Nonprofits a Voice to be Heard
pic by RaaKanin
The Nonprofit industry has evolved into a business model giant and should be recognized as a force in the economy. There are very few sectors where nonprofits do not exist. As a business model the nonprofit mission is to bring a service with a mission of charity. This means the service is affordable. For those for-profit businesses where profit comes first, the nonprofit business model is a threat because it is a model where a business can be built and survive without ownership by investors. There is no reason to promote a nonprofit solution as the model that will destroy any particular industry.
However, I would ask this question, “If the price of a nonprofits service is not considered affordable or charitable should the entity be considered a nonprofit?”
Two nonprofit sectors that I place at the forefront of this discussion are hospitals and colleges/universities.
July 9th, 2009 at 12:40 am
“Affordable by whom?” Your question implies that the lowest income individual must be able to “afford” the service (if charged for). Hospitals and universities have extraordinary costs that must be paid for. Could “less” be charged and still meet all costs? If profits (from a GAAP or tax standpoint) are made, and instead of dividends to shareholders, as in a for-profit business, those profits are plowed back into buildings, salaries, employee benefits, and additional services (as in a nonprofit), is that a “bad” thing? Nonprofits are “businesses” that ’should’ be for-profits when they compete unfairly with the for-profit sector. Universities and nonprofit hospitals generally are competitive only because of huge endowments and gift campaigns, which provide them with the resources to provide their services, and without which they would not exist. Without them, who fills the vacuum? For-profit businesses, which charge more, because investors/shareholders demand a return on their investment, a feature not present in nonprofits.
July 9th, 2009 at 9:44 am
I use the word affordable in the context of the IRS standard of being a charitable organization. To provide a service in which an individual has to borrow money to attend the college/university would not seem to meet the test of being charitable or affordable.
To go into debt to receive hospital care would not seem to show charitable or affordable.
I use these two types of nonprofits since education and health care are two areas where there really is not a choice not to obtain them.