The Role of Nonprofit Organizations in the Public Policy Process:

Advocacy in a Post Recession Economy

by

Sharmaine McLaren

Submitted in partial fulfillment of the requirements for the Master of Arts Degree

at

Union Institute & University

August 2015

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ABSTRACT

The role nonprofit organizations (NPOs) play in the public policy process has evolved over time. The nonprofit sector has grown, as the nation has grown, to become the third largest employer, the largest governmental contractor, and one of the largest collective political influences in United States. The demands placed upon the sector, during and immediately following the recent economic recession were unprecedented, as the sector experienced a simultaneous increase in demand for services and a decrease in funding resources. This study examines the role NPOs play in the public policy process, specifically sector advocacy efforts following the 2007-09 economic recession, seeking to answer the following research questions: 1. Does the size and/or capacity of an NPO impact advocacy efforts? 2. Do NPO’s understand the legal limitations of 501(c)(3) political engagement? 3. Are NPOs working independently or collaboratively in their political advocacy efforts? The study provides a historical overview of the sector, including the findings of the comprehensive study Strengthening Nonprofit Advocacy Project (SNAP), conducted by Tuffs University, in 2002. A multi-year research project conducted to understand how nonprofits use the public policy process. The study included 2735 randomly selected 501(c)(3) nonprofit organizations, who were asked to complete a qualitative written survey. The survey yielded a 63.7% response rate. Using the SNAP survey results as the basis for comparison, this study compares the 2002 survey results with a qualitative field study, conducted from February through March of 2015. The field qualitative survey was conducted online, and distributed via url link to 255 members of the Cincinnati Chapter of the Association of Fundraising professionals (AFP). Only members employed by a 501(c)(3) organizations were permitted to participate. The survey yielded a 15.2% response rate.

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TABLE OF CONTENTS

I. Title Page……………………………………………………………………………………. 1 II. Abstract …………….…………………………………………….………………………... 2 III. Table of Contents ………………………………..………………………………….…… 3 IV. Acknowledgements .……..…………………………………………………………...... 4 Introduction: Purpose and Significance of the Study…………………………………….. 5 Chapter 2 - Literature Review and Theoretical Foundation of the Study ………... 18 Chapter 3 – Research Method and Design …………………….…………………...…. 33 Chapter 4 – Findings and Analysis ……………………………………………………... 40 Chapter 5 - Conclusions and Recommendations …………………………………..... 48 References …..……………………………………………………………………………... 56

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ACKNOWLEDGEMENTS

This study would not have been possible without the assistance of numerous

nonprofit professionals, who validated the need for new information on this topic,

facilitated the research study, and encouraged the pursuit of this course of study.

First, to Meghan Cummings, Development Officer for the Women’s Fund of the

Greater Cincinnati Foundation (GCF) and immediate Past President of the Cincinnati

Chapter of the Association of Fundraising Professionals (AFP), with whom I initially

discussed the intent and focus of the study, for validating the need for this study and for

introducing me to Jason Lee, General Counsel and Director of Public Policy for AFP

National. I must also acknowledge Mr. Lee, for his personal introduction to the high-

ranking public policy professionals, who helped inform the study through personal

interviews, including: Neal Denton, Senior Vice President and Chief Government Affairs

Officer, YMCA USA, Chanelle Hardy, Senior Vice President Public Policy and Executive

Director, National Urban League Policy Institute, and Steve Taylor, Senior Vice

President and Counsel for Public Policy, United Way Worldwide. Lastly, the study could

not have been completed without the assistance of the AFP Cincinnati Chapter who

participated in the electronic survey, specifically, Sydney Schnurr, 2015 President of the

Cincinnati Chapter, who encouraged participation by publicizing the study in the chapter

newsletter, and championing the survey to chapter members.

Academically, acknowledgement and thanks to professor and thesis advisor

Asgar Zomorrodian, Ph.D., for his unfailing support throughout the study.

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INTRODUCTION

This study examines the role nonprofit organizations (NPOs) play in the public

policy process, specifically NPOs with a IRS 501(c)(3) tax-exempt designation. The

study includes a review of NPO advocacy efforts historically, sector trend predictions,

and through a qualitative field research study, examines 501(c)(3) advocacy efforts in a

post recession economy, a period to be defined for the purposes of this study as from

January 2007 through October 2009.

As a career nonprofit professional, this researcher’s knowledge of the sector was

experiential. Prior to this study, this researcher placed nonprofit involvement in the

public policy process into one of two categories: organizations, which rely on funding

support from the government in order to deliver services to the public, and

organizations, which seek to impact the legislative process on behalf of the public. In my

experience, the majority of NPOs purposely avoided involvement in the public policy

process for fear of their actions being labeled lobbying, and impacting their IRS tax-

exempt designation as a 501(c)(3) organization. Accurate or inaccurate, the belief that

any action taken to influence public policy would threaten 501(c)(3) exempt status was

considered fact among my peers. However, a myriad of forces affecting the nonprofit

sector in the recent economic recession, such as an increase in demand for services,

declines in privately funded support, and threats to chartable-giving tax codes left many

NPOs searching for solutions outside of their normal wheelhouse. Economic influences

left many NPOs with two primary choices, cut services, or learn how to impact the public

policy process as a means to accomplishing their missions.

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By 2009, 3 in 4 foundations experienced a 25% or larger decrease in their

endowment funds, resulting in a sector-wide decrease in grant awards. (Sheets,

Marcus, and Migliaccio, 2009, pp. 81-85) The recession resulted in state and federal

budget deficits, reverberating throughout the nonprofit sector for the next several years.

In Ohio, deficits resulted in the Govenor employing a two-year spending plan,

which slashed funding for local governments by 25% in fiscal 2012, (Luhby, 2011)

nearly three years after the period identified as the height of the recession. A decision

which impacted state-funded nonprofit service contractors statewide. The recession hit

the nonprofit sector from every funding source; those relying on individual donations

saw giving decrease due to job and personal investment losses, foundation giving

decreased due to losses in invested endowment funds, which impacted the number and

amount of disbursments, and governmental funding decreased due to budget deficits, at

the state and federal level.

Background, Purpose and Significance of the Study

In October of 2010, the Association for Research on Nonprofit Organizations and

Voluntary Organizations (ARNOVA), a United States based national and international

association that connects scholars, teachers, and practice leaders interested in

research on nonprofit organizations, (ARNOVA, 2015) convened a group of thirty

nonprofit scholars to explore public policies’ impact on the nonprofit sector. The

gathering focused on how public policy helps or harms the ability of organizations to

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fulfill their missions. (Thomas, 2011, p. 1) The ARNOVA group identified five areas of

new research needed to address concerns about public policies’ impact on nonprofits:

1. To understand different forms of nonprofit financing and their impact

2. To understand the effects of regulatory and tax policies on NPOs

3. To understand emerging models for forming and operating organizations

4. To understand the work of NPOs in advocacy, including the boundaries

between public policy advocacy and political engagement

5. What benefit (tangible and intangible) does the public expect from NPOs

Using those questions as a base, this study’s focus was further narrowed through

conversations with high-raking nonprofit leaders working within the field of public policy.

Leaders were asked to consider ARNOVA’s five areas of needed research, and of

those, which would yield the most valuable information to those working in the sector?

The conversations revealed that leaders working within the field considered

understanding the work of NPOs in advocacy, including the boundaries between public

policy advocacy and political engagement to be of paramount importance. In addition,

there was unanimous agreement that the government/nonprofit relationship is evolving,

requiring all nonprofit leaders to explore political engagement as a means of service

delivery and mission fulfillment. The nonprofit leaders reaffirmed one of the four

assumptions made by the ARNOVA group at the beginning of the symposium, that the

recent recession presented new challenges for sector leaders:

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• Due to current economic conditions, the needs for nonprofit services are

greater while resources decline. A combination of decreased charitable

giving, and state and federal budget deficits threatens service and

sustainability. (Thomas, 2011, p. 8)

The ARNOVA group identified three influences, currently necessitating an increase in

NPO engagement in the public policy process. During and after the recent recession,

NPOs who relied on private funding needed to diversify funding sources, and began to

look to the government for support. As governmental funding for social service

programs declined, the need for NPOs to defend government-supported programs

increased. And, in early 2009, the administration and congress began to make changes

in the tax code which affect charitable contributions to nonprofits. These converging

factors brought nonprofit advocacy efforts to the forefront of sector concerns.

The purpose of this study is to examine NPO advocacy efforts in a post

recession economy, to better understand how NPOs participate in political advocacy,

what factors influence participation in the public policy process, what myths are

prevalent among sector leaders regarding political advocacy, and how NPOs seek to

influence the public policy process. The study focused on three areas of information:

demographic, beliefs and assumptions, and level of political advocacy participation,

seeking to answer the following research questions:

1. Does the size and/or capacity of an NPO impact advocacy efforts?

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2. Do NPO’s understand the legal limitations of 501(c)(3) political engagement?

