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The changing role of private, nonprofit organizations in the development and delivery of human services in the United States.


While an academic literature on the nonprofit sector in the U.S. economy did not emerge until the 1970s (Hall, 2010), community-based organizations and charities have been essential in addressing human service needs since the colonial days. Nonprofit organizations today continue in this role offering a complex set of programs. Domestic violence shelters, job training and employment programs, child care centers, foster care, child protection, prisoner reentry, and day programs for seniors and the mentally challenged are among the long and ever-growing list of human services provided by nonprofit organizations.

Nonprofit organizations have a long history of partnering with government, private business and communities in the creation and delivery of human services. Through lobbying and advocacy, nonprofits have also influenced public policy and developed funding streams. This article highlights the important historic roots of the nonprofit sector to provide a context to more fully understand the scope and breadth of modern nonprofit human service organizations in the United States. The first section provides a brief history of nonprofit human service organizations and the key policies impacting the development of the nonprofit sector. An examination of the contemporary human services subsector follows with a discussion of the challenges including the push-pull tensions of contracting out versus collaboration and grassroots or community-based responsiveness versus professionalized management. Finally, implications of these challenges, coupled with the current political context, lead to important questions for nonprofit leaders and policymakers.

Newspaper headlines today underscore the needs of the homeless, poor, neglected and disabled. Private, nonprofit organizations, government agencies, and churches work individually and collaboratively to create responses to these and other social issues. Throughout the history of the U.S., nonprofit human service organizations have played pivotal roles in maintaining and promoting overall quality of life for individuals and communities (Zins, 2001). This article both celebrates and encourages these purposes.


The nonprofit sector in the United States has evidenced a remarkable ability to adapt over time to changing demands and expectations. The practice of charity has been a part of life since the first settlers. The laws and traditions prominent in England at the time were often adopted in early American communities. For example, in 1601 the English Parliament passed the Statute of Charitable Uses, described as "the starting point of the modern law of charities" (Douglas, 1987, p. 43). The statute sanctioned use of private monies for the benefit of the public good. Early American colonists incorporated these values as they shaped the roles of government, business and community (Hall, 2010; Holland & Ritvo, 2008). Voluntary associations were often created to address community problems (Arnsberger, Ludlum, Riley, & Stanton, 2008). As the U.S. Constitution granted significant powers to the states to develop their own laws governing corporations and associations, colonial governments and emerging community groups took on the role of funding and delivering social services "working side by side, at times together and other times along parallel lines" (Lowenberg, 1992, p. 125). The tradition of reciprocal support continued throughout the nineteenth century as governments funded a variety of voluntary social welfare activities, and many voluntary organizations assisted cities, states, and the federal government fulfill their welfare responsibilities (Lowenberg, 1992). During this time period, voluntary agencies were created out of pragmatic necessity to tackle emerging social and human problems when government did not have adequate resources, rather than to express and ideological cause (Lowenberg, 1992).

Although tensions remained about the suitable functions for church and government, religious congregations played an important role in meeting human service needs in early America. Protestant and Catholic and other religious groups established many of the earliest nonprofit organizations to serve the poor (Gibelman & Gelman, 2003). In addition, religious denominations such as the Puritans in New England viewed charity as a religious duty and contributed a portion of their offering for people in need (Holland & Ritvo, 2008). Religious diversity and state neutrality toward the participation of religious institutions in the delivery of human services can now be seen as key factors in the development of the American nonprofit experience (O'Neal, 1989).

As the population of the United States expanded, human service needs increased and changed role expectations for nonprofits. The impacts of disease, war, economic swings, and natural disasters were fertile ground for the creation of organizations such as the Ladies Aid Societies and the American Red Cross. During the era of industrialization that followed the Civil War, voluntary organizations served many different functions including teaching vocation skills and advocating for reform. The latter resulted in the establishment of child labor laws and the creation of a juvenile justice system (Shields & Rangarajan, 2011). In the late 1880s, Americans including Jane Addams advanced the settlement house model as a strategy for addressing urban poverty. This new movement embraced the progressive philosophy of the time emphasizing the importance of social science knowledge, compassion and expertise in creating solutions to social problems (Hall, 2010).

