Nonprofit Organization

In the United States, a nonprofit or not-for-profit organization is legally delineated from firms in the forprofit sector by its tax-exempt status. Outside of the United States, the legal framework defining the government, business, and nonprofit sectors can be less distinct, depending on the country. International nonprofit organizations are more often referred to as nongovernmental organizations. Nonprofit organizations are active in a large array of activities, from education to poverty relief and music to political advocacy. They have grown tremendously in number and in resources throughout the world in the latter half of the twentieth century. In response to their growing role in governance, the term third sector has been increasingly used over the past decade to describe nonprofit and nongovernmental organizations.

The nonprofit sector provides many opportunities for civic participation, as citizens join with others to pursue mission-oriented goals collectively. Examples range from groups centered around a pastime, such as a local choral group, to advocacy organizations centered on health, environmental, or other policy issues. Demographic groups that are disenfranchised, such as ethnic minorities, can form nonprofit organizations and develop a collective voice in the polity that is stronger than their voice in traditional representative governments. Individuals can develop leadership skills within the realm of the nonprofit sector, and then transition to active participation in decision making in their community. Public participation in [Page 620]nonprofit organizations is limited in some organizations where funding is largely from commercial sources (for example, hospitals). Other organizations involve the public mainly through payment of an annual membership fee. In contrast, many nonprofit organizations depend heavily on volunteer labor and extensive involvement of community members to carry out mission-related programs.

Despite creating opportunities for enhanced civic participation, a strong nonprofit sector can dilute the mandate of the voting public in several ways. First, nonprofit organizations are run not by elected officials, but by community members that have the time and wherewithal to devote themselves to the cause—which often means the community elite. Second, as government agencies contract out their services to be produced by nonprofit organizations, those services are now produced by organizations with multiple stakeholders, including board members, staff, and donors. The clarity of command, from the taxpaying and voting public down to the direct service provider, becomes less distinct. Governance that is clear and unquestioned at the government level, such as the separation of church and state (or in another country, the unified church-state), can be modified to accommodate differing points of view when the government funds a nonprofit organization to produce a service. Finally, an external funder, such as an overseas foundation, can finance activities that either the home government cannot afford to produce or may not want to produce.