Toward an Understanding of the Revenue of Nonprofit Organizations

Understanding the composition and distribution of the revenue of nonprofit organizations (NPOs) is key to understanding NPOs themselves. This research uses revenue data for 87,127 charitable NPOs to draw three main conclusions. First, revenue structures of NPOs vary widely by subsector and organizational size, with many NPOs demonstrating revenue structures that might be considered uncharacteristic of the nonprofit sector. Second, despite the concerns of many nonprofit scholars, heavy dependence on either government funding or charitable contributions is atypical of NPOs. And third, nonprofit revenue is highly concentrated in relatively few NPOs. The description of revenue expands to examine the relationship between two important sources of revenue, charitable contributions and government subsidies. Nonprofit scholars have long theorized that government funding diminishes charitable giving. This research finds that the effect of subsidy on charity varies substantially among the nonprofit subsectors, but, contrary to widely accepted theory, these effects are more often positive than negative: More than half of government funding of the nonprofit subsectors appears to spur an increase in charitable giving, whereas only 6 percent of government funding is associated with decreased giving. This research suggests that effects of subsidy on charity are less likely due to the decisions of donors than to the decisions of NPOs themselves. These findings assuage some concerns about the future of the nonprofit sector but substantiate others. As government increasingly relies on NPOs to deliver government-funded services, it appears unlikely that NPOs will suffer decreases in charitable giving, and government funding may even enable NPOs to increase revenue from charitable giving. But marginal changes in charitable giving will not mitigate what many see as a distressing move away from reliance on charity toward generating fees for services and generally becoming more business-like. Whether these findings represent a nonprofit sector betraying its charitable roots, diluting its power to effect social change by corporatizing, emphasizing service delivery at the expense of advocacy, or becoming more efficient, financially stable, and responsive to market demands remains a matter of debate, but debate better informed by the understanding of nonprofit revenue provided by this research.Ph.D