3. Are NPOs working independently or collaboratively in their political advocacy efforts?

Summary of Literature Review

Nonprofit organizations have been part of America’s cultural landscape since

before the nation was a republic. According to renowned scholar Robert H. Bremmer,

who literally wrote the book on American Philanthropy, the roots of today’s 501(c)(3)

nonprofit organizations can be traced back to 1894, with the formation of the first federal

income tax law granting tax exemption to organizations “founded and conducted solely

for charitable, religious, or educational purposes.” (Bremmer, 1988, p. 223) Beginning

with the first income tax exemption for charitable organizations, laws governing the

nonprofit sector in the United States have continued to evolve. Currently, there are

twenty-nine distinctly different 501(c) classifications of nonprofit organizations.(Internal

Revenue Service, Publication 557, 2015)

Early tax-exempt law centered around three principals; organizations which

operated specifically for charitable purposes should be exempt from paying Federal

income tax; the organizations’ income could not be used for the benefit of an individual

related to the organization or its principals; and to encourage individual giving, a tax

deduction should be granted for contributions to charitable organizations, which meet

the tax exempt criteria. The first of such laws, The Wilson-Gorman Tariff Act of 1894,

although declared unconstitutional the following year, included language, which would

provide the foundation for the charitable tax legislation governing NPOs today.

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(Arnsberger, 2008) This study examines the largest category of designated exempt

organizations, the 501(c)(3) IRS tax-exempt nonprofit.

501(c)(3) nonprofit organizations can be divided into three primary categories:

public charities, private foundations, and private operating foundations. The IRS broadly

defines charities based upon their funding sources, therefore a public charity receives

the bulk of its revenue, at least one-third, from the general public. The leadership of a

pubic charity must by rule of law maintain a governing board of non-related individuals.

Private foundations are often described as non-operating foundations, they have no

active programs or service delivery directives, and primarily support public works

through grants made to service or program charities. Private foundations have no

revenue or governance structure restrictions. Many private foundations have only a few,

or possibly one donor, often from a single family. The third category of 501(c)3s are the

least common, the private operating foundation, which may have active or service

delivery programs similar to those of public charities, but retain funding and governance

structures similar to private foundations, with the bulk of the revenue directed to the

foundation’s programs. (Arnsberger, 2008) NPOs, although defined under the same tax-

exempt status of 501(c)(3), vary greatly in mission focus, annual budget size, funding

sources, and in service delivery systems.

All 501(c)3s are strictly regulated in their activities, financial reporting, and

governance structures, and it is in these regulations that we find the seemingly blurred

lines involving participation in advocacy efforts and the public policy process. According

to the IRS, “no organization may qualify for section 501(c)3 status if a substantial part of

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its activities is attempting to influence legislation (commonly known as lobbying). A

501(c)3 organization may engage in some lobbying, but too much lobbying activity risks

loss of tax-exempt status.” (Service, IRS Publications Compliance Guide for 501c3

Public Charities, 2014) In reviewing the rule, the language is ambiguous at best.

Nonprofits may engage in “some” lobbying but “too much” could result in the loss of tax

exempt status, however, the IRS fails to define “some” or “too much,” which has created

a general lack of understanding as to exactly where the boundary between public policy

advocacy and political engagement is drawn. (Thomas, 2011)

In order to understand the importance of nonprofit advocacy, it is necessary to

examine the sector as a whole, its size, and scope, and impact as an employer and

contractor, as public advocate and political influence. This study will provide a look at

the sector overall, how the sector has evolved over time, and by using previously

published predictive research, sector trend analysis, and findings of an independent

qualitative field research study, will seek to produce conclusions and recommendations

which will provide new insight into nonprofit advocacy in a post recession economy.

According to Lester M. Salamon, contributing author of The Nonprofit Sector: a

Research Handbook, “the field of comparative nonprofit sector studies has grown from

one of widespread neglect to one of extensive contestation, with multiple definitions and

concepts of what the field encompasses competing for attention.” (Powell, 2006)

Salamon’s assertion mirrors this researcher’s findings. In review of the literature and

research available, it is apparent that to understand the nonprofit sector’s influence one

must examine the sector’s impact on the American cultural landscape.

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The nonprofit sector, the third largest employer and largest governmental

contractor in the United States, has become a major economic force, (Salamon, Holding

the Fort: Nonprofit Employment During a Decade of Turmoil, 2012) which must be

considered from a myriad of perspectives. As a social service provider, the nonprofit

sector assists government in providing services to the public, while often being the voice

of the minority, and those unable to speak for themselves. Since its inception, the

nonprofit sector has become one of the nation’s largest economic contributors in both

employment and service, and a major political force, both directly through advocacy,

and indirectly through citizen-driven legislative initiatives.

In the literature review section, we look at the development of the sector

historically, examining how the role nonprofit organizations play in the public policy

process has developed, through the lens of public advocate, economic force, and

political influence. Examining the foundation of the current 501(c) tax-exempt category

of nonprofit organizations, to isolate the differences between 501(c)3 and 501(c)4

designations, and define current legal limitations of advocacy efforts.

Once a firm background of the sector has been established, the study explores

research methodologies used in the evaluating the field of public administration, and by

examining contemporary scholarly opinion, compares qualitative and quantitative

methodologies, and how they are used in sector analysis. The review includes

contemporary research in the field, looking specifically at three previously conducted

research projects: the 2012 Johns Hopkins Nonprofit Listening Post Project, the 2009

Congressional Research Service Report: An Overview of the Nonprofit and Charitable

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Sector, and the 2002 Tufts University Strengthening Nonprofit Advocacy Project

(SNAP). Using these previously published studies as a basis for comparison, the study

examines newly collected information from a qualitative field research study conducted

by the researcher, of 501(c)(3) organizations in Cincinnati, Ohio, which was distributed

by the Association of Fundraising Professionals (AFP) in February and March 2015.

In the findings and analysis section, the study evaluates the impact of the recent

economic recession on the sector, to answer the following questions: Does the size

and/or capacity of an NPO impact advocacy efforts? Do NPO’s understand the legal

limitations of 501(c)(3) political engagement? And, are NPOs working collaboratively or

independently in their political advocacy efforts?

In conclusions and recommendations, the study examines previous scholarly

predictions surrounding the sector post recession, and using newly collected data, the

study informs NPO leaders with recommendations on how the sector may evolve as a

principal player in the public policy process, in a post recession economy.

Statement of the Problem and Research Questions

The group of thirty nonprofit scholars and leaders, who convened to explore

public policies’ impact on the nonprofit sector at the 2010 ARNOVA Symposium,

suggested potential research projects, which could most benefit the sector. Among the

potential projects suggested was to more closely examine the types and levels of policy

advocacy nonprofits are engaged and to look at factors, which appear to support or

discourage advocacy activity among nonprofits designated by the IRS as 501(c)(3)

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exempt. (Thomas, 2011, p. 116) This study examines agency demographics, to

ascertain what factors if any, including NPO size, annual budget, leadership structure,

and/or mission-focus impact political advocacy participation? Members of the Cincinnati

Chapter, of the Association of Fundraising Professionals (AFP), an association of

professionals, which advance philanthropy by enabling people and organizations to

practice ethical and effective fundraising, (AFP, 2015), who work for NPOs with an IRS

Tax Exempt status of 501(c)(3), were surveyed in an effort to ascertain their current

knowledge and understanding of NPO legal limitations of participation in the public

policy process. The survey was announced, promoted, and completed electronically,

first in an initial email written and distributed by the current AFP President of the

Cincinnati chapter to members, and a second announcement for participation was

delivered via electronic newsletter, published by the Greater Cincinnati Chapter of AFP.

The survey was posted online using Google Forms survey tool. Participation was

encouraged throughout February and March of 2015, with a participation deadline of

March 31, 2015. Approximately 15% of the total potential participants responded,

mimicking similar study response ratios within this population. A complete overview of

prior research, including response ratios, will be provided in the findings and analysis

chapter.

NPOs, although defined under the same tax-exempt status of 501(c)(3) (IRS,

2014), vary greatly in mission focus, annual budget size, funding sources, and in service

delivery systems. Diversity is required in order to meet the needs of a diverse society,

but difficult to understand or quantify. Based upon these assumptions, this study sought

to examine NPO advocacy efforts, to better understand how NPO leaders participate in

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political advocacy, what factors (size, budget, or mission) influence these decisions,

what myths are prevalent among sector leaders, and how NPOs are seeking to

influence the public policy process. The field research study focuses on three primary

areas of information; demographic, beliefs and assumptions, and best practices, in

answer to the following three research questions:

1. Does the size and/or capacity of an NPO impact advocacy efforts?

2. Do NPOs understand the legal limitations of 501(c)(3) political engagement?

3. Are NPOs working collaboratively in their political advocacy efforts?

The study examines the role nonprofit organizations (NPO’s) play in the public policy

process, and how that role is evolving within the sector, examining NPOs as contractor,

advocate, and as a political influence. As the role of the NPOs gains importance within

the public policy process, so does the need for sector leadership to interpret,

understand, and provide direction, which will best utilize the newly gained policymaking

power of the NPO.

