Understanding

Nonprofit
Organisations
An Introduction

On a typical day, our lives are touched

repeatedly by the world of nonprofit
organisations.
E.g., daycare center, school, hospital,
YMCA, college, museum, job-training
center, nursing home, environmental
protection group, Girl Scouts

Figure 1.1 The Role of Nonprofits In Society

Government

Private Sector
Enterprise

Third
Sector

Private Sector Or Market

It is not from the benevolence of the

butcher, the brewer, or the baker that
we expect our dinner, but from their
regard to their own self-interest. We
address ourselves, not to their humanity
but to their self-love, and never talk to
them of our own necessities but of their
own advantages
Adam Smith (1776, p119)
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Public Sector

those public institutions and those

public works, which though they may be
in the highest degree advantageous to a
great society, are, however, of such a
nature that the profit could never repay
the expense to any individual, or small
number of individuals; and which it,
therefore, cannot be expected that any
individual, or small number of individuals,
should erect or maintain.
Adam Smith (1776, p122)
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Non-Profit Sector
The essence of voluntary action is that it
is not directed or controlled by the State
and that in the main it is financed by
private, in contradistinction to public,
funds. It embodies the sense of
responsibility of private persons towards
the welfare of their fellows; it is the
meeting by private enterprise of a public
need.
(Nathan, 1952, p12)
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Other Terminology

Independent Sector
Nonprofit Sector
Voluntary Sector
Civil Society
Nongovernmental organisations
Nonproprietary organisations
Peoples organisations
Community organisations
Third sector
The commons
Charitable sector
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Non-Profit Organisations
(NPOs)

The terms of non-profit would be dissimilar because in

different countries or by different scholars, they focus on
different aspects of an NPO. Some look at its mission or
objectives. The others may stress on its characteristics
or functions.

What Is a Nonprofit?

Tax & regulatory definition: an organization that

- Enjoys special tax status
- Faces a non-distribution constraint (profit=0)
Functional definition: an organization that forms to
- Perform public tasks
environmental protection, social service provision
- Perform tasks for which there is demand but no supply
from for-profits or governments
religious activity, art museum
- Influence the direction of public policy
political party, issue organization

Cont.

Not conducted or maintained for the purpose of

making a profit.

not commercially motivated

A nonprofit organization is one that has

committed legally not to distribute any net
earnings (profits) to individuals with control over
it such as members, officers, directors, or
trustees. It may pay them for services rendered
and goods provided.
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Cont.

A nonprofit organisation is formed for

the purpose of serving a public or
mutual benefit other than the pursuit or
accumulation of profits for owners or
investors. The nonprofit sector is a
collection of entities that are
organisations; private as opposed to
governmental; non-profit distributing;
self-governing; voluntary; and of public
benefit .
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Salamons definition
Formal
Private
Non-profit-distributing
Self-governor
Voluntary

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Thomas Wolfs definition

Must have a public service mission
Must be organised as a non-for-profit or
charitable corporation
Governance structures must preclude
self-interest and private financial gain
Must be exempt from paying tax
Must possess the special legal status
that stipulates gifts made to them are
tax deductible

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Why Nonprofits?
There are economic, historical, and political
theories regarding the reason why nonprofit
organizations exist in today's society.
Economic Theories:
Market failure - This theory is based on the
premise that not enough people desire a service
or program to attract for-profit corporations to
provide such services. Also, the fact that an
organization exists without a profit-motive instills
trust in the constituent.

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Cont.

Government failure - The government will not

provide a service because of high cost or limited
interest by the public. If there is not a large
presence of constituents demanding a response
from government, then the government is not likely
to act. A small group of individuals can create a
nonprofit organization to provide mutually desired
services rather then trying to convince a majority
of citizens to support such efforts. There is also a
cultural resistance to "big" government. Citizens
are skeptical about the government being involved
in all aspects of community life.
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Cont.

Historical Theory - Communities in America were

formed well before formal government. Citizens were
forced to come together to address issues within
their communities and work together to form a
solution. Even when government developed a
presence within a community, citizens were afraid of
the bureaucracy and often sought out solutions
through voluntary association. Religion also provides
a strong foundation for charity and altruism through
Scripture and a sense of duty taught within the
church.
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Cont.

Political Science Theory - Nonprofit

organisations provide an avenue for civic
participation. People are able to assemble and
work towards a common goal with an intent to
benefit the public. Nonprofit organisations
provide an outlet for pluralism and solidarity.

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Cont.

In a book by Lester Salamon called America's Nonprofit

Sector, the author concludes that the nonprofit sector
exists to serve four critical functions:
Service Provision: Nonprofit organizations provide
programs and services to the community. Often
times, nonprofits are formed or expanded to react to
a community need not being met by the government.
Nonprofits also tend to have the ability to act faster
then government in response to an issue. Nonprofits
do not have to wait for a majority of citizens to agree
upon a proposed solution. Rather, they have the
ability to react to a specialized need or a request by a
small group of citizens.
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Cont.