By the end of the nineteenth century, the legal status and benefits of charitable and voluntary associations varied considerably by state. New England states, for example, encouraged nonprofit associations through tax exemptions. Other states required charitable entities to demonstrate their redistributional and noncommercial intent (Hall, 2010). Legislators in the 1900s further connected charitable giving to tax law by introducing deductions for individual and corporation contributions to nonprofit organizations. As the Great Depression began in the 1920s, the landscape of nonprofit human service providers contained mostly small agencies growing out of the settlement house movement and a few affiliates of larger national organizations such as the American Red Cross and the Salvation Army. These nonprofit agencies were funded mainly through private donations but did have some local government support (Gronjberg, 2001).

The relationship between government and nonprofit agencies began to shift beginning in 1955 when President Eisenhower signed policy formally initiating the concept of government contracting with the private sector, including nonprofit organizations (Van Slyke, 2002). The Kennedy and Johnson Administrations followed with additional policies favorable for contracting out including The Public Assistance Amendments of 1962 and 1967 and The Economic Opportunity Act of 1964 (Van Slyke, 2002). Human services were prime candidates for privatization since existing nonprofit agencies held the necessary content expertise, thus "building on historical precedent to remove government from providing services that nongovernmental organizations already or can potentially provide" (Van Slyke, 2007, p. 159)

By the late 1970s, government funding was significantly higher than any other form of revenue, including private donations, for nonprofit human service organizations. This change in funding source resulted in the transition from the small, volunteer-driven nonprofit to the professionally managed, single-focused organization, often with little dependence on volunteers or donations. Salamon highlights the importance of this time period indicating that "much of the modern nonprofit sector as we know it took a direct outgrowth of expanded government support" (Salamon, 2012, p. 22).

The dependence on government funding was not without risk to the sector. The Reagan Administration's policies of retrenchment cut federal spending to social and human services nonprofits by as much as 25% in the 1980s (Salamon, 2012). During the same time period, state funded public institutions were downsized or closed in lieu of community-based systems of nonprofit and for-profit providers. The shift from care for the developmentally disabled in public institutions to nonprofit or private community-based providers is one illustration (Smith, 2012) of the growing expectations for nonprofit sector organization. In order to survive and continue providing needed services, nonprofit leaders had to rethink their mix of funding sources, with new attention to commercial activities for revenue generation.

In the next decade, the Responsibility and Work Opportunity Reconciliation Act of 1996 brought welfare reform and created new opportunities for the nonprofit sector. Nonprofit agencies were again popular providers of programs, such as work readiness, job placement, childcare and other human services, funded through federal grants to states (Salamon, 2012). However, this new type of funding was accompanied by additional, and often burdensome, administrative demands for nonprofits. For example, the increased use of voucher certificates required nonprofit daycare providers to implement billing and reimbursement systems and to compete with for-profit providers for funding (Salamon, 2012). Government funding of faith-based agencies initiated by the George W. Bush Administration and continued by the Obama Administration's Office of Social Innovation (Smith, 2012) also altered the competitive funding environment for human service nonprofits.

More recently funding provided by the American Recovery and Reinvestment Act of 2009 temporarily buffered the growing economic uncertainty for many human service nonprofits. In 2010, about 33,000 human service nonprofit agencies held approximately 200,000 grant and contract agreements with government agencies (Boris, 2010). Ranging in amounts from $500 to several million dollars, government funding for nonprofits totaled over $100 billion dollars. These government-nonprofit funding relationships, along with high profile examples of unethical or inappropriate behavior, increased demands for accountability, and performance measurement, again emphasizing the need for professional and knowledgeable nonprofit leaders, both paid and volunteer.

