as participation was voluntary, consent was implied by completing the survey. The researcher had no direct contact with participants. Using Google Forms, survey
  • 40. 40 responses were collected and tabulated automatically and electronically, thereby eliminating personal interpretation of responses based on unwritten cues, i.e., voice inflection, etc., often cited as a criticism of qualitative research. Survey results were generated automatically by the survey application to insure data collection integrity. The field study was divided into three sections:  Demographic: including NPO annual budget, staff size, and breakdown, mission, and number of constituents served.  Advocacy Efforts: including questions to ascertain NPO Leaders understanding of the legal limitations of 501(c)(3) political engagement, the number and size of 501(c)(3)s with active initiatives.  Collaboration: the number and size of NPOs working collaboratively in order to affect change at the policy level. Using an electronic distribution system for the survey provided two distinct advantages: data collection was independent of the researcher thereby reducing incidence of inference or personal bias, and participants completed surveys independent of the researcher, eliminating the possibility of data tampering in the collection process. Chapter Four FINDINGS AND ANALYSIS The goal of the 2015 field research study was to examine NPO advocacy in a post recession economy. Historical analysis as a point of reference was necessary. The point of reference chosen for the study was the SNAP overview of findings, published in May 2002, by Tuffs University Professor, Jeffrey M. Berry, (Berry, Strengthening
  • 41. 41 Nonprofit Advocacy Project (SNAP) Overview of Findings, 2002), and his subsequent book on the topic, A Voice for Nonprofits, published with David F. Arons, in 2003. (Berry, 2003) Conducted as a multi-year project by Tuffs University, OMB Watch, and Charity Lobbying in the Public Interest (CLPI) the goal of the project was to understand how to motivate more public policy participation by United States nonprofits. The project was conducted using three different research strategies: 1. In 2000, January to June, written surveys were mailed to 2735 randomly selected charities with a 501(c)(3) designation, which filed IRS 990 form in the previous year. Excluded from the selection were hospitals, universities, and private foundations. 2. From September 2000 to February 2001, 45 telephone interviews were conducted with executive directors who had responded to the written survey. 3. From February to September 2001, 17 focus groups of executive directors and board members were held. For purposes of the field study comparison, only the findings yielded through the initial SNAP mailed survey were included. The SNAP 2002 report concluded the following:  Although there is a broad understanding of some of the general laws and regulations governing policy participation, there are two major misconceptions, which dramatically impact NPO participation; 50% of NPOs believe they are prohibited from lobbying if a portion of their budget comes from federal funds, and 43% believe they could not sponsor a forum featuring candidates for office.
  • 42. 42  There are persistent barriers to NPO participation in the public policy process, including annual budget size, organizational infrastructure, staff size and skill level, and access to technology.  There is an even larger gap in understanding of federal lobbying laws and rules governing NPOs, specifically surrounding how much lobbying violates IRS limits on tax exempt 501(c)(3) nonprofit organizations. Using similar questions, regarding agency demographics, understanding the rules, and participation in the public policy process, a field study was conducted from February 1, 2015 through March 31, 2015, the following is an overview of the survey data. Field Research Study Data The survey was conducted online and distributed to 255 members of the Cincinnati Chapter of the Association of Fundraising professionals (AFP), of those, only members employed with a 501(c)(3) organization were permitted to participate. The survey yielded a 15.2% response rate. The study was divided into three areas of information: demographics, advocacy efforts, and collaboration. The survey was distributed to potential participants on February 1, 2015, with a completion deadline of March 31, 2015. Participants were pre-qualified by being current members of the Association of Fundraising Professionals (AFP), Cincinnati, Ohio chapter. Respondents were diverse in the types of NPOs represented, as employees of small, medium, and large NPOs responded. In mission focus, direct or indirect service, arts and culture as well as Health and Human Services, and in individual perspective, as all employees were welcome to participate, leadership and staff, with no differentiation data collected.
