Efficiency of Nonprofit Vs. Government Term Paper

Excerpt from Term Paper :

Then, a second major difference resides in the sources used to retrieve the necessary funds. The nonprofit organizations do indeed get the support of the federal budget in the meaning that they are often exempt from tax payment; but they have to raise the funds by themselves without any additional help or interference. They do this through the organization of various events, such as concerts, dinner parties or theatre plays, during which wealthy members of the community donate money to the causes promoted by the NPOs. In the case of governmental institutions however, the funds come directly from the state officials. The money is initially collected from the general public in the form of taxes, fines or other transfers to the state budget, and then redistributed to the state agencies.

A third difference also deals with the financial nature of the organizational activities, but is somewhat different from the previous one. In this order of ideas, since the governmental institutions retrieve their funds from the state budget, they are likely to fluctuate in direct proportion with the national economy. To better explain, were the country to encounter economic stagnation or worse, recession, they would dispose of fewer resources. Therefore, the governmental institutions would be only limitedly able to help the population. On the other hand, since the nonprofit organizations retrieve their funds from wealthy individuals through charitable events, they would depend less on the general economic status. A specification must be made here in that even for the wealthy individuals donating to NPOs, a generally downhill economic performance would not have a positive outcome, and through losing money, they would donate less, affecting as such the funds of the nonprofit entities. But even so, these donors often conduct operations at international scale, protecting themselves against the incurring risks and ensuring as such their profits. All in all, however both types of social development entities depend upon the national economic status and stability, the degrees are different.

It has already been established that both nonprofit and governmental institutions strive to offer high quality services to the U.S. citizens. But since the success of the first is significantly increasing, against the financial constraints of the latter, the government has become more and more centred on collaborating with NPOs. Foremost, the nonprofits often seek the collaboration of state agencies, as they have more power and can even influence the legislation to the benefit of the clients deserved with such high interest by the NPOs. However, the role of the nonprofits remains quite limited, or at least limitedly recognized. They can be formed at local level, but also on national level, and the two types of entities (NFO and state owned) can be collaborators, fierce adversaries or can complete each other (Feiock and Andrew).

The most important statement to be made in regard to the relationship between the two types of entities is that it can be collaborative, adversary and complementary. And this is the single most important sentence to reveal the comparative efficiencies of both nonprofit entities and governmental agencies. To better explain, regardless of the general results retrieved by the organizations, fact remains that in most cases they come to be influenced one by the other. Foremost, this then means that the efficiencies vary and the results are given by the relationship. In a simpler formulation based on the three direction relationship:

when NPOs come to complement the services offered by the governmental institutions, then the latter has registered a reduced efficiency and has been unable to fully satisfy the needs of the individuals; the same is valid vice versa when the two types of organizations choose to collaborate, however this is in the best interest of the population, it could easily mean that they are unable to successfully organize their operations by themselves finally, when the two compete, it means that their efficiencies are balanced and similar; and generally competition is good for the client, as the entities will implement various strategies to increase their satisfaction; however, there is the risk that the organizations become too focused on the organizational battle and fail to properly address the clients' needs

The collaboration between the two types of entities is generally beneficial for the population, and foremost, the state officials could further support the NPOs as to leverage the efficiency of the latter. In this order of ideas, the following measures could be taken:

the government should exempt all NPOs from tax payments, not just some of them, as they do now the federal organization should also grant the NPOs other subsidies, both financial and non-financial the government should become the primary endorser of the nonprofit organizations; this would become extremely beneficial as most NPOs possess limited resources and therefore encounter difficulties with retaining the staff members or the buildings they need; if the government becomes the endorser, the NPOs would get increased access to bank loans or other funding sources also, to increase the on the job satisfaction, the quality of the services, the client satisfaction and eventually the efficiencies of the processes, the government should help create and sustain an employment campaign within the NPOs; they could even offer wage subsidies, for instance the employees in NPOs would not have their hole salaries taxed

5. Efficiencies of Nonprofit Organizations

With more and more problems and even disasters affecting the global population, there is an increasing need for organizations that help the population recover from the tremendous effects of the unfortunate event. But natural calamities are not the sole reason why the existence of such entities is vital. In the dynamic environment in which we live today, change occurs on daily basis and the people who fail to adapt to it will lose the most; these people need help. Probably the most significant example in this sense is given by the increasing poverty, in the background of higher unemployment rate and as such, an increasing dependency on social programs, coming from either government or nonprofits.

