Leah Davis

Mrs. Corbett

AP Literature

10/30/11

Senior Project Essay

Nonprofit organizations have a profound effect on the economy. The economy of today,

however, is not a favorable environment for nonprofit organizations to flourish. Today's

economy affects various nonprofit organizations in a plethora of ways.

First of all, a nonprofit organization is defined as an organization that is set up to provide

a public service without the gain of a profit (dictionary.reference.com). In other words, a

nonprofit organization offers a service without charging patrons for the service. These

organizations have many obstacles that they must overcome in order to function successfully.

One such interference would be financing the nonprofit organization. Since nonprofit

organizations operate without actually gaining a profit, in other words without charging for the

service provided, they have difficulty obtaining funds. Nevertheless, the necessary funds are

possible to receive if the correct approach is used. According to Husock the “Government may

both fund and operate such programs” as nonprofit organizations (Husock 16). This is an

example of how nonprofit organizations acquire the assets that they need. Also, if a nonprofit

organization is failing, the government may take over the nonprofit organization and operate it

until the nonprofit organization can function on its own. Borrowing is another way for nonprofit

organizations to gain needed funds. “Loans can be a tool that can help their nonprofit grow and

succeed” (Hogye 142). Nonprofit organizations are able to obtain loans just as a business can.

These loans go toward covering the costs or expanding the outreach of the nonprofit

organization. Although these are effective ways to fundraise, different options are available.

As operative as government funding and loans are, alternatives to advance resources are

accessible. Philanthropy is another major way that nonprofits attain funding. Husock refers to a

quote by Olasky which states that a method centered around government interference does not

“[emphasize] the crucial role of truly compassionate individuals and groups in the long fight

against poverty” (Husock 17). Where government help is a successful approach, voluntarism is

considered a paramount strategy. When people volunteer, they give more than just money or

supplies, they give compassion. Donations provide a large portion of funding for nonprofit

organization. There is, however, another form of philanthropy used by some nonprofit

organizations called percentage philanthropy. This type of philanthropy is “when [donations are]

derived from tax revenue but the decision is individual within legal restrictions” (Hogye 141).

This is a reliable way for a nonprofit organization to acquire funding since it is in the form of a

tax. Taxpayers are also benefitted because, even though they are required to pay the tax, they are

allowed to choose the amount that they are willing to pay. Even with numerous ways to enlarge

funding, nonprofit organizations are affected by today’s weakening economy.

Since nonprofit organizations cannot set a price on their service and they can only obtain

funds from outside help, these nonprofit organizations can only fair as well as the economy.

Many nonprofit organizations “face challenges persuading middle-class people to give because

many of them are still struggling with unemployment, declining housing values, and other

economic woes” (“How Nonprofit Causes Fared in 2010”). People are unwilling to donate when

the economy is declining. Therefore, if the economy is failing, so are the nonprofit organizations.

Gose also declares “When grant discussions with Ford and Kellogg, longtime supporters of the

group, fell apart, the nonprofit organization decided to close rather than continue operating with

a skeletal staff” (Gose 9). Not only are people unwilling to donate, grants also decline when the

economy does. Some nonprofit organizations are even forced shut down when the economy

dwindles enough. Nevertheless, several nonprofit organizations find tactics to meddle through

the tough economic situations.

When economic times become problematic, not all nonprofit organizations dissolve.

Many nonprofit organizations may join together to combat the troubles of a failing economy.

Although, as Fioramonti states, “supporting such an alliance would require many foundations to

rethink their role in society and become not only more political, but also more critical of the

problems caused by our economic systems” (Fioramonti 42). It will take more than just joining

together for nonprofit organizations to survive the worsening economy. Nonprofit organizations

will have to be more aware of the problems that they actually face. Some organizations exchange

money donations for donations of time. “Cash-poor, time-rich volunteers…have every right to

believe that what they are doing is just as valuable as handing over cash. Indeed, the charity

world puts a cash value on volunteers' time--$19.51 an hour...” (Kadlec 1). Since this time is

volunteered, nonprofit organizations do not necessarily have to pay these workers and are

therefore saving money. The organization is getting its service produced without spending as

much, thus, time is as valuable, if not more so, as money. Even though nonprofit organizations

join together to help one another in a diminishing economy, they still have to compete with one

another for the funds that they need.

Nonprofit organizations assist each other during difficult times; however, they must

continue to contend for the funding of possible donors. Stiller suggests that, when it comes to

philanthropy, “The options are dizzying, and the results are difficult to evaluate” (Stiller 146).

Even in a failing economy, people still try to practice philanthropy. Although, these potential

philanthropists must figure out which nonprofit organizations are the most worthy of their

donations. Since these benefactors have to choose which nonprofit organization they prefer

contribute to, the nonprofit organizations must contest with one another for the donations. There

are various ways for nonprofit organizations to compete for the funds of donors, but some are

more beneficial than others. Hoye quotes Rinker in saying that, of all the methods to gain

funding, “Word of mouth is your best form of advertising” (Hoye 9). Nonprofit organizations

must advertise their goals in order to have a chance to obtain funds. If they make current donors

feel appreciated, those donors will tell other donors, and the chain of funding will reach the most

hospitable organizations. There are many effects of the economy on nonprofit organizations, yet

nonprofit organizations also affect the economy.

Many people are concerned with how the economy affects nonprofit organizations.

Nonprofit organizations, however, affect the economy as well. Lombardi quotes Marsh saying,

''so many nonprofits have gone around with a tin cup in their hand without really thinking about

how much they do give to the county, not only in the services they provide, but in terms of what

they do for the economy.” (Lombardi 1). Several nonprofit organizations do not realize that they

are affecting the economy. Nonetheless, the revenue that they bring in to help their cause,

because they are nonprofit organizations, is returned to the economy, in turn boosting the

economy. According to Perry, “Public Allies…applications…[provide] a stipend and an

education grant” (Perry 1). Nonprofit organizations receive applications from volunteers that

want to be trained. Chosen applicants are presented with education grants and, even though the

grant money is not repaid directly by the applicants, the money will eventually recirculate

through the economy. Also, any future jobs the applicants receive will add money flow into the

economy. Therefore, nonprofit organizations impact the economy just as the economy impacts

them.

The economy is influenced strongly by nonprofit organizations. Nonprofit organizations

provide services to society without charging for the product, however they still have costs. These

nonprofit organizations face numerous complications attaining the assets that they need in order

to sustain themselves. Some of the ways that they overcome these difficulties are through

government help, grants, and loans. Funding can also be provided through volunteerism. Another

type of philanthropy is that of percentage philanthropy, in which funding comes through taxes.

Although the donors can decided how much they want to provide for the tax. Another obstacle

imposed on nonprofit organizations is that if the economy begins to fail, so do they. People are

less willing to donate, and if they do donate it is not as much as when the economy is faring well.

The grants received by nonprofit organizations also begin to dwindle. When this begins to occur,

many nonprofit organizations may join together in order to survive. However, as these nonprofit

organizations start to unite they will have to alter their original goals. This can also include

accepting donations of time over money donations. Even if nonprofit organizations venture to

unify, they will still be forced to compete among themselves for funding. The best strategy for

nonprofit organizations to influence donors to assist their cause is to prove how appreciative they

are for their donors. If the donors feel valued they will tell others to donate to the nonprofit

organization’s cause as well. Also, the nonprofit organizations affect the economy as much as the

economy affects them. Nonprofit organizations increase the revenue supplemented to the

economy through grants given to some volunteers. The funding that they receive is also

implemented once again into the economy. Nonprofit organizations are effected by today’s

economy and the economy is also influenced by these nonprofit organizations.