Crowding‐Out and Fundraising Efforts

The crowding‐out of private donations by government grants is an integral element in designing an efficient method of financing nonprofit activity. This article looks at elements of crowd‐out, both the direct impact on donors and the indirect impact caused by the response of nonprofits. We include both theoretical and empirical analyses of the reactions by donors and nonprofits to an increase in government funding based on data from the League of American Orchestras’ annual reports from 2004 to 2007. To combat indirect crowd‐out, renewed emphasis should be placed on grant design; for direct crowd‐out, theories of collective action are appropriate.     

KIDS OR CASH? EXPLORING CHARTER SCHOOL RESPONSES TO DECLINING GOVERNMENT REVENUES

While the literature is extensive on school districts' revenue sources, less research has been done on the impact of donations on school district funds. In this paper, we extend the theoretical literature on crowding out of private donations by government grants for one type of nonprofit firm, namely charter schools. The theoretical model leads us to focus on the key relationships among fundraising effort, enrollment (which is tied to federal and state funding) and donations. Using a dataset on Texas charter schools we adopt a two-stage approach to examine the empirical relationship between changes in nondonor revenues and the donations received by charter schools. Like the extensive empirical estimates of the effects of government grants on donations for other types of nonprofit firms, we find evidence of crowding-out with respect to our sample of charter schools. We also find a significant, positive effect of fundraising on donations with a $1 increase in fundraising associated to a $0.58 increase in donations, a pattern consistent with overinvestment in fundraising. Enrollments exhibit a robust inverse relationship to changes in nondonor revenues. (JEL H00, H32, H50)     

Reputation spillover effects from grant‐providing institutions

There is a broad academic discussion about the impact of funding grants from a foundation or a government department on individual support intentions toward the nonprofit organization receiving the grant. However, the role of the grant provider's reputation has frequently been overlooked. In this study, we experimentally tested whether there is a reputation spillover effect of a grant‐providing organization. Based on a real‐life example, we asked citizens to rate their willingness to donate to a nonprofit organization, and we experimentally manipulated the available information on funding sources. We test this for both a government department and a foundation as a grant provider. Our results suggest that not the act of receiving a grant, but the citizens' awareness about the funding organization—at least in the case of a foundation—has an impact on support intentions. In contrast, for a prominent government department as a grant provider, we did not find support for a reputation spillover effect.     

Effects of Government Support of Nonprofit Institutions on Aggregate Private Philanthropy: Evidence from 40 Countries

This paper examines the effects of aggregate government payments to nonprofit organizations on aggregate private philanthropy. Four behavioral models of private philanthropic giving are proposed to formulate four hypotheses about those effects: no net effect (null hypothesis), crowding in (positive effect), crowding out (negative effect), and “philanthropic flight” or displacement (negative effect across different subsectors). These hypotheses were tested against the evidence from 40 countries collected as a part of a larger research project aimed to document the scale and finances of the nonprofit sector. The data show that, on the balance, government payments to nonprofit institutions (NPIs) have a positive effect on aggregate philanthropic donations to nonprofits, as stipulated by the crowding in hypothesis, but a field level analysis revealed evidence of “philanthropic flight” or displacement from “service” to “expressive” activities by government payments to “service” NPIs. Due to the limitations of the data, these results indicate empirical plausibility of the hypothesized effects rather than their incidence. The findings demonstrate the complexity of the relationship between government funding and philanthropic donations to nonprofits, which depends on the goals of the actors (donors and recipients) and institutional settings mediating the transaction costs of difference sources of nonprofit support.     

Net impact of government funding on nonprofit fiscal health: burden or benefit?