Value Guardian: Nonprofit organizations

provide a mechanism for promoting individual
initiatives for the public good. Nonprofit
organizations provide a means by which members
of a community can take action in an attempt to
change the community they live in. These actions
may take the form of developing a local
neighbourhood watch program or, on a larger scale,
developing an organisation that responds to world
relief efforts.
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Cont.

Advocacy and Problem Identification :

Nonprofit organisations provide a means for
drawing public attention to societal issues.
Nonprofit organizations make it possible to
identify significant social and political
concerns, to give voice to underrepresented people and points of view, and
to integrate these perspectives into social
and political life.

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Cont.

Social Capital: In America, the nonprofit sector

can be seen as a bridge between capitalism
and democracy. Nonprofit organisations
develop a sense of community among the
citizens by providing a means to engage in
social welfare.

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Issues topics for Nonprofits

Poverty

Poverty is a relative concept, not an absolute standard.

Poorest

Richest

In the United States, the richest 1 percent of

households owns 38 percent of all wealth.
The top 20 percent owns over 80 percent of all
wealth. In 1998, it owned 83 percent of all
wealth. (Wolff, 2003).
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The top 1% of Americans own as much wealth

as the bottom 95% percent.
The total wealth of the top 60% of Americans
is 500 times the total wealth of the bottom
40%.
The bottom 40% of households own one-fifth
of 1% (or 0.2%) of the nation's wealth.
Bill Gates (net worth approximately $50 billion)
alone has more wealth than 40% of the U.S.
population combined, or 120 million people.
Ratio of the net worth of the richest 1 percent
of U.S. households to the size of the national
debt: 2:1.
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Cont.

Share of national wealth by percentage of population.

Edward N. Wolff, "Recent Trends in Wealth Ownership, 19831998," April 2000 (Original graph by Devesh Kumar)

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Source: Edward N. Wolff, "Recent Trends in Wealth Ownership,

1983-1998," April 2000. Table 2. (Courtesy, United For a Fair
Economy)
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North-South Debate ( )
(factors: e.g. weather, geographical
location, natural resources, social
customs, religion, historical
development, ideologies)

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Save the Children

http://ww.savethechildren.org/
United Nations Childrens Fund
http://www.unicef.org/
World Vision http://www.worldvision.org/
One: make poverty history
http://www.one.org/about/
Grameen Foundation
http://www.grameenfoundation.org/

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Issues on Medical Care

Health is a complete physical, mental
and social well-being, and not merely the
absence of disease or infirmity. (WHO)
Places without health care system;
people get sick, people get help
Sick people should get treated equally,
not because they are rich or poor.

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Cont.

AIDS.ORG
Educating, Raising HIV Awareness, Building
Community, http://www.aids.org/
British Heart Foundation, http://www.bhf.org.uk/
National Kidney Foundation, UK
http://www.kidney.org.uk/
British Lung foundation, http://www.lunguk.org/
British Nutrition Foundation,

http://www.nutrition.org.uk

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Cont.

Organ Donation and nonprofits

Organ Donor Foundation, South Africa

http://www.organdonor.org.za/
Mohan Foundation
(Multi Organ Harvesting Aid Network),

http://www.india4u.com/mohan/index.htm

Don't take your organs to heaven for heaven

knows they are needed here.
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Environmental Issues
Kyoto Protocol (1997)
Green Peace International
http://www.greenpeace.org
Earth force (engages young people as active
citizens who improve the environment and their
communities now and in the future)
http://www.earthforce.org
Environmental Defense
http://www.environmentaldefense.org/home.cfm

Seacology http://www.seacology.org
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Employment issues

Equal opportunity
Free from discrimination
Especially for the disabled and racial
minority.
Gender issues, equal pay
Job security, workplace safety
Etc.

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Cont.

Employment Opportunities

Employment Opportunities is a national charity helping

people with disabilities find and retain work. We also
provide a wide range of support and advice to employers
on disability and employment issues.
http://www.opportunities.org.uk

Skill:

National Bureau for Students with Disabilities

(Skill is a national charity promoting opportunities for young

people and adults with any kind of disability in post-16
education, training and employment across the UK.)
http://www.skill.org.uk
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Education issues

The importance of education

One way to get away from poverty
Equal opportunity to receive education
Educational resources should be shared by
all

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Cont.

Special Kids Fund for children with disabilities and atrisk youth http://www.specialkidsfund.org
The Federation for Children with Special Needs Early
Childhood, Education & Special Needs, and Health
Care http://www.fcsn.org
Charity for African Education
http://www.africaneducation.org

Did You Know...

25/$40 will keep one African child in school
for a whole year! (World Bank figures for 1998)

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Traffic or Transportation issues

Private owned cars vs. mass transit

system
Environmental concerns, historical sites
vs. developmental issues (Hsuehshan
Tunnel)

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Cont.

Charity Motor Donate your car and choose your favorite

charity to receive the proceeds
http://www.charitymotors.org

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Safety/security Issues

NPOs that deal with Terrorism

Civil society and community
Free from Fear for humans

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Definition

Civil society refers to the set of institutions,

organisations and behaviour situated between
the state, the business world, and the family.
Specifically, this includes voluntary and nonprofit organisations of many different kinds,
philanthropic institutions, social and political
movements, other forms of social participation
and engagement and the values and cultural
patterns associated with them. (LSE)
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Cont.