Potential Ethical Concerns of the Study

Research ethics are defined as an application of moral standards to decisions

made in planning, conducting, and reporting study results. (McNabb, 2008, p. 20)

J. Mitchell (Mitchell, 1998) identified four ethical principles, which shape morality in

public administration research: truthfulness, thoroughness, objectivity, and relevance.

The truthfulness principle simply stated means it is unethical for researchers to

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purposely be dishonest in any aspect of the study, from the study’s stated purpose to

reporting results without bias.(McNabb, 2008, pp. 20-21) The thoroughness principle

requires researchers to be thorough in their research design, and ethically obligated to

include key concept definitions, appropriate selection of samples, participants, or groups

with full descriptions, to identify the limitations of the research design, and a full

description of the analysis design, and that all study finding be reported, regardless of

whether or not they support the proposed theory or hypothesis. The Objectivity principle

requires researchers to remain objective throughout the process, and lastly the

relevance principal states “research in a democracy has a moral responsibility to be

understandable to people and be useful.” (McNabb, 2008, p. 22)

In addition to the ethical considerations within the field of public administration,

this study also adheres to Union Institute & University’s Institutional Review Board (IRB)

requirements (Union Institute & University, 2014) The IRB reviews all university

research involving human subjects, by university students and by university employees

(faculty and staff). Union Institute & University will not approve or support research

involving human subjects, which does not meet IRB guidelines and has not received

approval from Union Institute & University’s IRB, as follows:

The IRB’s policies and procedures are guided by the Code of Federal

Regulations Title 45 CFR Part 46, “Protection of Human Subjects” (Revised June

23, 2005), of the U.S. Department of Health and Human Services (HHS), the

National Institutes of Health (NIH), the Office for Human Research Protections

(OHRP) or any other successor office, and The Belmont Report: Ethical

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Principles and Guidelines for the Protection of Human Subjects of Research.

(Union Institute & University, 2014)

In addition to the above ethical considerations, this study was conducted via the

internet to eliminate personal bias, and/or inference in the data collection process.

Research Method: Qualitative v. Quantitative Research Methods

According to Kaifeng Yang, and collaborating authors Vache Gabrielian and

Susan Spice, (Miller and Yang, 2008) “Qualitative methods often serve as an umbrella

term for a variety of methods and techniques that could not for various reasons be

quantified, situations and/or group behaviors which cannot be illustrated effectively

through data analysis alone. It is for this reason that “qualitative methods have become

part of the mainstream in political science and public administration.” (McNabb, 2008, p.

xxiii) Choosing the correct research methodology lies with the objective of the study, the

question, and/or problem the research seeks to analyze. “Quantitative research involves

the use of numbers to describe things.” (McNabb, 2008, p. 9) Statistical analysis of

collected data is used to establish differences or similarities based upon measured

responses, assigned specific values. Qualitative research is explanatory, can occur

through many different means, open-ended survey questions seeking personal opinion,

focus groups, individual or group interviews, and seeks to understand influences,

environments, and phenomenon based upon participant subjective opinions. Upon

reviewing considerations, the qualitative research method was the logical choice of

research methodology for this study, as ascertaining beliefs and assumptions regarding

nonprofit participation in the public policy process was a stated research goal.

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Chapter Two

LITERATURE REVIEW AND THEORETICAL FOUNDATION OF THE STUDY

In order to understand the role nonprofit organizations (NPOs) currently play in

the development of public policy, it is necessary to review the development of the

sector, and the major influences, which helped to shape the sector, as we know it today.

The nonprofit sector can trace its concept to the Elizabethan period, and the Poor Law

of 1601 (Powell, 2006, p. 91), which formalized a national system of charitable relief to

be paid for by levying property taxes, ideals carried to Plymouth by the first settlers.

American philanthropy, which gave birth to the nonprofit sector, can trace its

roots to Europe but settlers of the new world relied on private and religious institutions

for support, with the goal of founding communities “being better than, instead of like or

different from, the ones they had known.”(Bremmer, 1988, p. 6) Early Americans,

theoretically opposed to government taxation, laid the foundation of the nonprofit sector

of today, by adhering to the “principle of improving social conditions through voluntary

associations.” (Bremmer, 1988, p. 18) The voluntary system of charitable works

continued to evolve with the formation of charitable foundations and trusts, but it was

not until the 1930’s and Roosevelt’s New Deal, did government seek to regulate support

for the citizenry.

According to noted scholar, Peter Dobkin Hall, the terms we use to describe the

nonprofit sector and nonprofit organizations are, “neologisms,” (Hall, 2006, p. 32) coined

after the Second World War, by political scientists, economists, and lawmakers, to

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describe and classify organizations based upon their intent and purposes, for tax and

regulatory reasons. Classified in the 1954 Internal Revenue Code, specifically 501(c)(3),

and 501(c)(4) designated organizations, with the broader 501(c) classifications

extending to include education, religious, and political advocacy organizations, which

benefit from varying degrees of tax exemption. After World War II, income and social tax

and spending policies transformed the domain of philanthropy, which resulted in

unprecedented grown of tax-exempt organizations, more than doubling the number of

fully or partially exempt entities by 1950, and more than twenty-fold by 1968 with more

than a quarter million reporting under the 501(c) designation. (Hall, 2006, pp. 50-52)

Nonprofit Advocacy and the Government: Friends or Foes

What is advocacy? In order to understand advocacy, as it pertains to the

nonprofit sector, we must first seek to understand the relationship between NPOs and

the government. According to Dennis R. Young, noted scholar on the subject of

nonprofit-governmental relations, advocacy, in one form or another has been part of

American society since we formed a collective society, “nonprofit activity supplementary

to government predates the U.S. republic.” (Boris, 2006, p. 42) A complex relationship

with a single defining thread, the desire to provide for the citizenry. Governments and

nonprofit organizations (NPOs) with a common mission, which simultaneously binds

them and places them at odds. Advocacy, as it pertains to the NPO/Government

relationship must be viewed through overlapping influences.

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Economically, the nonprofit sector’s relationship with government has evolved,

now including service provider of principal, as well as supplemental services, as

contractor for the government. As this role has evolved so has the relationship, with the

modern welfare state, also known as public assistance programs, evidence of this shift.

Politically, the sector represents nearly a third of the national workforce as an employer,

a large number when added to the number of under-served minority populations for

which the sector advocates as their representative to the legislature. A significant

portion of NPOs financial resources are derived either directly or indirectly from

government funds, either delivered in the form of pass-through state grants or direct-

service reimbursement for contacted services. Does this new partnership impact

political engagement? Or, as some would suggest, is the current relationship where

nonprofits perform critical functions in delivering services the perfect solution? In the

next section we will review contemporary literature on nonprofit advocacy and the role

the NPO/Government relationship plays in 501(c)(3) advocacy. (Berry, 2003)

As mentioned earlier, advocacy, in the terms of a collective group of people

petitioning the government on behalf of the larger population need, predates the

Republic and is as intrinsic to the American value system as the freedom of speech.

According to Mary R. Hamilton, in her article titled Democracy and Public Service,

“It is fair to say that public service and democracy are both antithetical and

complementary. There is also no generally accepted theory or model of public

administration for American democratic government. Neither the United States

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Constitution nor other documents related to the founding of the nation provide a

model for an administrative component. The Constitution specifies a goal of

providing for the common defense and producing other public goods, but it says

little or nothing about contemporary issues such as providing for the social,

economic, and physical well-being of the populace.” (Box, 2007, pp. 3-20)

Although the underlying relationship between NPOs and government has changed little

over time, the role advocacy plays in the public policy process has shifted dependent

upon prevailing theories of governance. American philanthropy until the Great

Depression was primarily the work of the wealthy. The private foundation of today owes

its roots to the nation’s elites, who exercised significant influence on policy development

and implementation. It was not until the late nineteenth century that political leanings

began to shift power away from the elites in an attempt to reduce their influence. In the

19st Century, a new model of public administration was born, beginning with the

Pendleton Act, passed in 1883, establishing the first civil service in the United States.