This study examines the impact of federal grant awards on the financial health of recipient nonprofits. Although a modest body of research finds that government grants are beneficial to nonprofit fiscal health, a large Urban Institute study (2010, 2013, 2015) found that nonprofit managers receiving government grants consistently report fiscal harm due to awards that do not cover all program costs, late payments, and significant administrative burden. Those findings raise the question of whether government funding leads to net benefits or net harm for organizations given the administrative and fiscal burdens identified. This study tests that question using a large panel of federal grants to estimate the impact of government awards on three measures of nonprofit financial health. We find that government grants promote an increase in nonprofit size, improve operating margins, and increase financial reserves for recipient organizations. These benefits endure after the receipt of the award.     

The role of county‐based funders in sustaining nonprofits within rural and urbanized counties

Social service nonprofit organizations in the United States originally relied on private donations and charitable events to sustain their operations. Using case studies, this article examines the role played by local officials in the thirty‐year survival of certain Indiana Youth Services Bureaus (YSBs) and highlights the salient factors that influenced the viability of some nonprofit organizations over the others.     

How nonprofit human service organizations manage their funding sources: key findings and policy implications

Major findings and policy implications on how nonprofit social service organizations manage their funding relations are summarized. Data from in-depth case studies of six medium-sized social service organizations with distinctive funding profiles yielded findings on the major contingencies associated with controlling fees, the volatility of donations, and the driving force of public funding relationships for funders (public and private), nonprofit managers, and the role of nonprofit organizations.     

Exploring the link between government funding and efficiency in nonprofit colleges

Previous literature has suggested that federal funding can hinder the efficiency of nonprofit organizations, but this has yet not been empirically tested. This study used a two‐stage data envelopment analysis (DEA) model to measure the efficiency of a set of private nonprofit teaching‐oriented colleges, then estimate the impact of federal and state funding on organizational efficiency. The findings indicate that, on average, increases in neither state nor federal funding effect efficiency of nonprofit colleges. Increasing state funding negatively impacted the efficiency of public colleges (N = 799). This study suggests that the challenges for nonprofits that accompany government funding may not rise to a quantifiable negative effect on efficiency.     

Risk and diversification of nonprofit revenue portfolios: Applying modern portfolio theory to nonprofit revenue management

This study uses modern portfolio theory (MPT) to estimate the risk of nonprofit revenue portfolios and examines to what degree the revenue concentration measure based on Herfindahl–Hirschman Index is associated with the portfolio risk measure based on MPT. The findings suggest that nonprofits with greater revenue concentration have lower revenue portfolio risk in the whole sample analysis. However, it is plausible that this result is dominated by organizations reliant on commercial income, which comprise over half of the sample. In fact, when examined separately, the relationship varies by an organization's primary funding structure. While higher revenue concentration is positively associated with portfolio risk for organizations relying on donations or those without a consistent primary funding source, it appears to associate with a lower portfolio risk for commercial organizations and those relying on government grants. This study reflects on the concept of diversification derived from portfolio theory and calls attention to a more nuanced approach to nonprofit revenue strategy.     

Complementary or Supplementary? The Relationship Between Government Size and Nonprofit Sector Size

Do government activities discourage or leverage nonprofit activities? The extant literature has proposed competing lines of arguments, making the net effect ambiguous. The present study conducts a meta-analysis to synthesize extant studies concerning the relationship between the level of government activities and the level of nonprofit activities within a locality and explore potential moderating effects. Through systematically reviewing 30 extant studies, the study finds a mostly positive association between the level of government activities and the level of nonprofit activities, but this relationship is generally weak and sometimes statistically insignificant. In addition, the moderator analysis concludes that data structure, unit of analysis, and field of activity significantly moderate effect size estimates across extant studies. Overall, the net relationship between the level of government activities and the level of nonprofit activities within a locality ranges from null to slight positive. Government activities generally seem not to discourage nonprofit activities, but may slightly leverage them.     

