posted by Mark Hager, Ph.D., Associate Professor, ASU School of Community Resources & Development

This topic gets trotted out a lot, so maybe that just means it's worth having again. We discuss it in one of my graduate seminars, but a blog post is probably a good place to gather up people's reactions in the comments section. Really, I'd love to hear your thoughts.

In my last blog post, I suggested that the idea of "sector" has taken hold, which means that we need a way to refer to all the organizations that fall inside such a sector. Clearly, to me anyway, the frontrunner is "nonprofit organizations" operating in a "nonprofit sector." The word nonprofit is in the Lodestar Center's full name, it's in my job title, and it's in the name of my professional association. If our goal is to communicate clearly, then nonprofit sticks because most people know what we mean when we use it.

The problem is that this isn't always the case. At a dinner party, when you tell somebody that you work for a nonprofit organization, there's a fair chance that your drinking buddy will react something like, "Oh, yeah, a nonprofit organization. Those things that can't make a profit." Well, no... the defining characteristic of the nonprofit organization is that it returns all of its surplus income ("profit") to furthering its mission, rather than feathering the pockets of owners. But the moniker "nonprofit" doesn't exactly make that clear. There are at least three shortcomings with the name: (1) it defines the sector in economic rather than social terms; (2) it does so in a confusing way; and (3) it approaches these organizations in terms of what they are not or what they cannot do, rather than what they are and what they seek to add to our lives.

Can we do better?

Well, there are a host of alternatives, some of which already have some currency. One alternative is to go with the U.S. federal term: the tax-exempts. A defining characteristic of the "sector" we're trying to name is that they don't pay federal income tax, so tax exempts, or exempt entities, sums it up pretty well. You hear these terms regularly in regulatory and legal contexts. However, it's a bit dry, and not generally used outside of those circles. Maybe we should adopt these as preferred terms?

posted by Mark Hager, Ph.D., Associate Professor, ASU School of Community Resources & Development

If you're reading this, you've probably already been indoctrinated into the idea that nonprofit has some particular useful meaning. Not everybody thinks so, or has thought so for very long.

The quibble is that this "sector" is really a whacky collection of radically different organizations. Who would put hospitals in the same bucket as credit unions, and then throw operas in, too? Who thinks social service organizations should fly under the same banner as those that organize the public for political change?

So, these things are all defined under one section of a messy tax code. Is that really a reason to study, talk about, and define a professional identity of a "nonprofit sector?" Better maybe, for the different pieces to keep to themselves, with their own methods, language, and professional development programs? Maybe. My favorite historian, Peter Dobkin Hall, wrote a defining essay in one of his books that describes the "invention" of the nonprofit sector in the United States. It isn't the missions that have so much been invented, mind you — it's the idea of collective sectorness.

Look at it this way. The term "philanthropy" has been in American parlance for a long time, referring to individual action, charitable behavior, and (more recently) the professional field of grantmaking foundations. Google Labs has a cool tool where you can map usage of words in published materials. The map for American English usage of "philanthropy" is below. The term has seen a surge over the past decade, but it's nonetheless about half as popular as it was in 1850. Anyway, the term has been around for a long time. "Philanthropy" is roughly as common now as it was 200 years ago.

posted by Mark Hager, Ph.D., Associate Professor, ASU School of Community Resources & Development

Welcome to Research Friday! As part of a continuing weekly series, each Friday we invite a nonprofit expert from our academic faculty to highlight a research report or study and discuss how it can inform and improve day-to-day nonprofit practice. We welcome your comments and feedback.

Long overdue, the IRS finally pulled the trigger. Yesterday, they published the list of organizations that have lost their exemption from paying income tax due to failure to file required reports in 2007, 2008, and 2009. The list includes 4,025 with an Arizona address, including two-thirds (2,708) with the coveted charitable exemption.

This is great news. You wouldn't know it from reading most of the hand-wringing, though. The IRS has been slow to move, making sure that they had gone well out of their way to inform these organizations of their obligations and then warn them of impending doom. The ones that did not get the message are either working under a rock, willfully noncompliant, or closed up without telling the authorities. The result is that the chaff is blown away, leaving behind a much cleaner picture of the nonprofit sector. Arizona doesn't have 15,000 federally-recognized charities — it now has closer to 12,000.

The news no doubt sent many board members scurrying to their organizations to find out if they are on the list. For the most part, if you think to ask, you probably aren't on the list. Most of them are very small. The National Center for Charitable Statistics notes that 90 percent of these organizations have never filed any kind of return. Mostly they're clubs, and they come and go. In this economy, we shouldn't be surprised that a big chunk of these tiny organizations reliant on donations have simply disappeared. And, for what its worth, Arizona organizations are getting new charitable exemptions all the time, more than 800 of them in 2010 alone. Out with the old, in with the new.

posted by Mark Hager, Ph.D., Associate Professor, ASU School of Community Resources & Development

Welcome to Research Friday! As part of a continuing weekly series, each Friday we invite a nonprofit expert from our academic faculty to highlight a research report or study and discuss how it can inform and improve day-to-day nonprofit practice. We welcome your comments and feedback.

Near the end of the past semester, my class discussed one of the chestnuts of the nonprofit sector. Our text, Peter Frumkin's On Being Nonprofit makes some strong statements about the place of earned revenues in nonprofit organizations. "Earned" revenues are those that come from sales and contracts, not from the donated revenues that so many people associate with nonprofits. Some people really hate the idea of earned revenues, believing that commerciality makes nonprofits look and act more like businesses, which can erode their special character. On the other hand, proponents of social enterprise have a lot of good things to say about earned income strategies, especially in lean times when grants and contributions are hard to come by.

