Chapter 9: Understanding Revenues

Question 1

What percent of the American workforce is employed by nonprofits?

Answer 1

10%

Question 2

Term for the phenomenon of the poor and unfortunate that need basic services a civilized society does not provide

Answer 2

Market failure

Question 3

Term for governments not setting taxation high enough to produce an adequate supply of public good and services for the needy

Answer 3

Government failure

Question 4

Benefit Theory

Answer 4

Dennis Young
Classifies benefits that nonprofit organizations generate into 4 broad categories based on goods/services they provide: private benefits, group benefits, public benefits, trade benefits. Nonprofits should seek support from beneficiaries and/or those who value the benefits.

Question 5

Private Benefits

Answer 5

Accrue to clients and consumers of the nonprofits’ services. Rival and excludable. (example: private nursing care)

Question 6

Group Benefits

Answer 6

Accrue to specific constituencies associated with causes that potential donors value and are willing to support. Often have significant externalities. (example: free access to classical music)

Question 7

Public Benefits

Answer 7

Accrue to the general public. Nonrival and nonexcludable between beneficiaries. (example: clean air)

Question 8

Public Goods

Answer 8

One person’s consuming the benefit does not reduce the benefit for others, and nonpayers can not be excluded from the benefit

Question 9

Trade Benefits

Answer 9

Accrue to organizational partners in a quid pro quo relationship

Question 10

Quid Pro Quo

Answer 10

A favor or advantage granted or expected in return for something

Question 11

Sources of revenue for nonprofits (3)

Answer 11

1. Public support
2. Private donations
3. Earned revenue

Question 12

What is (overall) the largest source of revenue for nonprofits?

Answer 12

Earned revenue / fees for goods and services (from private sources)

Question 13

What group provides the greatest revenue sources to nonprofits?

• Corporations
• Foundations
• Individuals
• Bequests

Answer 13

Individuals (private donation)

Question 14

Categories of motivation for corporate grants (2)

Answer 14

1. Charitable giving

2. Strategic alliances (mutually beneficial)

Question 15

What type of organization receives the largest share of nonprofit donations? What approximate percent?

Answer 15

Religious

35%

Question 16

Types of government support for charities (2)

Answer 16

1. Contracts

2. Grants

Question 17

Heartfelt Connectors
(nonprofit model)

Answer 17

Focus on causes that resonate with large numbers of people, creating structured ways for these people to connect and donate
(example: cancer foundation)

Question 18

Beneficiary Builders
(nonprofit model)

Answer 18

Financed by reimbursement for services they provide to specific individuals, but at the same time rely on people who have benefited from their services in the past
(example: University alumni)

Question 19

Member Motivators
(nonprofit model)

Answer 19

Rely on individuals who donate money because the issues the nonprofit addresses are important to these donors’ values’

Question 20

Big Bettors
(nonprofit model)

Answer 20

Rely on major grants from a few individuals or foundations to address major solutions with promising solutions
(example: Stanley Medical Research Institute)

Question 21

Public Providers
(nonprofit model)

Answer 21

Provide essential social services that are traditionally supported by governments
(example: foundation that provides services in housing, human services, and education)

Question 22

Policy Innovators
(nonprofit model)

Answer 22

Develop novel methods to address social issues. Financed primarily through government support.

Question 23

Beneficiary Brokers
(nonprofit model)

Answer 23

Compete to match up government services with intended beneficiaries. Often manage voucher programs. Supported by the government.

Question 24

Resource Recyclers
(nonprofit model)

Answer 24

Nonprofits that collect donations from corporations and individuals, and distribute these donated goods to other nonprofits that provide direct services to need recipients. Receive in-kind donations, but also need funds to finance operations.
(example: food bank)

Question 25

Market Makers
(nonprofit model)

Answer 25

Provide services where there is a need, but no market to fill the need. Generally health care.

Question 26

Local Nationalizers
(nonprofit model)

Answer 26

Focus on local issues that are also common and important across the nation. Often locally funded.