But as the need for such organizations increased, so did their numbers - the number of nonprofit organizations has increased from 12,000 in 1940 to more than 1.5 million in 2000 (Frumkin and Kim, 2000). The possibility to attract funds has generated increased competition between these organizations. And the question being posed here is do these entities actually help the population, or do they use most of the money to pursue their personal agenda? In order to answer this question, one should analyze the efficiencies of each type of entity.

The ultimate efficiency of the nonprofit sector depends on the skills and capabilities of each individual organization. This basically refers to their ability to attract and serve clients. The entities are highly competitive and however this is generally in the best interest of the population, they may at times get lost in the competitive strategies and place reduced emphasis on the interest of the served individuals and groups.

Despite the relatively high interest in the efficiencies and results of nonprofit organizations, studies conducted are "surprisingly sparse. [...] One reason for this is the limited data available on nonprofit institutions in existing data sources. Estimates of key dimensions of this sector therefore remain dependent on highly imperfect projections from dated information or on data sources whose accuracy and reliability remain highly suspect. In some respects, in fact, the data sources have deteriorated in recent years" (Salamon and Sokolowski, 2005). But in spite the relatively reduced empirical evidence, fact remains that the nonprofit organizations have to work close with state owned entities. "In some cases, nonprofits may be seen as partners in the government's design or delivery of public services though joint planning and program development" (Feiock and Andrew).

There is a general tendency for the results of nonprofit organizations to be measured in the same terms as those of for-profit entities. But despite their common interests (generically, both types of companies are interested in the well-being of their stakeholders and place increased emphasis on making profits - NFOs continue the implementation of their programs whereas profit organizations distribute the income), the results and efficiencies of the entities cannot be measured in the same terms.

A way in which nonprofits can assess their efficiencies is through retrieving feedback from their clients. In this particular instance, organizations that only worked with highly specialized and experienced volunteers retrieved the most of praises and revealed as such high efficiencies. These agencies have a quite strict recruitment process, in the meaning that the volunteers are asked to participate to an interview, where a psychologist is also present. Given that they are selected, the volunteers will commence a nine-month training program; and only at the end of this program will they be able to interact with clients. They do this not only for the full satisfaction of the individuals deserved, but also as they are aware that a…

Sources Used in Document:


Alvarado, E.I., 1998, Is there a Difference between 'Nonprofit' and 'Not-for-profit'?, Idealist, http://www.idealist.org/if/idealist/en/FAQ/QuestionViewer/default?section=01&item=09last accessed on June 19, 2008

Feiock, R.C., Andrew, S.A., Understanding the Relationships Between Nonprofit Organizations and Local Governments, Florida State University, Retrieved at http://www.fsu.edu/~spap/feiock/papers/Nonprofits_&_Public_Services.pdfon June 19, 2008

Frumkin, P., Kim, M.T., 2000, Strategic Positioning and the Financing of Nonprofit Organizations: Is Efficiency Rewarded in the Contributions Markeplace?, the Hauser Center for Nonprofit Organizations and the Kennedy School of Government, Harvard University, Retrieved at http://www.ksghauser.harvard.edu/PDF_XLS/workingpapers/workingpaper_2.pdfon June 19, 2008

Hopkins, B.R., 2005, Starting and Managing a Nonprofit Organization: A Legal Guide, Wiley

Cite This Term Paper:

"Efficiency Of Nonprofit Vs Government" (2008, June 21) Retrieved January 22, 2019, from

"Efficiency Of Nonprofit Vs Government" 21 June 2008. Web.22 January. 2019. <

"Efficiency Of Nonprofit Vs Government", 21 June 2008, Accessed.22 January. 2019,