Civil society International http://www.civilsoc.org

The African Center for the Constructive Resolution
of Disputes creating African solutions to African
challenges http://www.accord.org.za
Center for War/Peace Studies think tank
http://www.cwps.org

The Center for Security Policy

http://www.centerforsecuritypolicy.org

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Issues on underprivileged people

Ethnic minority (rights to education,

employment, etc)
Women
People with disability

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Cont.

Ethnic Minority Foundation building a security base

http://ethnicminorityfund.org.uk

Women Helping Women

http://whwnj.com/

Women for Women International

http://www.womenforwomen.org

Calvary Womens Services

A safe caring place for tonight.

Support, hope and change
for tomorrow.
http://www.calvaryservices.org
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Child Protection Issues

Ownership: children can be considered

as Public goods
inferior goods??
Children cant choose their parents
Some are born with a silver spoon, some
are quite opposite
Child protection: medical care, parenting,
education, etc.
bullying, child prostitution, pornography,
trafficking, emotional, physical, sexual
abuse, neglect

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Cont.

Australian Childhood Foundation

Counseling, Advocacy for Children, Education, Child abuse
programmes, inspiring and supporting parents, research.
http://www.aaca.com.au
Advocates for Survivors of Child Abuse
Primary mission is the healing and well-being of survivors.
Ultimate goal is the prevention of all child abuse.
http://www.asca.org.au
Kids First foundation
http://www.kidsfirst.com.au

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Self-portrait, Jacob, 6
Jacob is one of five children under the age of seven.
Life at home is chaotic as Mum and Dad, while
struggling to cope with their children, become
physically and emotionally abusive.
When Jacob appears to be distressed and anxious, he
will become withdrawn and engross himself in his art.
This is a self-portrait that Jacob produced on one such occasion.
When Jacob arrived at the early childhood program, he was very
upset and curled up on a rug, cuddling into a teddy bear, while he was
gently patted. After some time, he settled, rejoined the group of
children and then quietly wandered over to the easel and produced
this masterpiece.
Source: Kids First Foundation

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Happy Me, Jessica, 5

Jessica lives at home with her mother, step-father,

brother and two sisters. Because Jessica is the eldest
child in the family, she has been expected to take on
far too many adult responsibilities within the home.
Dad is a strong disciplinarian, which has led to physical
and emotional abuse, and has included being locked in
an outside shed as punishment. Jessica always appears to be hungry
and will raid rubbish bins and steal food from other childrens lunch
boxes. Jessica has become a very sad, anxious little girl who suffers
significant mood swings. Often Jessica is reluctant to participate in
activities and will become extremely withdrawn. However, during a
party at school when Jessica appeared to be having a wonderful time,
she painted this happy picture of herself.
Source: Kids First Foundation.

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National society for the Prevention

of Cruelty to Children (NSPCC)
(Since 1884)
http://www.nspcc.org.uk
International Society for Prevention of Child Abuse
And Neglect (ISPCAN)
Kidscape
Preventing bullying and child abuse
http://www.kidscape.org.uk
Barnardos
Giving Children Back Their Future (Since 1876)
http://www.barnardos.co.uk

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Issues on Elderly people

Gerontology
McDonalds (1980) invites elderly people to
drink coffee (3~5 pm.), marketing strategy:
corporate social responsibility.
Medical care
thanatology (study of death among humans)
Fighting isolation, poverty, neglect

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Global Action on Ageing

Elderly rights, Health, Pension watch, Rural Ageing
http://www.globalaging.org
Age Concern England
http://www.ageconcern.org.uk
Ageing and ethnicity
Provide info to minority ethnic older persons
http://www.eng.aeweb.org
Ageing in New York Fund
to enhancing the quality of life for older New Yorkers and their
families http://www.anyf.org

Help age International http://www.helpage.org/

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Issues on Housing

Basic human rights?

Rent seeking
Low income people cant afford
Homelessness
Affordable housing

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BC Non-Profit Housing Association

formed in 1993; representing the interests of the
non-profit housing sector to government and the
public;participates in housing policy and program
development with all levels of government.
http://www.bcnpha.bc.ca/
Canadian Housing and Renewal Association: Your National
Ally for Affordable Housing
promotes access to adequate, affordable housing for
low- and modest-income households, and seeks to
heighten awareness of affordable housing issues
through research, advocacy, networking and
communications. http://www.chra-achru.ca
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Older homelessness
http://www.olderhomelessness.org.uk/
Glasgow homeless network
http://www.ghn.org.uk
Centrepoint http://www.centrepoint.org.uk/

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Issue Advocacy

Patients vs. doctors (asymmetric information)

Information Ethics

Patients are Powerful

A diverse group of "managed care experts"
singularly dedicated to helping patients improve
their managed medical healthcare. Healthcare
insurance companies have put profits before
patient care. Cost containment measures have
limited your ability to See a Specialist, Get a 2nd
Opinion, Receive High Quality Medications and
have your Surgery performed at your choice of
institution. http://www.patientsarepowerful.org

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