Nonprofit Organizations

Nonprofit organizations comprise the sector of the ecomomy referred to as the nonprofit, voluntary, or third sector. Incorporated under state law as charitable or not-for-profit corporations, these organizations are distinguished from organizations that focus on either making a profit (the private sector) or serving as an arm of government (the governmental sector). The nonprofit organization must focus on making some portion of society better or preventing it from becoming worse. As a result, nonprofit organizations provide not only welfare services but also social, educational, and cultural services. This category of organization is also called not-for-profit.

The nonprofit sector has a significant impact not only on quality of life, but also on the economy. In 2000, over $200 billion in donations from individuals, corporations, bequests, and foundations were collected to serve a variety of community needs. This sector may be the fastest-growing sector in the United States economy, with over 1.6 million nonprofit organizations in existence. With their focus on issues such as education, culture, religion, social service, environment, and health, nonprofit organizations are an important part of both the economy and community life. Involvement in such organizations has long been characteristic of American culture. Researchers such as Harvard professor Robert Putman have suggested that the number or density of such organizations is predictive of a region's economic health, governmental efficiency, personal happiness, and faith in public institutions.

Statistics indicate that the number of nonprofit organizations continues to grow, with as many as 50,000 new charities created in recent years. Times of economic growth encourage the development of nonprofit organizations. Nonprofit organizations are developed within local communities to meet specific local needs such as an animal shelter or boosters to support the local marching band. They exist along with those organizations defined as regional or national, such as the American Lung Association. Included in the nonprofit sector are hospitals, schools, museums, homeless shelters, [Page 579]research centers, youth groups, symphony orchestras, houses of worship, and health organizations such as the American Cancer Society and the American Heart Association.