  • 43. 43 Demographic Data Summary  68.4% of respondents work for NPOs with annual budgets in excess of $1M  28.9% of respondents work for NPOs with 25 to 50 employees, with the next largest group being 21.1% with 1 to 5 employees  23.7% of respondents work for NPOs with a designated Public Affairs Director  26.3% of respondents work for NPOs with 30+ board members  44.7% of respondents work for Health and Human Services NPOs  76.3% of respondents work for NPOs which serve 1000+ individuals  23.7% of respondents work for NPOs which receive 50% or more of their funding from individuals, with 71.3% receiving 5% to 30% from individual donations  All respondents work for NPOs which receive a percentage of their funding from private foundation support, with 15.8% receiving 50% or more from foundations  50% of respondents work for NPOs which receive 0% of their funding from governmental funds  73.7% of respondents answered YES to the question, “Did the recent economic recession impact your fundraising efforts?” The demographic information yielded by the respondents was very much in line with the SNAP survey demographics, with one noticeable difference: In 2002, 82% of the respondents reported receiving the majority of their funding from individuals, as opposed to 71.3% reporting less than 30% of funding from individual donations in 2015. In the narrative question section of the 2015 field study, respondents were asked “if you answered yes to the question, ‘Did the recent economic recession impact your
  • 44. 44 fundraising efforts?’ please explain how your fundraising efforts were impacted?” Loss of funding was the predominate reason cited, below is a sampling of those responses:  “The economic crisis left people with few funds in their banks, which they were less likely to share with us.”  “Our governmental grant dollars were cut, each year, resulting in a 30% decline in previously anticipated funding.”  “The recession simultaneously increased the demand for services while decreasing dollars raised in support of these services.”  “We hired a fulltime development director to solicit private funding to offset decreases in state and federal funding due to budget cuts.”  “Government funding decreased, the number and size of individual gifts decreased, foundation support became harder to secure.” Advocacy Data Summary As predicted by Jeffrey M. Berry, in 2003, “current trends suggest that they [NPOs] are going to grow even more significant in the years to come.” (Berry, A Voice for Nonprofits, 2003, p. 2) Prior to the economic recession of 2007-09, scholars of public administration were noticing (Berry, A Voice for Nonprofits, 2003, p. 3) a governmental trend of nonprofits being called upon to deliver critical services to the populace, “Indeed, the modern welfare state has largely been subcontracted to nonprofits.” The ever- increasing influence of the nonprofit sector was further analyzed in The Johns Hopkins Listening Post Project. A joint project of the Center for Civil Society Studies at the Johns Hopkins Institute for Policy Studies in cooperation with The Alliance for Children and
  • 45. 45 Families, Alliance for Nonprofit Management, The National Council of Nonprofits and several other nonprofit organizations, formed to study the impact of the recent recession on the nonprofit sector. (Salamon, Recession Pressures on Nonprofit Jobs, 2010) In early April 2010, the Listening Post Project conducted a nationwide survey of 1100 NPOs, asking to report on their experiences over the previous six months, from October 2009 through March 2010. Of the 1100 NPOs solicited, 526 organizations responded, yielding a 46% response rate, which according to the author “is quite high for the nonprofit field, particularly in a time of economic hardship.” (Salamon, Recession Pressures on Nonprofit Jobs, 2010, p. 2) Two key findings were derived: 1. The financial battering and increased demands nonprofits are experiencing in the current recession are taking a serious toll on both their crucial human resources and their ability to deliver vital programs and services, and yet, 2. Nonprofits have displayed enormous resilience and a strong commitment to their critical missions in the face of lingering recession, with more organizations holding employment steady or actually adding staff, though many of these are finding it difficult to maintain existing services. Considering NPOs have been challenged to do more with less, it is not hard to understand why Lester M. Salamon titled the first chapter in his 2012 book, “The Resilient Sector.” (Salamon, The State of Nonprofit America, 2012, p. 3) However, one must ask what part of that resiliency is owed to NPO advocacy efforts? According to the SNAP survey, in 2002, NPOs were not using the public policy process to their