Another trend of this period further focused on diversifying the revenue base of nonprofit organizations, including renewed support for commercial or social enterprise strategies. These earned-income strategies include client and member fees, product development and sales, and cause related marketing relationships (Helm, 2010). Some human services nonprofits acknowledge great success with mission related commercial activities (Smith, B., Cronley, M., & Barr, T., 2012; Bryson, John M., Michael J. Gibbons, and Gary Shaye, 2001), while critics claim that this emphasis increases mission drift in the nonprofit agency (Bielefield, 2009; Guo, 2006) and unfair competition for small businesses (Bennett, J. T., & DiLorenzo, 1989; Steinberg, 1991). Nevertheless, nonprofit leaders continue to experiment with enterprise activity. A few states have approved with new organization forms, such as the Low-Profit Limited Liability Company (L3C), B Corp Certification, the Benefit Corporation or other Flexible/Social Purpose Organizations to fund socially focused programming.

This brief history of nonprofit human services began with the traditions and tensions that laid the foundation for the American charitable sector. The scope and breadth of the subsector of nonprofit human service organizations has evolved as societal problems and issues emerged. Changes in U.S. public policy related to nonprofit organizations, including funding availability from federal, state, or local government sources, also influenced the development of the sector. At the same time, public officials at all levels have questioned and sought to influence the role and function of nonprofit sector organizations. Limiting political activity, requiring evidence of service provision to the poor, challenging real estate tax exclusions and instituting PILOTs (Payments in Lieu of Taxes) are strategies introduced by governments in recent years.

Over the last fifty years, government-nonprofit funding relationships have centered largely on the delivery of services. These partnerships have had significant effects on the structure and function of human service nonprofits due to increased requirements for performance measurement and accountability. The result for many human service nonprofits has been the transition from small, volunteer driven organizations to professionalized agencies. The implications of the government-nonprofit partnerships and increased professionalization of the sector will be discussed further in a later section. The next section examines the scope of human service nonprofits today.


According to the National Center for Charitable Statistics (, over 1.5 million nonprofit organizations were registered with United States Internal Revenue Service in 2012 (Blackwood, 2012). These organizations vary on many descriptive dimensions including mission, budget, number of employees, age, target service population, and use of volunteers. One data source commonly employed to examine nonprofit organizations by policy or service area is the National Taxonomy of Exempt Entities (NTEE) classifications, developed and used by the Internal Revenue Service and National Center for Charitable Statistics (Granbjerg, 1994). Human Services is one of the ten NTEE broad categories and is composed of eight major groups (NCCS, 2013):

* Public Protection: Crime & Delinquency Prevention, Legal Administration & Services: Organizations that protect the public from antisocial elements, including crime and delinquency prevention services; detention and rehabilitation; services to prevent or protect individuals from neglect, abuse or exploitation; and legal assistance to individuals and organizations.

* Employment/Jobs: Organizations that help individuals to find and sustain gainful employment, including job training, retraining, and placement services; vocational guidance and counseling services. Also includes labor unions and organizations whose purpose is promoting and protecting the rights of employees to fair remuneration and safe working conditions.

* Food, Nutrition & Agriculture: Organizations focused on the development and improvement of food resources, including preservation of farmlands, soil and water conservation for agricultural purposes, management of livestock, and other agricultural programs; food services and distribution programs; home economics and home extension services.

* Housing/Shelter: Organizations that promote adequate housing for individuals, families and communities, including housing development and construction services, housing rehabilitation, home improvement, shelters, and services to assist individuals and families in locating, acquiring, or sustaining clean, safe and adequate housing.

* Public Safety, Disaster Preparedness & Relief: Organizations which aim to prevent, predict or control the effects of disasters; educate and individuals to cope with the effects of disasters; or provide broad-based disaster relief services to disaster victims. Also includes organizations that focus on preventing or providing relief to victims of accidents caused by human frailty or error; first aid training and services; automotive safety education and promotion.

* Recreation, Leisure, Sports, Athletics: Organizations that promote or provide services to meet the recreational needs of individuals and communities, including camps and camping programs; physical fitness and other recreational facilities; sports training and competition services; and other sports, recreational and social clubs.

* Youth Development: Organizations that work to build character and develop leadership and social skills among children and youth, including scouting organizations; mentoring programs; business, agricultural, religious and other youth leadership programs, and youth community service clubs.