The system of merit based-promotion and employment helped to usher in a new era of

political neutrality. (Kettl, 2009, p. 208)

The 20th century, the New Deal, and World War II solidified the need for a new

relationship between government and the people. Scarcity and need propelled

government to assume a proactive approach to providing societal needs. Trust in

government and civil service remained the national tenor until the 1960s, when issues

abroad resulted in countrywide distrust, and protest led to major reforms. (Box, 2007,

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pp. 70-71) As the nation struggled under its own weight, to reduce its size and

streamline processes, the nonprofit sector was called to assist the government as social

service provider. Outsourcing service to the citizenry served two purposes, it provided

for the needs of the public, while allowing government to reduce the number of

departments and employees. A system which continues to be debated, with those

calling for less government applauding efforts to shrink through outsourcing, while

others see the approach as erosion of democracy in the name of efficiency. (Box, 2007,

pp. 4-12)

According to a report by the Aspen institute , a global forum founded in 1950 to

leverage the power of leaders to improve the human condition, a study completed in

2002, shows the landscape of the nonprofit sector has shifted in recent times,

responding to new social and political dynamics. Influences including an ever-increasing

diversity of peoples and cultures, immediate accessibility to information through

emerging technologies, downsizing and the development of a global marketplace

present opportunities and challenges for nonprofit organizations. These converging

factors offer potential for new nonprofit-governmental partnership models, and potential

new revenues resources for the historically underfunded nonprofit sector, but

simultaneously result in additional challenges for the sector, such as for-profit

businesses competing with nonprofits for service delivery contracts, and pressure for

nonprofits to remain true to their mission in a competitive economic environment.

((NSSG), 2002) In the study of nonprofit-governmental relations, in the United States,

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three predominate theories exist, Supplementary, Complementary, and Adversarial with

each representing a distinct relationship structure and purpose.

In the Supplementary theory, nonprofits fulfill public needs, which are not

supplied by the government, thereby supplementing the public service offerings of the

government. In the supplementary model, private support of public services are only

offered to augment governmental support, with the government maintaining primary

responsibility for providing public needs, with these supplemented funds being raised

through voluntary collective means. According to Young, Burton Weisbrod first

presented the supplementary model of nonprofit-government relations in 1977. (Dennis

R. Young, 1995, p. 34) The theory posits that given the democratic policymaking

process, governments must consider the preferences of the majority when choosing

levels, types, and qualities of services, which serves the citizenry well if their

preferences are homogeneous. The citizens’ whose needs fall outside the norm or

median range of service preferences, are then addressed by nonprofit organizations

willing to supplement governmentally supplied services with additional services, to serve

those minority preferences. The supplementary theory of nonprofit-government relations

is similar in terms of advocacy as the Free Market theory of economics.

The Free Market theory assumes that in a given market the people will have

knowledge of all competitive strategies available and given that knowledge will always

make the choice that will produce the most positive results for the most people.

(VanHorn, 2001, pp. 27-31) The theory posits that tending to the needs of the minority is

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not a market driver because the theory is based on all people having access to all

information and opportunities available. Free market economic theory asserts the

government is only responsible for the needs of the majority, supporting the theory that

nonprofit/nongovernmental organizations should supplement social services by tending

to the needs of the minority.

The Complementary theory of nonprofit-governmental relations sees the two

entities as partners, NPOs working with the government, to compliment each other, in

delivering service to the public. In the complementary relationship, nonprofits and the

government have a direct relationship with one another. According to noted scholar

Lester Salamon, a principal proponent of the partnership relationship, this theory posits

that government should finance public services, while nonprofits deliver the services,

thereby complimenting each other in servicing the citizenry. Salamon asserts the

nonprofit sector has long been a “hidden subcontinent on the social landscape of

American Life,” (Salamon, The State of Nonprofit America, 2012, p. 4) in which we rely

on nonprofit organizations to handle critical public needs. A necessary partnership,

between NPOs and the government, originated in the 1960’s, is responsible for the

tremendous growth of the sector over the last fifty years. (Salamon, The State of

Nonprofit America, 2012, pp. 3-5)

The complementary theory has gained prominence in today’s society primarily

due to an ever-growing government, and multi-layered bureaucracy. In the span of just

over 50 years, from 1962 to 2007, the number of governmental employees grew from

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just over 5 million to nearly 20 million (Kettl, 2009, p. 62) and with a governmental

structure of that size, costs and inefficiencies are unavoidable, specifically in the

delivery of social services. Therefore, it is often cheaper for governments to contract out

certain services, than it is for them to administer them internally. In addition to the cost

of labor, which is a primary consideration in service delivery, the private or nonprofit

sector may be better informed or educated on the issue or service to be delivered. The

last and final justification for the complementary theory of nonprofit-governmental

relations is that nonprofits do not operate from a profit-making position. The goal of the

nonprofit is mission-based as opposed to profit or political motivations, therefore there

are fewer reasons to compromise on service or lower the costs to increase profits.

The last most prominent theory in the analysis of nonprofit-governmental

relations is the Adversarial view. In this theory, nonprofits take on the role of watchdog

and adopt an additional directive, to influence the government to make changes in

public policy and/or to maintain accountability to the public. As with most things, the

sword cuts both ways, as government attempts to influence nonprofit organizations, by

regulating their services, and choosing to respond or not respond to their advocacy

initiatives. As Dennis Young explains, “The adversarial view does not posit any specific

relationship between the levels of nonprofit and governmental activity. For example,

nonprofits can advocate for smaller or more efficient government operations, or they

can advocate for new programs and regulations that would increase government

activity.” (Boris, 2006, p. 33)

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Unlike the supplemental and complimentary theories of nonprofit-governmental

relations, the adversarial theory promotes an advocacy role for nonprofits in public

policymaking, and the role of governmental control over nonprofit organizations. The

adversarial theory has only recently been explored as a separate theory. Many scholars

see nonprofit advocacy and governmental efforts to regulate nonprofits as one aspect of

complementary theory. Nonprofits and government are often collaborators in passing

legislation or changing public attitudes. However, as Young illustrates, new literature

proposes there is also a third way of characterizing the relationship between nonprofit

organizations and government, as adversaries in policymaking and service delivery,

with the primary difference being the added role of citizen advocate.

Young looks to economic theory to illustrate the adversarial relationship, by citing

Weisbrod's theory of government failure. Weisbrod asserts, “In heterogeneous

communities, where minority views are not well reflected in public policy, minorities will

organize themselves on a voluntary collective basis, not only to provide public services

for themselves but also to press government to more adequately serve their interests.”

(Boris, 2006, p. 39)

The Economics of Nonprofit Advocacy

Scholars agree the nonprofit sector is becoming an important player in the

delivery of social services in the United States. The rationale for this increase is simple,

the government is too large to effectively ascertain the needs of its citizenry making

provision of services challenging at best. Therefore, government allocates direct service

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to private organizations, both nonprofit and for profit, with specialization of service within

a specific area of societal needs, and knowledge of constituency, based upon

geographic location and specialization.

Examining the NPO as service provider for the government is primarily examined

using the Principal-agent theory of economics. In this theory, the nonprofit is not seen

as a supplemental service delivery system for services. To apply the business model of

principal-agent theory to the NPO-governmental relationship, “the nonprofit’s public is to

the nonprofit what owners are to the firm (the principals) and what the people are to

their democratic (representative and responsive) government – its ultimate sovereign,

beneficiary, and assessor of value added (its principals).” (Bryce, 2012, p. xiii)

The most recent scholarly work published on this theory, by Herrington Bryce,

published in 2012, breaks down the theory into key concepts, which include; the Public

Policy Process, “The” or “Its” Public, Social Capital Assets, Cognitive Social Capital,

Principal-Agent, Agents and Stewards, Contracts, Trust, Unspecified Contracts, and

Shirking, and uses these concepts to demonstrate the theory through a principal/agent

paradigm across public purposes. This perspective offers a set of strategic positioning

implications for nonprofit organizations in the public policy arena. The author presents

the theory from an interdisciplinary perspective, looking at the subject from current

theoretical assumptions from law, economics, public policy, political and sociology and

puts forth the argument that the theory presented is universally applicable, regardless of

a nonprofit’s mission focus and asserts that this theory is applicable to NPO’s as well as

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for profit businesses because they not only discharge humanitarian action on behalf of

the American public, they generate public concern, shape the debate, shape the

formulation of policies and how they will be discharged, this elevates the NPO from

contractor for the government to social change agent. (Bryce, 2012, p. 2)

Although not the first to apply the principal-agent theory to the NPOs, Bryce’s

expansion on the theory explains by identifying why the principal-agent theory is

significant to NPOs and how it differs from other theories on the subject. The NPO,

Bryce asserts, has a competitive advantage over governments or private firms, in the

public policy process for many reasons. The first being public opinion, as although many

for-profit corporations maintain the ability to provide services to the citizenry, they do so

for profit. The perception that profit is primary in for-profit enterprise and mission is

primary for NPOs, both the citizenry and the ruling government is likely to view the

NPOs motives more favorably, if all other factors of delivery are equal. The next factor

hinges on the transactional cost of the contract. According to Bryce, the primary motives

of each entity again play a primary role in preference, and as the NPO’s motive is not to

make a profit, the assumption is the NPO will deliver the service for a lower cost than

the for-profit organization. Bryce’s assumption is reinforced by the findings by Corts and

Singh (Corts and Singh, 2004), Gulati (Gulati, 1995), and Schwartz and Watson

(Watson, 2004). These scholars view the NPO as an economic and legal entity, which is

independent of productive economic activity although their purpose is societal rather

than individual benefit or profit. (Bryce, 2012, pp. 33 -111)

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The Principal-agent theory, when used to look at NPOs rather than for-profit

organizations, offers a solution to traditional public administration’s problems in

delivering services to the public. Nonprofit organizations are specialized, with a specific

mission focus, normally addressing the needs of their mission constituency within a

designated geographic area and demographic. The specialization of NPOs makes them

the best organizations to serve these specific constituents, because in principal-agent

theory the focus is on information, and how having and using information is necessary

in service delivery, both problem areas for government/public administration (Kettl,

2009, pp. 102-105). However, not all political scholars believe the Principal-agent theory

is the only way to view the nonprofit-governmental relationship.

