Another Outlook towards the U.S. Nonprofit Sector Segments.

• Author: Nodoushani, Omid

INTRODUCTION

Nonprofit organizations exist at the intersection of market, government and social forces and occupy a unique role in communities where they are located. Nonprofits reflect and shape the environment where they operate and exist to address unmet human needs within their general environment. These organizations have many similarities to "traditional" business entities: they are formal organizations operating under relevant laws, capable of executing contracts and holding property; they are private and distinct from government institutions; they endure over time; they are organized around some core business model or objective; they are self-governing, yet subject to external governance and regulation; and they are voluntary. There are also many distinguishing features that set nonprofit apart from private for-profit enterprises. In particular, they are legally distinct from their officers, and as the name suggests, nonprofits are nonprofit distributing organizations. All surplus revenue generated through core business activities is reinvested in the service delivery model and is not distributed to stakeholders.

Additionally, these organizations deal primarily in services designed to address persistent social problems like the education achievement gap, poverty, the provision of health care, or housing, not products. Like in the private for-profit sector, nonprofits are diverse in scale, in scope, and operational structure. However, to a greater extent, all nonprofits rely on their community for support in the form of volunteer labor and donations. In this way, the success of a nonprofit enterprise is dependent on its connection to the general environment, and its specific local context.

This paper seeks to examine the various features that make this sector distinct, discuss its origins, some of its core challenges, as well as strengths and present opportunities discussed in the research to influence other sectors of the economy.

HISTORY OF THE SECTOR

According to Hammack (2012), the history and origins of the nonprofit sector in America discuss the state of contemporary nonprofits and the social, cultural, and legal forces that support or constrain them. Beginning shortly before the American Revolution, and continuing through to the present, Americans have demonstrated a fondness for engaging in a voluntary associational activity, although many features of the nonprofit sector have evolved. Civic life in pre-revolutionary America was predominantly organized around the church and religious participation such as ministers and ministers' wives. The colleges that produced ministers and their missionary efforts of the church were the primary vehicle through which communities received social services like education and aid to the poor. (Hammack, 2012). Toward the latter half of the 18th century, independent clubs and mutual benefit associations focused on providing support for merchants and sailors without any attachment to a settled religious community. But according to Hammack, that was the extent of secular nonprofit activity before 1790.

Following the American Revolution and the expansion of civic freedoms, nonprofits that addressed all manners of social need of all kinds began to flourish. With the restructuring of the relationship between church and state in early 19th century America, churches and the institutions they had previously administered (schools, libraries, hospitals, orphanages, etc.) were forced to seek alternate sources of funding in the form of private donations and fees for service, which led to the formation of some of the earliest "modern" nonprofit organizations. Additionally, constitutional and legislative changes paved the way for greater corporatism during this era, and it became much more accessible for individuals or groups to obtain corporate charters to establish their enterprises as legal entities separate from themselves, thus granting them access to the protections, rights, and privileges of incorporation. However, the groundwork had been established to promote the creation of the sector, and by 1900, nonprofits that conformed had grown to represent 1% of non-agricultural employment (Hammack, 2012).

During the 19th century, churches remained a significant feature of American life, and most charitable activities continued within this context, particularly in the form of private religious schools and colleges. Hospitals, old age homes, publishing houses, museums, and libraries emerged as nonprofit organizations for the first time. Funding for the services provided by 19th-century nonprofits came from a variety of sources, including private donations, earned income (such as fees and tuition) and government subsidies in the form of land grants, buildings, and in some cases, funds to support operations (Hammack, 2012). During this period, courts and legislation became more involved in regulating charitable activities, targeting organizations that threatened religious, gender, racial and class norms, as well as local values and interests.

In general, 19th-century trends concerning values, norms, and the status of women and minorities in the sector continued as nonprofits continued to favor the issues and institutions of wealthy, educated men. New Deal programs, which were created in the aftermath of the Great Depression, began to channel even more federal dollars towards charitable aid. As a result, some nonprofits joined with local governments in order to access these resources. Following World War II and the creation of the G.I. Bill, colleges expanded in response to the availability of federal funds. It was during this period of non-secular expansion that the community foundation began to emerge as a significant source of funding for the sector.

Twentieth-century America witnessed a significant expansion...