Wednesday, August 09, 2006

Nonprofit Organizations and the Economy

"Nonprofits produce profits." That could serve as a catchy title for an interesting essay. In fact, all organizations - whether "nonprofit" or "for profit" - must have income equal to or greater than expenses. Otherwise, they cannot survive. The term, "nonprofit organization" simply indicates that, if revenues are greater than expenses, the extra money will stay in the bank for later good uses. It will not be distributed to shareholders as "profit." Many people are not aware of that.

In addition, many of us do not think about the economic impacts of nonprofit organizations within the communities that they serve. We tend to think only about the humanitarian goals and social impacts that nonprofit organizations have on people and communities. However, nonprofit organizations comprise part of the economy. They pay wages; they purchase goods and services. The amount of our economy occupied by nonprofits is the topic of several articles in fedgazette, a publication of the Federal Reserve of Minneapolis.

The article estimates that nonprofit receipts are 2.4 trillion per year. (That's perhaps 15% of the U.S. Gross Domestic Product??) The numbers can help us to appreciate the impacts of nonprofit organizations that go far beyond their charitable missions and goals.

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