Angela Eikenberry explores an alternative approach in her essay titled “Nonprofit

Organizations, Philanthropy, and Democracy” (Box, 2007, pp. 169-193). Eikenberry

agrees with the majority of scholarly opinion, regarding the increasing importance of

nonprofits as social service providers. However, she asserts that public administrators

need to look beyond Principal-agent theory when defining their relationship with

nonprofit organizations and consider the democratic implications of relying on nonprofits

to provide these services, charging that the Principal-agent theory is inadequate, as it

focuses too largely on the administrative process as opposed to the implications to

democracy. Eikenberry cites accountability as the primary source of concern because

nonprofit service providers are only loosely accountable to the elected officials who

approve and administer the programs, thereby creating a much narrower view of the

role nonprofits play in society. (Box, 2007) Regardless of the ongoing theoretical dialog

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on the pros and cons of the principal-agent theory, most political scholars agree on one

truth that as the population grows so does the government, and as the government

grows its capacity to know the needs of the public diminishes.

The Politics of Nonprofit Advocacy

Looking at the nonprofit organization as a political influence is best illustrated in

the third edition of Van Horn’s Politics and Public Policy. Van Horn and his collaborators

divide public policy into political domains, which examine policy development through

the roles of people and institutions (VanHorn, 2001). According to the authors, the

framework of domain politics is segmented into six domains, including Boardroom,

Bureaucratic, Cloakroom, Chief Executive, Courtroom, and Living-room politics, and

examines the process through the actors involved. These actors represent the principal

influencers within the six policy domains. The nonprofit organization (NPO) influences

through political party affiliation in several of these domains: Cloakroom politics or

policymaking by legislators, who are influenced through NPO lobbying efforts;

Courtroom politics, where NPOs may influence through judicial orders in response to

interest groups and lastly through Living-room politics, where public opinion influences

through media with predominate party affiliation within a region, which may impact

media coverage in tone and frequency.

According to the authors’, each of these domains “implies a different arena of

combat, a different set of participants, and different rules of conduct,” (Horn, 2001, p.

21) which also implies different outcomes. The theory breakdowns each domain by its

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principal actors, common issue characteristics, and common policy outcomes, i.e., in

living room politics mass media and public opinion are the principal actors, revolving

around common issues involving high salience, high conflict, and manifest costs issues,

and normally results in a change in policy, responsiveness or innovation. Van Horn’s

assertions differs from traditional scholarly literature on public policy, which assumes

that issues proceed orderly from agenda to policy formation and adoption, a theory

which discounts the influence of private business, interest groups and the influence of

media and public opinion.

Cloakroom politics is the most divergent from traditional public policy literature, in

that it posits that the majority of American policymaking takes place in the venues

outside the House and Senate. (Horn, 2001, p. 121) The second strongest argument

Van Horn asserts that governments cannot make decisions without the consent of

legislatures. (Horn, 2001, p. 152) Considering most NPO lobbying efforts center on the

legislature, and public opinion and private interest influence legislatures, NPO are

political influencers. Political party affiliation is extremely important in legislative

influence; if the majority party agrees with the mission goals of the lobbying NPO little

lobbying is necessary, whereas if the reverse is true the same NPO must increase

lobbying efforts to gain support from an opposing party majority.

Courtroom politics looks at how judges influence public policy through the

governing of constitutional and administrative law. As many judicial seats are elected

rather than appointed party affiliation plays a role in this aspect of politics with majority

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party penetration in the judiciary and impacting the effectiveness of NPO/interest

groups.

The last domain to illustrate the NPO, as a political influence is Living-room

politics, which is the political discourse of America’s living rooms. Today, more than

ever, grassroots movements are shaping the political landscape. The increase in

communication facilitated by the Internet is swaying public opinion, and mobilizing

people on policy issues. Social-media has become one of the most cited influences in

American politics today. Previously limited by funding, the 21st Century NPO may

employ low to no cost mechanisms to influence, such as email marketing, blogs, and

online forums making lobbying efforts affordable to even the smallest NPOs.

In November 2008, New York Magazine’s John Heilemann led a panel at the

Web 2.0 Summit in San Francisco on “The Web and Politics.” Heilemann compared the

disruptive role the Internet played in the 2008 election to the role television played in the

1960 election of John F. Kennedy. In both cases, use of the new medium for political

influence swung the election towards the winning candidate, even though in 2007 the

winning party was not in majority. (Arrington, 2008).

One summit respondent identified three influences currently in play necessitating

an increase in NPO engaged in the public policy process; during and after the most

recent recession, NPOs who relied on private funding needed to diversify funding

sources, and began to look to the government for support, as governmental funding for

social service programs declined the need for NPOs to defend the government

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supported programs increased, and in early 2009, the administration and congress

began to make changes in the tax code which affect charitable contributions to

nonprofits. These converging factors have brought nonprofit advocacy to the forefront of

sector concerns.

Chapter Three

RESEARCH DESIGN AND METHOD

According to Kaifeng Yang, and collaborating authors Vache Gabrielian and

Susan Spice, (Miller and Yang, 2008) “Qualitative methods often serve as an umbrella

term for a variety of methods and techniques that could not for various reasons be

quantified. Examples of these reasons are inability to formulate fuzzy concepts, small

number of observations, study of unique events, and losing essence in coding the

situation. Specifically, qualitative methods are often used to indicate three related

concepts:(1) qualitative research epistemologies that are nonpositivistic; (2) qualitative

research strategies that aim more toward interpreting or revealing meanings rather than

generalizing causal relationships; and (3) qualitative research techniques that are not

operationalized with numbers.” (Miller, 2008, p. 142) Upon reviewing considerations, the

qualitative research method was the logical choice of research methodology.

As stated above, qualitative research is best employed in epistemologies, which

are nonpositivistic. In order to understand what epistemologies are nonpositivistic, we

must compare the positivistic perspective, which assumes “that there is a clear

separation between the researcher and the research participants because the

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researcher does not influence the participants’ behavior” (Miller, 2008, p. 144) with the

nonpositivistic perspective, which assumes the position that the researcher will always

influences the participant because if “the participants know they are participating, their

behaviors are affected and become less authentic .” (Miller, 2008, p. 144) The

qualitative research method was applicable to this study because the researcher is also

a nonprofit professional, and member of the group being surveyed. The nonpositivistic

approach was necessary, as the principal researcher is also a sector participant.

Participant experience will then influence the questions asked within the study.

The second reason to employ a qualitative research strategy in this study was

the goal of interpreting and/or revealing meaning in answers to study questions, rather

than generalizing causal relationships. The goal of the study is to provide new

information to the nonprofit sector, specifically to professionals working within the field,

which will assist nonprofit organizations in successfully utilizing the public policy process

as a means to fulfilling their social service missions. Opinions on the current relationship

between NPOs and the public policy process may only be expressed in narrative open-

ended answers and not quantifiable with data analysis alone.

The qualitative method of research is also more applicable to this study’s design

due to the information it is intended to produce; emergent, and improvisational, which

allows for openness meaning. As recommended in hard-to-study settings (NPOs) and

groups (advocacy groups and nongovernmental social service providers), ambiguous

phenomena and will include open-ended questions, which are goaled to be

35

interpretative and subjective and for these reasons, this study used a qualitative

methodology. Although a qualitative research design is the most prevalent in the study

of public administration, there are many criticisms of qualitative research. Despite its

strengths, qualitative inquiry is not without its limitations. The four most common

criticisms were itemized in a journal published The British Journal of Sociology in 1984:

1. Too subjective, purists assert qualitative studies are too impressionistic, as it

relies upon the participants’ perspective rather than hard data.

2. Difficult to replicate, as the researcher is the main research instrument,

duplicating a study is practically impossible unless the same research, same

participants, the same in scope and time period observed.

3. Problems of generalization, as qualitative research studies are not supposed

be representative of a larger population studies may yield restricted conclusions.

4. Lack of transparency, since qualitative research is largely interpretative and

conducted through non-mathematical methods (e.g., interviewing) articulating

procedures such as sample selection, collection and analysis of data are difficult.

Despite these criticisms, the qualitative research method was chosen for this study

based upon the following considerations:

1. No preset hypothesis, the study did not seek to prove or disprove a theory, rather to

allow hypothesis and conclusions to evolve as the study developed.

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2. Participant opinion was necessary therefore narrative questions were employed.

3. Participant experience within the study subject matter was variable dependent upon

agency demographics, therefore holistic descriptions of the 2007-09 economic

recession phenomenon were necessary to study varying levels of impact.