Staffing,retention, and government funding: A case study

This study analyzes the implications of government‐contract funding on the staffing pattern of a nonprofit agency, the Canadian Red Cross, Toronto Region. Furthermore, the study explains the implications of the staffing pattern on services and on the agency's organization. Staffing is one area that the literature on nonprofit organizations has not adequately addressed. The findings indicate that contract‐based funding leads to the hiring of temporary staff and affects the retention of employees. Although contract funding has some benefits, temporary staffing is detrimental to the agency's services. It affects not only employee recruitment and retention but also training. The results highlight how change in government funding from grants to contracts resulted in the agency's new staffing strategy and ultimately reduced the effectiveness of the services the agency provided to the community.     

What Accounts for the Variations in Nonprofit Growth? A Cross-National Panel Study

Previous studies of nonprofit growth have lamented the lack of cross-national longitudinal data measuring the size of the nonprofit sector across countries, which has made it difficult to assess the current state of knowledge about the nonprofit sector beyond national boundaries. Recent progress in measuring nonprofit growth using panel studies or cross-national data has compensated for the limitations of the existing research, but even the recent data are either country specific or cross sectional in nature. This study takes on the challenge of supplementing the current research by measuring nonprofit growth using internationally comparable longitudinal data. Specifically, this study focuses on whether certain key indicators of the overall state of the economy can be used to predict and explain the size of nonprofit sectors cross-nationally. The overall state of the economy has considerable relevance for nonprofit growth, as it influences the levels of government funding and private philanthropy that benefit the nonprofit sector. The results indicate that the existing theories about the nonprofit sector account for variations in nonprofit growth but are limited in their explanations of the underlying dynamics of such variations beyond national boundaries. Social origins theory is a useful addition that helps to explain cross-national variations in nonprofit growth. Importantly, the interplay among the government, private philanthropy, and the nonprofit sector is dynamic, and its effect on economic indicators varies across nonprofit regime types when sociodemographic variables are controlled.     

The crowding‐out effect within government funding: Implications for within‐source diversification

The benefits and risks of revenue diversification lead scholars to propose within‐source diversification as a possible compromise. Although this revenue strategy sounds promising, no scholarly attention has been devoted to empirically examining it. This study explores within‐source diversification across government funding, specifically whether nonprofit receipt of support from a major government funder affects support from other government funders. Using a panel dataset of U.S.‐based international development nonprofits from 1995 to 2014, we find that nonprofits with more funding from the major funder are associated with significantly less funding from other funders. This crowding‐out effect weakens as organization size grows. The findings imply that the within‐source diversification strategy might be more desirable for larger organizations with the capacity to manage multiple funding relationships.     

Corporate Volunteering: Benefits and Challenges for Nonprofits

In the frame of corporate social responsibility, corporate volunteering is almost exclusively studied from the point of view of companies, while the perspectives of nonprofit organizations are neglected. Hence, this article focuses on the perspective of managers of nonprofit organizations on volunteer partnership projects with for‐profit companies. In the center of this article lie nonprofit managers' strategy and motivation for participating in corporate volunteering, conception of corporate volunteer activities, and the often‐cited win‐win‐win aspect. Key findings suggest that a majority of the questioned nonprofits lack strategic behavior and management tools for undertaking volunteer partnership projects with companies. Nevertheless, corporate volunteering is widely perceived as an opportunity and a promising method of raising donations for nonprofit organizations. This article suggests that the key to successful future cooperation between nonprofits and profit‐oriented organizations lies in the processes of internal evaluation and subsequent strategy development.     

Which Nonprofit Gets More Government Funding?

Government represents one of the most important funding sources for nonprofit organizations. However, the literature has not yet provided a systematic understanding of nonprofits’ organizational factors that are associated with their receipts of government funding. This study combines interorganizational relationships and organizational institutionalism literature to examine the determinants of nonprofits’ obtainment of government funding. Based on a survey of human service nonprofits in Maryland, this research finds that nonprofits with higher bureaucratic orientation, stronger domain consensus with government, and longer government funding history are more likely to receive government contracts and grants. Nonprofits’ revenue diversification, professionalization, and board co‐optation might have very limited impacts.     