  • 46. 46 advantage, most NPO leaders had limited knowledge of the 501(c)(3) legal limitations to lobbying, and not one of the NPO respondents surveyed correctly answered all of the questions pertaining to advocacy, and the rules governing participation in the public policy process. In an effort to see if this reported resiliency was due to a greater understanding of the laws regarding lobbying, the 2015 survey posed similar questions included in the 2002 SNAP survey. Below is a summary of that data:  60.5% of respondents answered “Somewhat” to the question, “Are you familiar with the current IRS rules regarding 501(c)(3) advocacy?”  15.8% answered yes to the question “Are you familiar with the current IRS rules regarding 501(c)(3) advocacy?”  63.2% of respondents answered “No” incorrectly to the question, “Under current IRS regulations can your organization support or oppose federal legislation.”  84% of respondents answered “No” incorrectly to the question, “Under current IRS regulations, can your organization lobby if a portion of your annual budget is derived from federal funds.”  65.8% of respondents answered “No” incorrectly to the question, “Under current IRS regulations, can your organization sponsor a forum or candidate debate for elected office?” As reported in the 2002 SNAP survey overview, the percentage of incorrectly answered questions has increased over time, indicating NPO know less in 2015 about the rules governing their advocacy efforts. Incorrect responses increased from 50% to 84% of respondents who believe they cannot lobby if a portion of their annual budget is derived
  • 47. 47 from federal funds, with an increase from 43% in 2002 to 65.8% in 2015, of respondents who believe they could not sponsor a forum or debate featuring candidates for office. Collaboration Data Summary The final section of the 2015 field survey focused on collaboration. The 2002 SNAP survey did not include a specific section on how organizations accomplished their advocacy efforts. The following is a summary of those findings:  86% of respondents report they do participate in the public policy process, however, 78% of that participation is considered “Grassroots” lobbying, i.e., organizing public support.  84% of respondents report NPO capacity as being the primary reason their efforts to impact public policy are not more robust, with 50% of respondents reporting paid staff of 11 or fewer employees, and 87% of respondents with less than $1M annually unable to employ technology, i.e., email, social media, in their advocacy efforts. Capacity was also found to be an issue in the 2015 field study, as NPOs reported similar circumstances in advocacy efforts, below is a summary of those findings:  81.6% of respondents answered “No” to the question, “Does your NPO participate in mobilization efforts to engage the public in political advocacy?”  15.8% of respondents report having a designated staff person responsible for government relations  60.5% of respondents cite agency capacity, (staff or budget limitations) as the primary barrier to participation in the public policy process
  • 48. 48  21.1% of respondents cite fear of losing their IRS 501(c)(3) status as the primary barrier to participation in the public policy process  55.3% of respondents have not used social media in their advocacy efforts  13.2% of respondents answered YES to the question “Were your organization’s advocacy efforts impacted by the recent economic recession.”  65.8% of respondents reported belonging to a coalition of like-minded NPOs  Of the 65.8% of NPOs belonging to a coalition, 42.1% of those coalitions lobby on behalf of its member agencies  31.6% of respondents who answered YES to belonging to a coalition, reported the coalition had a separate 501(c)(4) IRS designated organization which performs lobbying activities on behalf of member agencies  86.8% of respondents answered NO to the question, “Do your board members lobby legislators on behalf of your mission?”  76.3% of respondents do not participate in a coordinated “Lobby Day” to advocate to legislators on behalf of their mission. As indicated in the 2002 SNAP survey, the 2015 field study affirmed the majority of NPOs do not participate in organized efforts to impact the public policy process. Chapter Five CONCLUSIONS AND RECOMMENDATIONS The purpose of this study was to examine the role nonprofit organizations (NPOs) play in the public policy process in a post recession economy, specifically NPOs with a IRS 501(c)(3) tax designation. A fundraiser working in the nonprofit sector
  • 49. 49 throughout the economic downturn, this researcher experienced declining individual gifts, in numbers of donors and gift amount, reduction in the number and amounts of private foundation grants, and nonprofit agency endowment losses due to investment losses. A simultaneous increase in the demand for services, due to the economic downturn, placed greater demands on nonprofit agencies, now with fewer resources. Exacerbating both influences, declining funds and increased demands were additional challenges surrounding the tax codes governing charitable giving. Nonprofit leaders, previously uninvolved in efforts to impact public policy, began to look at participation in the process as not only potentially beneficial, but possibly inevitable. Intrigued by the ARNOVA symposium’s identified areas of new research needed to address concerns about public policies’ impact on nonprofits, this study focuses on one of the five areas identified: To understand the work of NPOs in advocacy, including the boundaries between public policy advocacy and political engagement. The study included a review of NPO advocacy efforts historically, sector trend predictions beginning in 2002, and a qualitative field research study, designed to answer the following research questions: 1. Does the size and/or capacity of an NPO impact advocacy efforts? 2. Do NPO’s understand the legal limitations of 501(c)(3) political engagement? 3. Are NPOs working independently or collaboratively in their political advocacy efforts?