Data Collection and Analysis

In an attempt to ensure the study yielded new and valuable information within the

nonprofit sector, leaders in the area of public policy within the nonprofit sector were

consulted before study questions drafted or posed. Jason Lee, General Counsel and

Director of Public Policy for the Association of Fund Raising Professionals (AFP), a

membership organization representing more than 30,000 members in 235 chapters

throughout the world, which works to advance philanthropy through advocacy, research,

education, and certification programs (AFP, 2015), confirmed the impetus theory which

prompted this study. The role of NPO as social service contractor, advocate, and

political influence is evolving and NPOs have the potential to become a powerful

political force in the future. To validate this assumption, Mr. Lee suggested consulting

other sector leaders. Conversations with nonprofit leaders working in the field of public

policy affirmed a consensus that the sector was evolving and the need for new research

in the field. As early as 2003, scholars in the field reported trends, which reinforce a

sector-wide evolution of importance. Jeffrey Berry, noted “As essential as nonprofits are

today, current trends suggest that they are going to grow even more significant in the

years to come,” in his sector analysis, designating the 21st century as “The Age of

Nonprofits.” (Berry, 2003, p. 2)

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In 2007, in the most recently published quantitative analysis, the sector showed

unprecedented growth, “nonprofit organizations employed close to 13.5 million paid

workers” representing over 10% of the U.S. workforce, placing it as the third largest

industry. (Salamon, The State of Nonprofit America, 2012, p. 8) If we add the estimated

4.5 million volunteer workers annually, the nonprofit sector labor force swells to nearly

over 18 million annually, the largest workforce of any industry in the United States. In

addition to being the nation’s largest employer, the sector holds economic sway as well,

representing revenues of over $1.7 trillion dollars, with over $85 billion represented just

in the social services segment of the sector, nonprofits are funding 70% of all social

services in the U.S. In addition to employer and economic force, the sector also acts as

a tremendous political influence, by identifying social inequities and bringing those issue

to the public, seeking to protect human rights by being the voice of social, political,

environmental, and ethical concerns. Salamon asserts that the nonprofit sector acts as

“a critical social safety valve, permitting aggrieved groups to bring their concerns to the

broader public attention and to rally to improve their circumstances.” (Salamon, The

State of Nonprofit America, 2012, pp. 3-12)

The importance of NPOs, across sectors, cannot be ignored, “after adjusting for

inflation, revenues for nonprofits grew by 144% between 1977 and 1997 while the

nation’s economy grew at just 81%.” (Berry, 2003, p. 10) Until recently, scholars and

economic theorists consider the market economy, as it pertains to the business and

governmental sectors, with businesses producing and distributing goods and services,

and governments as regulators and lawmakers, ensuring social justice. However, as the

38

nonprofit sector continues to grow, so does its influence, adding a new player to the

national economy and political landscape. Using previously published sector research,

including the following projects: the 2012 Johns Hopkins Nonprofit Listening Post

Project, the 2009 Congressional Research Service Report: An Overview of the

Nonprofit and Charitable Sector, and the 2002 Tufts University Strengthening Nonprofit

Advocacy Project (SNAP), a qualitative research study was created. Data obtained in

these historical studies was used to identify recurring themes and new insights.

The Field Study Research Project

A field research study, titled Survey: Nonprofit Advocacy in a Post Recession

Economy was conducted in February and March of 2015 to examine Nonprofit

Organizations, (NPOs) advocacy efforts in order to better understand how NPO leaders

participate in political advocacy, and whether advocacy efforts changed as a result of

the recent economic recession. The questions of the study were derived using the

comprehensive study Strengthening Nonprofit Advocacy Project (SNAP), a multi-year

research project conducted by Tuffs University in 2002, to understand how nonprofits

use the public policy process, as a historical reference. SNAP included 2735 randomly

selected 501(c)(3) nonprofit organizations, who were asked to complete a qualitative

written survey. The SNAP survey yielded a 63.7% response rate. Using the SNAP

survey results as the basis for comparison, this study compares those results with a

qualitative field study, conducted from February through March of 2015. The survey was

conducted online and distributed to 255 members of the Cincinnati Chapter of the

Association of Fundraising professionals (AFP), of those, only members employed with

39

a 501(c)(3) organization were permitted to participate. The survey yielded a 15.2%

response rate. This field research study was divided into three areas of information:

demographics, advocacy efforts, and collaboration and was conducted via the internet,

utilizing Google survey and analytics survey tool. The survey was distributed to potential

participants in February 2015, with a completion deadline of March 31, 2015.

Participants were pre-qualified for participation by being current members of the

Association of Fundraising Professionals (AFP), Cincinnati, Ohio chapter, and employed

with a 501(c)(3) nonprofit organization, and was endorsed by the leadership of the

Cincinnati Chapter of AFP. The participant pool was diverse in both the type of nonprofit

organization (small, medium, large, mission or service driven), and in the perspective of

the participants, as all employees were welcome, both leadership and staff were polled.

The diversity of the survey participants helped to validate the responses, and insure the

information collected was not influenced by mission focus. The study was qualitative,

included open-ended questions, interpretative and subjective, to encourage openness.

The survey was distributed to participants electronically in an email written by the

AFP Chapter President. Potential participants were directed to the survey Url:

https://docs.google.com/forms/d/1SCj-iBd6dmkLEjrV4HW6QGEzzxnmnl--

hn7XLjlyNXU/viewform?c=0&w=1, to access and complete the online form. Participation

was anonymous, as no personal identifying information was collected, and as

participation was voluntary, consent was implied by completing the survey. The

researcher had no direct contact with participants. Using Google Forms, survey

40

responses were collected and tabulated automatically and electronically, thereby

eliminating personal interpretation of responses based on unwritten cues, i.e., voice

inflection, etc., often cited as a criticism of qualitative research. Survey results were

generated automatically by the survey application to insure data collection integrity.

The field study was divided into three sections:

Demographic: including NPO annual budget, staff size, and breakdown,

mission, and number of constituents served.

Advocacy Efforts: including questions to ascertain NPO Leaders understanding

of the legal limitations of 501(c)(3) political engagement, the number and size of

501(c)(3)s with active initiatives.

Collaboration: the number and size of NPOs working collaboratively in order to

affect change at the policy level.

Using an electronic distribution system for the survey provided two distinct advantages:

data collection was independent of the researcher thereby reducing incidence of

inference or personal bias, and participants completed surveys independent of the

researcher, eliminating the possibility of data tampering in the collection process.

Chapter Four

FINDINGS AND ANALYSIS

The goal of the 2015 field research study was to examine NPO advocacy in a

post recession economy. Historical analysis as a point of reference was necessary. The

point of reference chosen for the study was the SNAP overview of findings, published in

May 2002, by Tuffs University Professor, Jeffrey M. Berry, (Berry, Strengthening

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Nonprofit Advocacy Project (SNAP) Overview of Findings, 2002), and his subsequent

book on the topic, A Voice for Nonprofits, published with David F. Arons, in 2003.

(Berry, 2003)

Conducted as a multi-year project by Tuffs University, OMB Watch, and Charity

Lobbying in the Public Interest (CLPI) the goal of the project was to understand how to

motivate more public policy participation by United States nonprofits. The project was

conducted using three different research strategies:

1. In 2000, January to June, written surveys were mailed to 2735 randomly

selected charities with a 501(c)(3) designation, which filed IRS 990 form in the

previous year. Excluded from the selection were hospitals, universities, and

private foundations.

2. From September 2000 to February 2001, 45 telephone interviews were

conducted with executive directors who had responded to the written survey.

3. From February to September 2001, 17 focus groups of executive directors and

board members were held.

For purposes of the field study comparison, only the findings yielded through the initial

SNAP mailed survey were included. The SNAP 2002 report concluded the following:

Although there is a broad understanding of some of the general laws and

regulations governing policy participation, there are two major misconceptions,

which dramatically impact NPO participation; 50% of NPOs believe they are

prohibited from lobbying if a portion of their budget comes from federal funds,

and 43% believe they could not sponsor a forum featuring candidates for office.

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There are persistent barriers to NPO participation in the public policy process,

including annual budget size, organizational infrastructure, staff size and skill

level, and access to technology.

There is an even larger gap in understanding of federal lobbying laws and rules

governing NPOs, specifically surrounding how much lobbying violates IRS limits

on tax exempt 501(c)(3) nonprofit organizations.

Using similar questions, regarding agency demographics, understanding the rules, and

participation in the public policy process, a field study was conducted from February 1,

2015 through March 31, 2015, the following is an overview of the survey data.

