Nonprofits: Do We Need Them?

A Cause for Celebration?

Image Credit: Cbaquiran

As Capital Good Fund nears its sixth birthday, I would like to pause for a moment and ask two uncomfortable questions: is this cause for celebration, and fundamentally, do we need nonprofits?

Some background is in order. As a nonprofit executive and donor to a multitude of other charities, I am deeply acquainted with what I like to think of as the glossy facade we erect on our annual reports, grant applications, and public communications. We change the life of every person we serve, and we do so with a minimum of cost. Ours is the business model best suited to solving the problem highlighted in our respective mission statements. Everyone involved with our organization (board members, staff, volunteers, donors, and clients) wanders the world with a perpetual smile, the result of the unequivocal good we do in the world.

The Ideal and the Real
Yikes, that sounds cynical, does it not? Relax, I may have just turned thirty, yet I remain ferociously devoted to my idealism, something so many others told my fifteen-year-old self would never happen! But the dictionary makes a clear distinction between the optimistic and the Pollyannaish, and we would be remiss to forget that.  So let's take an unvarnished look at the nonprofit sector and see what we find.

Success in Longevity, or in Obsolescence?

A couple of years ago Amnesty International made a big deal of its fiftieth anniversary, and I too delighted in their success; I know how hard it is to keep the lights on month to month, let alone decade after decade. Contemplating a donation, I decided to read their mission statement, which is to create a world "in which every person--regardless of race, religion, ethnicity, sexual orientation or gender identity--enjoys all of the human rights enshrined in the Universal Declaration of Human Rights." Yet I couldn't help but wonder if their continued existence is a failure, a sign that they haven't achieved their core purpose.

Let's be clear: when your mission is to end poverty or injustice, it's absurd to expect to ever fulfill it. Still, as I think back to all that gloss, I start to wonder if we've got it all wrong. Maybe our goal shouldn't be our perpetual existence as nonprofit organizations. Maybe our goal, properly defined, ought to be to put ourselves out of business, to achieve enough success so as to render our continued operations redundant and unnecessary.

Enough to Survive vs. Enough to Thrive

In Capital Good Fund's case, the truth is that we will never have the reach of, say, Bank of America, which has assets in excess of $2 trillion. Contrast that with our budget of $800,000 and the starkness of the imbalance becomes unavoidable. What's more, if Bank of America were to dedicate itself to providing equitable financial services to create pathways out of poverty, which is our mission, their impact would dwarf what we could ever hope to do as a nonprofit. Consider this: at $243.4 billion, Bank of America's total equity is in the ballpark of the sum of all charitable contributions in the United States in 2013 ($335.17 billion).

Of course, there is no evidence that Bank of America is going to do that. They are a for-profit, publicly traded corporation; they have a legal obligation to maximize profits for their shareholders, and equitably serving the poor is not the easiest way to do that (though some might disagree). Recognizing this, the Community Reinvestment Act of 1977 "is intended to encourage depository institutions to help meet the credit needs of the communities in which they operate, including low- and moderate-income neighborhoods, consistent with safe and sound operations." (Federal Reserve) One of the ways they live up to this obligation is to make charitable contributions to organizations like ours.

These donations keep us afloat and enable us to serve a couple thousand people per year, and therein lies the problem: we receive enough funding to survive, to celebrate our sixth birthday, but nowhere near enough to render ourselves obsolete. This dynamic is costly in a variety of ways. For starters, the tax-deductible nature of the funds we receive reduces the funds available to the government to invest in infrastructure, job creation, and poverty-reducing policies, to name a few examples. Worse, it lets off the hook the entities with the scale needed to really solve problems.

The Answer

The answer to our basic question, then, is that we undoubtedly need nonprofits. In the absence of changes to the law, in the absence of powerful corporations willing to put people ahead of profits, we are best positioned to serve the underserved and advocate for the vulnerable.

We would do well, however, to remember that this is far from an ideal situation. The less we focus on how long we've been around, the better. Sure, it is imperative that we recognize our accomplishments, for our work is hard and we must remain positive. But we mustn't do so to the detriment of the bigger picture. If we are to accept that corporations “may exercise many of the rights of natural persons”—and even if we don't accept this premise, it's the law of the land—then we would do well to plan for our organizational deaths and ensure that we bequeath a better world to the future.

Andy is the Founder & CEO of Capital Good Fund, a social change organization dedicated to ending poverty in America. Capital Good Fund provides financial services— small personal loans as well as Financial & Health Coaching—to low-income families.