  • 50. 50 In 2003, Jeffery M. Berry predicted, “The role of nonprofits in providing health and human services will continue to grow because of fundamental changes in the American system of welfare. Over the last 40 years welfare has moved largely from a system of income maintenance to a system of social services.” (Berry, Empowering Nonprofits, 2003) Berry’s prediction was confirmed by noted scholar, Lester M. Salamon, in 2012, “Nonprofit organizations are service providers: they deliver much of the hospital care, higher education, social services, cultural entertainment, employment and training, low-income housing, community development, and emergency aid available in this country.” (Salamon, The State of Nonprofit America, 2012, p. 11) Considering the size and scope of the nonprofit sector today, economic theorist Herrington J. Bryce, proposes that nonprofits may indeed have a competitive advantage in service delivery, “often the agent of contractual choice by governments and even firms in the public policy process.” (Bryce, 2012, p. xiii) In nearly every instance, Berry’s predictions regarding the nonprofit sector have proved accurate, with one noted exception, the role nonprofits play in the public policy process. Findings in both the 2002 SNAP study, and the 2015 qualitative field research study conducted by this researcher confirm nonprofit organizations have made little progress in their participation in the public policy process, and in some cases knowledge and assumptions surrounding nonprofit political advocacy efforts have decreased over time. In examining the results of both surveys, it appears the 2007-09 economic recession, although necessitating a more active response in political advocacy, resulted in greater demand on staff with fewer resources, which created barriers to public policy participation by NPOs.
  • 51. 51 Side by Side: Participation and Assumptions 2002 SNAP Survey and 2015 Field Study QUESTION 2002 SNAP Survey* 2015 Field Study Does your agency participate in political adovocacy efforts - answered yes 86% 42.1% Are you familiar with the current IRS rules governing NPOs political advocacy - answered somewhat 30% 60.5% Can your organization support or oppose federal legislation - answered yes (correct assumption) 72% 63.2% Can your organization take a political position without referencing specific legislation- answered yes (correct assumption) 82% 39.5% Can your organization use federal funds to lobby - answered no (correct assumption) 94% 84.2% Can your organization endorse a candidate for office - answered no (correct assumption) 87% 100% Can your organization lobby if a percentage of your budget comes from federal funds - answered yes (incorrect assumption) 50% 84% Can your organization sponsor a forum or debate featuring candidates for office - answered yes (incorrect assumption) 43% 68.5% Can your organziation speak with elected officials about pubic policy issues - answered yes (correct assumption) 91% 73.7% *Source: Strengthening Nonprofit Advocacy Project (SNAP) Overview of Findings, 2002 A cursory view of the survey results shows dramatic decreases in involvement in political advocacy efforts and in understanding the legal limitations of lobbying for NPOs with a 501(c)(3) IRS designation, from 2002 to 2015. Political engagement is down by more than 50% and less than a third of respondents reporting a clear understanding of NPO rights to participate in the public policy process, or if they are entitled to engage legislators in pursuit of their mission directives.
  • 52. 52 Decreases in participation levels and levels of understanding regarding political advocacy were evident when comparing 2002 and 2015 survey responses. To ensure comparison viability and sampling integrity between the 2002 SNAP survey, the 2015 field study included respondent demographic questions regarding agency size, mission focus, and revenue sources. Side by Side: Respondent Demographics 2002 SNAP Survey and 2015 Field Study QUESTION 2002 SNAP Survey* 2015 Field Study Annual Budget size of $1M and above 71% 68.4% Total paid staff 11 or less 50% 45.80% Mission focus: Health and Human Services 48% 44.7% Percentage of annual revenue from individuals 25% 23.5% Does your organization have a specific person designated to political advocacy and/or government relations - answered No 73% 84.2% Does your organziation participate in direct lobbying with legislators - answered No 69% 76.3 Is your organization a member of a coalition - answered Yes 53% 65.8% *Source: Strengthening Nonprofit Advocacy Project (SNAP) Overview of Findings, 2002 A review of both surveys illustrates similar attributes in both sample populations, with two note worthy decreases, more organizations in 2015 do not having a person designated to political advocacy efforts, or participate in direct lobbying with legislators, which may be attributed to advocacy in a post recession economy, and the challenge of additional service demands and reduced funding. The 2015 field research study addressed this potential impact directly with multiple choice and narrative questions.