However, the particular chestnut we talked about in class isn't whether commerciality is good or bad. The topic was prominent statements about how much commerciality has crept into the sector over the past couple decades. A great recent article by Curtis Child points to statements by Frumkin and others about this alleged explosion in commerciality, which he refers to as the "commercial turn." Weisbrod refers to massive changes characterized as a pattern of growing commercialization of nonprofit organizations. Backman and Smith have called commercialization a major trend with potentially portentous consequences for civil society. Young and Salamon suggest that new commercial orientations are perhaps the dominant force shaping the nonprofit sector, following from Young's strong claims about rapidly growing commerciality in the late 1990s. Austin and colleagues reiterate the commercial turn thesis, as does Dees. The claim of increased commerciality starts feeling rather official when Tuckman and Chang proclaim it in Chapter 27 of the well-regarded Research Handbook and Anheier alerts students to significantly growing marketization and reliance on fee income on page 211 of his textbook.

Those, friends, are big names. Surely they must be right, and commerciality and marketization have been noticeably on the uptick over the last few decades? Enter Curtis Child, whose research on the topic was published last year in Social Forces, a reputable journal in the social sciences. In short, Child not only notices that the Emperor has no clothes, but is willing to point it out. "Whither the turn?" asks Child. He just doesn't see it.

posted by Mark Hager, Ph.D., Associate Professor, ASU School of Community Resources & Development

This post is about a bad dog and the role that a class of ASU students is playing in its quest for redemption.

Back in the early 1990s, I had a day job studying nonprofit spending and reporting as part of something called the Nonprofit Overhead Cost Study, a joint project between the Urban Institute and Indiana University. The project grew out of the observation that nonprofits were not tracking their spending very well, and many were putting down some pretty crazy numbers on their annual reports and Form 990s. It seemed that the world wanted nonprofits to spend nothing on administration and fundraising, and many were reporting just that.

Turns out that part of the problem was that many nonprofits didn't understand functional expense accounting or reporting rules. Another part was that many nonprofits didn't have systems in place to track and allocate expenses accurately. However, story after story pointed to pressures from donors for nonprofits to invest as little money as possible in administration and fundraising. After all, people want their contributions to go to programming. The average donor doesn't want to pay for "frilly" stuff like accounting software, talented executives, and fundraising campaigns. So, to conform to expectations, nonprofits had three bad options. One was to keep making necessary investments in overhead and potentially have donors walk away. A second was to trim administrative and fundraising expenses to the bone. The third was to fudge the accounting.

Where do donors get trained to think that investment in administration and fundraising is bad? Well, lots of places. In their quick-takes on "making smart donations," media stories frequently tell donors to pick the charity that spends the least on administration and fundraising. Magazines like Forbes, U.S. News and World Report, and Money routinely publish stories that emphasize program spending and fundraising cost ratios. Federated campaigns often "help" their donors make giving decisions by prominently publishing such ratios next to the organization's names. And those ratios are two of the accountability standards at the Better Business Bureau.

posted by Mark Hager, Ph.D., Associate Professor, ASU School of Community Resources & Development

Welcome to Research Friday! As part of a continuing weekly series, each Friday we invite a nonprofit expert from our academic faculty to highlight a research report or study and discuss how it can inform and improve day-to-day nonprofit practice. We welcome your comments and feedback.

Really, how many nonprofits are there?

Oy, such an easy question to ask. This is one of those common questions that doesn't have an easy answer. Part of the problem is that so many organizations fall under the umbrella of "nonprofit," which is a big stew of everything that isn't a government agency or registered as a business. This term includes informal and unincorporated associations that operate almost entirely off the regulatory radar screen. "Nonprofit" includes member-serving organizations, as well as the public-serving ones that we usually associate with the term. Some organizations are only known in their neighborhoods, some make themselves known only to the state, and some only keep up their federal paperwork. Often the best we can do is count within various categories and hope the number we come up with is close to how many nonprofits there actually are.

In Arizona, unincorporated associations sometimes register with the Corporation Commission or successfully apply for federal charitable exemptions. However, if they do not register with these bodies, and they do not have any employees, we won't easily know about them. They are the "dark matter" of the nonprofit universe — probably numerous, but almost always missing from our count-'em-up descriptions of nonprofit activity.

posted by Mark Hager, Ph.D., Associate Professor, ASU School of Community Resources & Development

Welcome to Research Friday! As part of a continuing weekly series, each Friday we invite a nonprofit expert from our academic faculty to highlight a research report or study and discuss how it can inform and improve day-to-day nonprofit practice. We welcome your comments and feedback.

A couple months ago, the ASU Lodestar Center released its 2010 report on Arizona Giving & Volunteering. The data were collected in the summer of 2009 by asking people to reflect on their volunteering during all of 2008. On one of the pages, amid all the charts on who volunteers and what they do, is a big banner depicting the following result: "33 percent of Arizona adults volunteered in 2008." One in three. The number seems high to some people and low to others. But is it right?

The main point of comparison is information on volunteering from the Current Population Survey (CPS), conducted by the U.S. Census Bureau and the Bureau of Labor Statistics. It provides the basis for regular reporting on volunteerism by the Corporation for National and Community Service. For 2008, the CPS put the Arizona volunteering rate at 25 percent. One in four.

That’s a pretty big difference, between 33 and 25. The ASU Morrison Institute presents both numbers and asserts that both survey methods have strengths and weaknesses, likely leaving the true rate somewhere “between these two estimates.”