““The Emerging Third Sector”The Emerging Third Sector”The Growth and Function of The Growth and Function of

Nonprofit Organizations Nonprofit Organizations

Amy Garrett

Political Science

Senior Capstone

Fall 2001

What Is AWhat Is A Nonprofit Organization? Nonprofit Organization?

Problems With Defining Problems With Defining Nonprofit OrganizationsNonprofit 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 Definition of A Nonprofit OrganizationNonprofit 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 Five Characteristics Of A Nonprofit OrganizationNonprofit 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 The History of Nonprofit OrganizationsNonprofit Organizations

The BeginningThe 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 19th 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 1940Growth Since 1940

0

200000

400000

600000

800000

1000000

1200000

1940 1950 1977

How Are How Are Nonprofit Organizations Nonprofit Organizations

Governed?Governed?

Board of DirectorsBoard 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 ExecutiveChief 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 ChosenWays 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 TrusteesResponsibilities of TrusteesEnsure the organization fills its missionDraft Articles of Incorporation and BylawsPlan for the future of the nonprofit organizationApprove and monitor programs and servicesEnsure the organization practices sound financial

managementEnsure all monetary necessities are metAdvance the public image of the organizationContinue board development

Role of Chief ExecutiveRole 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 Trustees Relationship With the Chief Executivethe 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 How Do The Chief Executive and The Board of Directors and The Board of Directors

Develop Centrality?Develop Centrality?

CentralityCentrality

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 CentralityThe 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 Keys To A Balanced RelationshipBalanced Relationship

Communication

Challenge Each Other

Be Supportive

Create A Clear Understanding

Where Is The Where Is The Nonprofit Sector Today?Nonprofit Sector Today?

Nonprofit Organizations TodayNonprofit 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