Field Research Study Data

The survey was conducted online and distributed to 255 members of the

Cincinnati Chapter of the Association of Fundraising professionals (AFP), of those, only

members employed with a 501(c)(3) organization were permitted to participate. The

survey yielded a 15.2% response rate. The study was divided into three areas of

information: demographics, advocacy efforts, and collaboration. The survey was

distributed to potential participants on February 1, 2015, with a completion deadline of

March 31, 2015. Participants were pre-qualified by being current members of the

Association of Fundraising Professionals (AFP), Cincinnati, Ohio chapter. Respondents

were diverse in the types of NPOs represented, as employees of small, medium, and

large NPOs responded. In mission focus, direct or indirect service, arts and culture as

well as Health and Human Services, and in individual perspective, as all employees

were welcome to participate, leadership and staff, with no differentiation data collected.

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Demographic Data Summary

68.4% of respondents work for NPOs with annual budgets in excess of $1M

28.9% of respondents work for NPOs with 25 to 50 employees, with the next

largest group being 21.1% with 1 to 5 employees

23.7% of respondents work for NPOs with a designated Public Affairs Director

26.3% of respondents work for NPOs with 30+ board members

44.7% of respondents work for Health and Human Services NPOs

76.3% of respondents work for NPOs which serve 1000+ individuals

23.7% of respondents work for NPOs which receive 50% or more of their funding

from individuals, with 71.3% receiving 5% to 30% from individual donations

All respondents work for NPOs which receive a percentage of their funding from

private foundation support, with 15.8% receiving 50% or more from foundations

50% of respondents work for NPOs which receive 0% of their funding from

governmental funds

73.7% of respondents answered YES to the question, “Did the recent economic

recession impact your fundraising efforts?”

The demographic information yielded by the respondents was very much in line with the

SNAP survey demographics, with one noticeable difference: In 2002, 82% of the

respondents reported receiving the majority of their funding from individuals, as

opposed to 71.3% reporting less than 30% of funding from individual donations in 2015.

In the narrative question section of the 2015 field study, respondents were asked “if you

answered yes to the question, ‘Did the recent economic recession impact your

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fundraising efforts?’ please explain how your fundraising efforts were impacted?” Loss

of funding was the predominate reason cited, below is a sampling of those responses:

“The economic crisis left people with few funds in their banks, which they were

less likely to share with us.”

“Our governmental grant dollars were cut, each year, resulting in a 30% decline

in previously anticipated funding.”

“The recession simultaneously increased the demand for services while

decreasing dollars raised in support of these services.”

“We hired a fulltime development director to solicit private funding to offset

decreases in state and federal funding due to budget cuts.”

“Government funding decreased, the number and size of individual gifts

decreased, foundation support became harder to secure.”

Advocacy Data Summary

As predicted by Jeffrey M. Berry, in 2003, “current trends suggest that they [NPOs] are

going to grow even more significant in the years to come.” (Berry, A Voice for

Nonprofits, 2003, p. 2) Prior to the economic recession of 2007-09, scholars of public

administration were noticing (Berry, A Voice for Nonprofits, 2003, p. 3) a governmental

trend of nonprofits being called upon to deliver critical services to the populace, “Indeed,

the modern welfare state has largely been subcontracted to nonprofits.” The ever-

increasing influence of the nonprofit sector was further analyzed in The Johns Hopkins

Listening Post Project. A joint project of the Center for Civil Society Studies at the Johns

Hopkins Institute for Policy Studies in cooperation with The Alliance for Children and

45

Families, Alliance for Nonprofit Management, The National Council of Nonprofits and

several other nonprofit organizations, formed to study the impact of the recent recession

on the nonprofit sector. (Salamon, Recession Pressures on Nonprofit Jobs, 2010)

In early April 2010, the Listening Post Project conducted a nationwide survey of 1100

NPOs, asking to report on their experiences over the previous six months, from October

2009 through March 2010. Of the 1100 NPOs solicited, 526 organizations responded,

yielding a 46% response rate, which according to the author “is quite high for the

nonprofit field, particularly in a time of economic hardship.” (Salamon, Recession

Pressures on Nonprofit Jobs, 2010, p. 2) Two key findings were derived:

1. The financial battering and increased demands nonprofits are experiencing in the

current recession are taking a serious toll on both their crucial human resources and

their ability to deliver vital programs and services, and yet,

2. Nonprofits have displayed enormous resilience and a strong commitment to their

critical missions in the face of lingering recession, with more organizations holding

employment steady or actually adding staff, though many of these are finding it difficult

to maintain existing services.

Considering NPOs have been challenged to do more with less, it is not hard to

understand why Lester M. Salamon titled the first chapter in his 2012 book, “The

Resilient Sector.” (Salamon, The State of Nonprofit America, 2012, p. 3) However, one

must ask what part of that resiliency is owed to NPO advocacy efforts? According to the

SNAP survey, in 2002, NPOs were not using the public policy process to their

46

advantage, most NPO leaders had limited knowledge of the 501(c)(3) legal limitations to

lobbying, and not one of the NPO respondents surveyed correctly answered all of the

questions pertaining to advocacy, and the rules governing participation in the public

policy process. In an effort to see if this reported resiliency was due to a greater

understanding of the laws regarding lobbying, the 2015 survey posed similar questions

included in the 2002 SNAP survey. Below is a summary of that data:

60.5% of respondents answered “Somewhat” to the question, “Are you familiar

with the current IRS rules regarding 501(c)(3) advocacy?”

15.8% answered yes to the question “Are you familiar with the current IRS rules

regarding 501(c)(3) advocacy?”

63.2% of respondents answered “No” incorrectly to the question, “Under current

IRS regulations can your organization support or oppose federal legislation.”

84% of respondents answered “No” incorrectly to the question, “Under current

IRS regulations, can your organization lobby if a portion of your annual budget is

derived from federal funds.”

65.8% of respondents answered “No” incorrectly to the question, “Under current

IRS regulations, can your organization sponsor a forum or candidate debate for

elected office?”

As reported in the 2002 SNAP survey overview, the percentage of incorrectly answered

questions has increased over time, indicating NPO know less in 2015 about the rules

governing their advocacy efforts. Incorrect responses increased from 50% to 84% of

respondents who believe they cannot lobby if a portion of their annual budget is derived

47

from federal funds, with an increase from 43% in 2002 to 65.8% in 2015, of respondents

who believe they could not sponsor a forum or debate featuring candidates for office.

Collaboration Data Summary

The final section of the 2015 field survey focused on collaboration. The 2002

SNAP survey did not include a specific section on how organizations accomplished their

advocacy efforts. The following is a summary of those findings:

86% of respondents report they do participate in the public policy process,

however, 78% of that participation is considered “Grassroots” lobbying, i.e.,

organizing public support.

84% of respondents report NPO capacity as being the primary reason their

efforts to impact public policy are not more robust, with 50% of respondents

reporting paid staff of 11 or fewer employees, and 87% of respondents with less

than $1M annually unable to employ technology, i.e., email, social media, in their

advocacy efforts.

Capacity was also found to be an issue in the 2015 field study, as NPOs reported

similar circumstances in advocacy efforts, below is a summary of those findings:

81.6% of respondents answered “No” to the question, “Does your NPO

participate in mobilization efforts to engage the public in political advocacy?”

15.8% of respondents report having a designated staff person responsible for

government relations

60.5% of respondents cite agency capacity, (staff or budget limitations) as the

primary barrier to participation in the public policy process

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21.1% of respondents cite fear of losing their IRS 501(c)(3) status as the primary

barrier to participation in the public policy process

55.3% of respondents have not used social media in their advocacy efforts

13.2% of respondents answered YES to the question “Were your organization’s

advocacy efforts impacted by the recent economic recession.”

65.8% of respondents reported belonging to a coalition of like-minded NPOs

Of the 65.8% of NPOs belonging to a coalition, 42.1% of those coalitions lobby

on behalf of its member agencies

31.6% of respondents who answered YES to belonging to a coalition, reported

the coalition had a separate 501(c)(4) IRS designated organization which

performs lobbying activities on behalf of member agencies

86.8% of respondents answered NO to the question, “Do your board members

lobby legislators on behalf of your mission?”

76.3% of respondents do not participate in a coordinated “Lobby Day” to

advocate to legislators on behalf of their mission.

As indicated in the 2002 SNAP survey, the 2015 field study affirmed the majority of

NPOs do not participate in organized efforts to impact the public policy process.

Chapter Five

CONCLUSIONS AND RECOMMENDATIONS

The purpose of this study was to examine the role nonprofit organizations

(NPOs) play in the public policy process in a post recession economy, specifically NPOs

with a IRS 501(c)(3) tax designation. A fundraiser working in the nonprofit sector

49

throughout the economic downturn, this researcher experienced declining individual

gifts, in numbers of donors and gift amount, reduction in the number and amounts of

private foundation grants, and nonprofit agency endowment losses due to investment

losses. A simultaneous increase in the demand for services, due to the economic

downturn, placed greater demands on nonprofit agencies, now with fewer resources.

Exacerbating both influences, declining funds and increased demands were additional

challenges surrounding the tax codes governing charitable giving. Nonprofit leaders,

previously uninvolved in efforts to impact public policy, began to look at participation in

the process as not only potentially beneficial, but possibly inevitable.

