“The Emerging Third Sector” The Growth and Function of Nonprofit Organizations Amy Garrett Political Science Senior Capstone Fall 2001

What Is A Nonprofit Organization?

Problems With Defining Nonprofit Organizations Scale and scope are vast and varied There is no one central purpose The sector is too new to be understood

Definition of A Nonprofit Organization A nonprofit organization is a legally constituted, nongovernmental entity incorporated under state law as a charitable or not-for-profit corporation that has been set up to serve some public purpose and is tax exempt according to the IRS

Five Characteristics Of A Nonprofit Organization 1. The Organization must have a public service mission. 2. It must be organized as a charitable corporation or nonprofit organization under law 3. Their governing structure must hinder personal and financial gain 4. They can not pay federal taxes. 5. They must have legal status allowing any gifts given to your organization be considered tax deductible

The History of Nonprofit Organizations

The Beginning The origins of nonprofits date back to colonial times In 1800 the Supreme Court ruled against government interference 1874 brought the first legislative act for voluntary associations Late 19 th century the wealthy developed the idea of philanthropy through foundation giving After World War I voluntary organizations began to gain respect After World War II the growth of the nonprofit organizations skyrocketed to the enormous sector it is today

Growth Since 1940

How Are Nonprofit Organizations Governed?

Board of Directors The Board of Directors, or Board of Trustees as they are sometimes referred to are voluntary members of the community who believe in the mission of the nonprofit organization they are working with.

Chief Executive The chief executive is the person hired by the board of directors to assist the board and implement the policies they make.

Ways the Board is Chosen Nominated by current members of the board and the executive director Election process by membership of the organization Selection by the body that oversees the organization

Responsibilities of Trustees Ensure the organization fills its mission Draft Articles of Incorporation and Bylaws Plan for the future of the nonprofit organization Approve and monitor programs and services Ensure the organization practices sound financial management Ensure all monetary necessities are met Advance the public image of the organization Continue board development

Role of Chief Executive Create relationships with outside community leaders Create an agenda to implement strategic plan created by board of directors. Use multiple frames to manage the organization

Trustees Relationship With the Chief Executive Select and support chief executive Evaluate the performance of the nonprofit director Develop clear understanding where their responsibilities end and staff responsibilities begin

How Do The Chief Executive and The Board of Directors Develop Centrality?

Centrality The idea that the chief executive and the board of directors have equal power between them by both parties completing their necessary responsibilities.

The Problems With Centrality Board of Directors do not usually fulfill all of their duties Chief executive has more experience, knowledge, and a greater stake in the organization Both parties are dependent upon each other but there is no equal distribution of power

Keys To A Balanced Relationship Communication Challenge Each Other Be Supportive Create A Clear Understanding

Where Is The Nonprofit Sector Today?

Nonprofit Organizations Today Employ almost 8.5 million people Bring in an estimated 26% of the gross domestic product The average American spends approximately 4.7 hours a week doing volunteer work of some type