Nonprofit Ch 3

Lester Salamon identifies six qualities that characterize nonprofit organizations. Briefly state and describe each

1) Organized Entity: Nonprofit organizations are formal organizations that for the most part incorporate under state law and have have the same benefit as business organizations. 2) Private: While nonprofit organizations have a commitment to the public or to public service, they operate in the private sector rather then in the government sector. These types of agencies form a third economic sector. 3) Non-profit Distributing: Nonprofits are not allowed to distribute any excess of revenues over expenditures to benefit individual owners. Profit that is generated must be returned to the organization itself rather than to pay dividends to owners or investors. 4) Self-Governing: Nonprofits are self governing i.e., they are not controlled either by government or by individual owners. Control rests within the Board of Directors (i.e., a set of people who have responsibility for ensuring the organization serves its mission and uses its funds in accordance to that mission and the law). The board is responsible for the organization. 5) Voluntary: Nonprofits can employ paid staff; however, most nonprofits utilize a set of volunteers such as a board of directors or other people to carry out activities who do not receive any compensations. 6) Of Public Benefit: Nonprofits exist to serve a social purpose that is deemed to be of public benefit. The purpose is stated in the "mission" of the organization

Individuals can deduct contributions from their personal income tax when contributions are made to _____________?

501(c)(3) organizations

A significant risk of resource dependency within a nonprofit organization is ______________________

Goal Displacement

Explain why/how nonprofit organizations act as gap fillers

Nonprofit organizations act as gap fillers when the market and government fail. The market may fail due to information asymmetry and the government may fail due to its inability to offer services and goods because of constraints (e.g., time, size and complexity, etc.). When the market and government fail, nonprofit organizations step in and fill the void by offering goods and services to meet the need of the people