Does meeting standards affect charitable giving? An empirical study of New York metropolitan area charities

Charitable donations constitute a significant revenue source for many nonprofit organizations. To help donors decide which nonprofits to support, watchdog organizations such as the Better Business Bureau (BBB) Wise Giving Alliance have developed standards to promote wise giving. The effectiveness of these guides in channeling limited resources to the best‐managed nonprofits is not widely studied. This research attempts to empirically investigate the effects of standards on public giving, controlling for factors that have documented effects on donations. Specifically, it regresses public support on the extent to which local nonprofits meet the standards of the Better Business Bureau Serving Metropolitan New York, Mid‐Hudson and Long Island Regions, controlling for organization size, board size, service category, government funding, fundraising expense, and giving price. The study found that BBB standards have a positive effect on giving behavior. Meeting BBB standards is associated with higher levels of public support. Participating in assessment programs and striving to meet the standards are recommended for nonprofits seeking to improve funding through charitable contributions. Further study that extends the search for the mechanism that links meeting standards to improved donations is recommended.     

Performance evaluations of for‐profit and nonprofit U.S. hospitals since 1980

This synthesis of studies examines whether the published literature shows an evidence‐based consensus on performance differences between private for‐profit and nonprofit hospitals in the United States since 1980. The author systematically and comprehensively surveyed peer‐reviewed publications to clarify this question. The author's second objective was to learn what proportion of all research assessing for‐profit and nonprofit health care providers is devoted to hospitals compared to all other providers. The third goal was to discover how any trends in observed performance differences among hospitals compare with trends among other provider types. Computerized bibliographic searches of all relevant databases yielded seventy‐five studies (ninety‐three assessments) that compared the performance of for‐profit and nonprofit hospitals on four performance criteria: access, quality, cost or efficiency, and amount of charity care. The author coded findings on performance in one of three ways: for‐profit superiority, nonprofit superiority, or inconclusive. Most studies (60 percent) reported that nonprofit hospitals have better relative performance than for‐profit hospitals, clear evidence of their organizational effectiveness. Thirty‐one percent were inconclusive, and 8 percent reported that for‐profits were better.     

The Intergenerational Transmission of Spouse Abuse: A Meta‐Analysis

This study uses meta‐analytic procedures to examine the relationship between growing up in a violent home and subsequently becoming part of a violent marital relationship. Our meta‐analysis examines published and unpublished research studies that investigate the relationship between witnessing or experiencing family violence in childhood and receiving or perpetrating violence in an adult heterosexual cohabiting or marital relationship. The findings of this meta‐analysis suggest there is a weak‐to‐moderate relationship between growing up in an abusive family and becoming involved in a violent marital relationship. Differential effects of gender and sample type are also discussed.     

The more you know,the more you give: Influence of online disclosure on European community foundations' donations

Competition is high in the charitable contributions market, and donors demand to know how nonprofit organizations use the money they receive. In scrutinizing the variables that affect the capacity of nonprofits to attract donations, previous research has highlighted the positive influence of the amount of financial and performance information that nonprofits disclose through their websites. This study explored whether the depth of the organizations' online disclosures also affects these donations. In line with existing studies on regression‐based economic models of giving, this study considered community foundations—focusing on the United Kingdom and Italy—and its results indicated that managing the depth of the information provided through financial reports can influence donors' sensitivity and willingness to donate.     

EDUCATION'S GAMBLING PROBLEM: EARMARKED LOTTERY REVENUES AND CHARITABLE DONATIONS TO EDUCATION

I examine the impact that lotteries introduced to support education have on voluntary contributions to education. State lotteries, and the causes they are introduced to support, are highly publicized. This provides the opportunity to assess whether donors are crowded‐out by government spending of which they are almost certainly aware. Using donor‐level survey data and nonprofits' tax returns, I find that donations to education‐related organizations fall with the introduction of a lottery. This result is driven by donors' response to the new (highly publicized) government revenue source (rather than a decrease in nonprofit fundraising efforts). (JEL D64, H3, H75)