Intrigued by the ARNOVA symposium’s identified areas of new research needed

to address concerns about public policies’ impact on nonprofits, this study focuses on

one of the five areas identified: To understand the work of NPOs in advocacy, including

the boundaries between public policy advocacy and political engagement. The study

included a review of NPO advocacy efforts historically, sector trend predictions

beginning in 2002, and a qualitative field research study, designed to answer the

following research questions:

1. Does the size and/or capacity of an NPO impact advocacy efforts?

2. Do NPO’s understand the legal limitations of 501(c)(3) political engagement?

3. Are NPOs working independently or collaboratively in their political advocacy efforts?

50

In 2003, Jeffery M. Berry predicted, “The role of nonprofits in providing health

and human services will continue to grow because of fundamental changes in the

American system of welfare. Over the last 40 years welfare has moved largely from a

system of income maintenance to a system of social services.” (Berry, Empowering

Nonprofits, 2003) Berry’s prediction was confirmed by noted scholar, Lester M.

Salamon, in 2012, “Nonprofit organizations are service providers: they deliver much of

the hospital care, higher education, social services, cultural entertainment, employment

and training, low-income housing, community development, and emergency aid

available in this country.” (Salamon, The State of Nonprofit America, 2012, p. 11)

Considering the size and scope of the nonprofit sector today, economic theorist

Herrington J. Bryce, proposes that nonprofits may indeed have a competitive advantage

in service delivery, “often the agent of contractual choice by governments and even

firms in the public policy process.” (Bryce, 2012, p. xiii) In nearly every instance, Berry’s

predictions regarding the nonprofit sector have proved accurate, with one noted

exception, the role nonprofits play in the public policy process. Findings in both the 2002

SNAP study, and the 2015 qualitative field research study conducted by this researcher

confirm nonprofit organizations have made little progress in their participation in the

public policy process, and in some cases knowledge and assumptions surrounding

nonprofit political advocacy efforts have decreased over time. In examining the results

of both surveys, it appears the 2007-09 economic recession, although necessitating a

more active response in political advocacy, resulted in greater demand on staff with

fewer resources, which created barriers to public policy participation by NPOs.

51

Side by Side: Participation and Assumptions 2002 SNAP Survey and 2015 Field Study

QUESTION

2002

SNAP

Survey*

2015

Field

Study

Does your agency participate in political adovocacy efforts - answered yes 86% 42.1%

Are you familiar with the current IRS rules governing NPOs political

advocacy - answered somewhat 30% 60.5%

Can your organization support or oppose federal legislation - answered yes

(correct assumption) 72% 63.2%

Can your organization take a political position without referencing specific

legislation- answered yes (correct assumption) 82% 39.5%

Can your organization use federal funds to lobby - answered no (correct

assumption) 94% 84.2%

Can your organization endorse a candidate for office - answered no (correct

assumption) 87% 100%

Can your organization lobby if a percentage of your budget comes from

federal funds - answered yes (incorrect assumption) 50% 84%

Can your organization sponsor a forum or debate featuring candidates for

office - answered yes (incorrect assumption) 43% 68.5%

Can your organziation speak with elected officials about pubic policy issues -

answered yes (correct assumption) 91% 73.7%

*Source: Strengthening Nonprofit Advocacy Project (SNAP) Overview of Findings, 2002

A cursory view of the survey results shows dramatic decreases in involvement in

political advocacy efforts and in understanding the legal limitations of lobbying for NPOs

with a 501(c)(3) IRS designation, from 2002 to 2015. Political engagement is down by

more than 50% and less than a third of respondents reporting a clear understanding of

NPO rights to participate in the public policy process, or if they are entitled to engage

legislators in pursuit of their mission directives.

52

Decreases in participation levels and levels of understanding regarding political

advocacy were evident when comparing 2002 and 2015 survey responses. To ensure

comparison viability and sampling integrity between the 2002 SNAP survey, the 2015

field study included respondent demographic questions regarding agency size, mission

focus, and revenue sources.

Side by Side: Respondent Demographics 2002 SNAP Survey and 2015 Field Study

QUESTION

2002

SNAP

Survey*

2015

Field

Study

Annual Budget size of $1M and above 71% 68.4%

Total paid staff 11 or less 50% 45.80%

Mission focus: Health and Human Services 48% 44.7%

Percentage of annual revenue from individuals 25% 23.5%

Does your organization have a specific person designated to political

advocacy and/or government relations - answered No 73% 84.2%

Does your organziation participate in direct lobbying with legislators -

answered No 69% 76.3

Is your organization a member of a coalition - answered Yes 53% 65.8%

*Source: Strengthening Nonprofit Advocacy Project (SNAP) Overview of Findings, 2002

A review of both surveys illustrates similar attributes in both sample populations, with

two note worthy decreases, more organizations in 2015 do not having a person

designated to political advocacy efforts, or participate in direct lobbying with legislators,

which may be attributed to advocacy in a post recession economy, and the challenge of

additional service demands and reduced funding. The 2015 field research study

addressed this potential impact directly with multiple choice and narrative questions.

53

In 2009 the Johns Hopkins Listening Post Project distributed an economic

downturn survey to 1,411 organizations, of which 363 responded. (Salamon, Impact of

the Economic Recession on Nonprofits, 2009) According to the report, 80% of

responding organizations reported fiscal stress during the recession, with nearly 40%

considering the fiscal stress to be severe. Over 50% of those surveyed reported

declines in revenue, increased costs, and significant losses to endowment funds, statics

similar to responses given in the 2015 field study regarding recession impact.

Recession Impact 2015 Field Study Results

QUESTION Yes NoNot

Applicable*

Did the recent economic recession impact your fundraising efforts73.7% 26.3% 0%

Was your organization's advocacy efforts impact by the recent

economic recession?13.2% 44.7% 42.1%

*Not applicable as organization does not participate in advocacy

In addition to multiple choice, respondents to the 2015 field study were also given an

opportunity to explain how their fundraising and advocacy efforts were impacted by the

recession. Narrative responses varied slightly but overwhelmingly respondents sighted

increases in demands for services with simultaneous decreases in funding as the

primary impact of the recession on their fundraising efforts. However, narrative

responses to impacts on advocacy efforts were minimal and surprising in the number of

respondents which did not feel the question was applicable to their organization, which

reflects back to a similar assumption mentioned in the 2002 SNAP survey findings

regarding policy participation, “Many executive directors felt that spending time on

54

lobbying detracted from doing the work they should or must be doing – such as

fundraising, dealing with staff issues, and day-to-day crisis.” And, the report continues,

“even when charities engage in policy they do not think of themselves as influencing.”

(Berry, Strengthening Nonprofit Advocacy Project (SNAP) Overview of Findings, 2002)

Further reinforcing the ARNOVA groups’ assumption that a greater understanding of

how NPOs participate in political advocacy and the SNAP survey’s assertion that there

is a general lack of knowledge among NPOs regarding their rights to participate in the

public policy process. These findings included, is there a role for NPOs in the public

policy process in a post recession economy?

Returning to the original research questions, has this study helped to better

understand what factors impact NPO advocacy efforts? Do NPO’s understand the legal

limitations of 501(c)(3) political engagement? Are NPOs working collaboratively in their

advocacy efforts? Yes, no, and possibly. As with all research, this study has yielded

new questions along with new understanding. In both the 2002 SNAP survey and the

2015 field study, a correlation can be drawn between agency capacity (annual budget,

staff size, and financial resources) and participation in the public policy process. Larger

NPOs can afford to employ a designated staff person to handle government affairs and

coordinate advocacy efforts. However, agency capacity has little impact within a sector

which lacks specific knowledge regarding legal limitations, and the rights of public policy

participation of 501(c)(3) nonprofit organizations. There is evidence that NPOs are

working collaboratively in their advocacy efforts, increasing by 12.8% from 2002 to

55

2015. However, when over 42% of the 2015 survey respondents say they do not

participate in advocacy therefore the question is not applicable, alarm bells sound.

In the 21st century, the nonprofit sector has become a principal player in the

nation’s economy, as an employer, governmental contractor, and advocate. However, if

the sector is to become a principal player the political arena barriers to NPO

participation must be addressed. Based upon a thorough review of literature and

prevailing theories on the topic and completion of a field research study, the research

reveals the following recommendations regarding the role NPOs play in the political

policy process in a post recession economy:

1. The lack of understanding and education regarding the rules governing NPO

participation in the public policy process must be corrected. Courses/training, covering

specific rules for each classification of the IRS 501 designations, should be created and

made available at low or no cost to nonprofit organizations.

2. Nonprofits nationally need to join together to amend and clarify IRS rules regarding

lobbying limitations, working to effectively remove ambiguous language and establish

national guidelines based upon annual revenue or tax classification.

3. The nonprofit sector as a whole needs to establish a national advocacy network,

working specifically to champion public policies impacting nonprofit organizations, such

as changes to tax laws governing charitable and rules regarding lobbying limitations.

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