  • 53. 53 In 2009 the Johns Hopkins Listening Post Project distributed an economic downturn survey to 1,411 organizations, of which 363 responded. (Salamon, Impact of the Economic Recession on Nonprofits, 2009) According to the report, 80% of responding organizations reported fiscal stress during the recession, with nearly 40% considering the fiscal stress to be severe. Over 50% of those surveyed reported declines in revenue, increased costs, and significant losses to endowment funds, statics similar to responses given in the 2015 field study regarding recession impact. Recession Impact 2015 Field Study Results QUESTION Yes No Not Applicable* Did the recent economic recession impact your fundraising efforts 73.7% 26.3% 0% Was your organization's advocacy efforts impact by the recent economic recession? 13.2% 44.7% 42.1% *Not applicable as organization does not participate in advocacy In addition to multiple choice, respondents to the 2015 field study were also given an opportunity to explain how their fundraising and advocacy efforts were impacted by the recession. Narrative responses varied slightly but overwhelmingly respondents sighted increases in demands for services with simultaneous decreases in funding as the primary impact of the recession on their fundraising efforts. However, narrative responses to impacts on advocacy efforts were minimal and surprising in the number of respondents which did not feel the question was applicable to their organization, which reflects back to a similar assumption mentioned in the 2002 SNAP survey findings regarding policy participation, “Many executive directors felt that spending time on
  • 54. 54 lobbying detracted from doing the work they should or must be doing – such as fundraising, dealing with staff issues, and day-to-day crisis.” And, the report continues, “even when charities engage in policy they do not think of themselves as influencing.” (Berry, Strengthening Nonprofit Advocacy Project (SNAP) Overview of Findings, 2002) Further reinforcing the ARNOVA groups’ assumption that a greater understanding of how NPOs participate in political advocacy and the SNAP survey’s assertion that there is a general lack of knowledge among NPOs regarding their rights to participate in the public policy process. These findings included, is there a role for NPOs in the public policy process in a post recession economy? Returning to the original research questions, has this study helped to better understand what factors impact NPO advocacy efforts? Do NPO’s understand the legal limitations of 501(c)(3) political engagement? Are NPOs working collaboratively in their advocacy efforts? Yes, no, and possibly. As with all research, this study has yielded new questions along with new understanding. In both the 2002 SNAP survey and the 2015 field study, a correlation can be drawn between agency capacity (annual budget, staff size, and financial resources) and participation in the public policy process. Larger NPOs can afford to employ a designated staff person to handle government affairs and coordinate advocacy efforts. However, agency capacity has little impact within a sector which lacks specific knowledge regarding legal limitations, and the rights of public policy participation of 501(c)(3) nonprofit organizations. There is evidence that NPOs are working collaboratively in their advocacy efforts, increasing by 12.8% from 2002 to
  • 55. 55 2015. However, when over 42% of the 2015 survey respondents say they do not participate in advocacy therefore the question is not applicable, alarm bells sound. In the 21st century, the nonprofit sector has become a principal player in the nation’s economy, as an employer, governmental contractor, and advocate. However, if the sector is to become a principal player the political arena barriers to NPO participation must be addressed. Based upon a thorough review of literature and prevailing theories on the topic and completion of a field research study, the research reveals the following recommendations regarding the role NPOs play in the political policy process in a post recession economy: 1. The lack of understanding and education regarding the rules governing NPO participation in the public policy process must be corrected. Courses/training, covering specific rules for each classification of the IRS 501 designations, should be created and made available at low or no cost to nonprofit organizations. 2. Nonprofits nationally need to join together to amend and clarify IRS rules regarding lobbying limitations, working to effectively remove ambiguous language and establish national guidelines based upon annual revenue or tax classification. 3. The nonprofit sector as a whole needs to establish a national advocacy network, working specifically to champion public policies impacting nonprofit organizations, such as changes to tax laws governing charitable and rules regarding lobbying limitations.
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