* Human Services: Multipurpose & Other: Organizations that promote or provide a broad range of social or human services to individuals or families, even though specific programs operated within those agencies may be classified elsewhere; personal social services, travelers aid; residential, custodial care facilities and services for individuals unable to live independently due to developmental disabilities, age or physical infirmity; and programs that promote general independent functioning, living of individuals.

Registered charitable nonprofits identified in the NTEE broad category of Human Services (including the 8 major groups) numbered at 232,385 in 2013, almost double the number in 1995 (NCCS, 2013). The revenues for the nonprofits filing an IRS Form 990 in the Human Services Category were over $200 billion, more than triple the 1995 revenue amount and representing 13% of revenues for all public charity categories (NCCS, 2013) (1). The Human Services: Multipurpose & Other subgroup was the largest with 33% of the organizations in Human Services broad category (See Table 1) and had the highest revenue representing 61% of the total Human Services broad category.

Important to note is that the total numbers in Table 1 fail to detail the large variation in financial operations of individual nonprofit human service agencies. Table 2 provides the revenue level for registered nonprofit human services organizations illustrating that the overwhelming majority (83.5%) of nonprofit human service agencies are small operating with less than $500,000 annually. These small agencies represent only five percent of the total revenues for all human services nonprofits. At the other end of the spectrum, less than five percent of the nonprofit human services organizations have revenues of $5 million or greater. However, these larger agencies receive almost two-thirds of the total nonprofit human services revenues.

The distribution of human service nonprofits adds complexity to understanding the operations and capacity of this set of organizations. Even smaller nonprofit agencies without a history of government funding have increased expectations for outcomes assessment and accountability today. The challenges are discussed further in the next section.


As a vital actor in the human services arena, nonprofit organizations play essential roles in delivering services and providing a forum for individuals to participate in democratic processes of problem solving (Hall, 2010). Therefore, the capacity of this sector of organizations to continue on the forefront of social problems and issues is critical. Several challenges build out of the history and distribution of human service nonprofits. These challenges are not new. Many authors (Salamon, 2012; Smith, 2012, Hall, 2010 and others) articulately describe the issues in political and economic terms. The emphasis here is the connectedness of these two issues: 1) grassroots versus professionalized orientations and 2) contracting out versus collaboration. Assuring that the needs of communities and target populations are met required both guarding the nonprofit's mission and creating channels for cooperation and collaboration.

Balancing Grassroots Initiatives and Professionalization

Grounded in the needs of communities, most nonprofit organizations are started with passion and enthusiasm for resolving a particular issue. Many of these are the small grassroots or community-based nonprofits that meet important human service needs for a specific geographic area or population. For example, nonprofits with religious and ethnic focused missions serve specific minority communities (Granbjerg, 2001).

The most dramatic evolution in nonprofit organizations has been the shift from a grassroots and volunteer driven emphasis to professionalized service delivery. Public funding, a major factor in this shift, brought new skill requirements for grant and contract application processes, management, and accountability. The need for a more professional and trained workforce to handle these new requirements also brought a focus on managerial efficiency. As nonprofits formalized and grew in size and complexity, the organization's mission focus was no longer the priority for leaders. For some nonprofits, the new emphasis on efficiency, diverted resources for compliance measures, and continued resource development resulted in an overemphasis on the professionalized roles and minimization of the activities important to engagement and responsiveness with their communities and recipients.

A thriving nonprofit sector needs a diversity of organizational structures, sizes, strategies, funders, and lifecycle stages - all with a primary focus on the mission. However, smaller grassroots organizations must develop professional systems if they are to be successful in attracting and managing government grants and contracts. At the same time, larger, professional nonprofits can benefit from a constant focus on the clients and community needs that sparked their creation and remain the core of their mission.

Moving from Contracting Out to Collaboration

The contracts and grants funding relationships between governments and nonprofit agencies have been instrumental in essential delivery of services for individuals, families and communities in need since the 1950s. However, several dynamics inhibit successful collaboration today. One important dynamic is the relationship between public and nonprofit organizations. Too often the primary focus of related research and political discussion has been on the financial relationship. Even as public and nonprofit managers have agreed in both theory and practice to move from a Principal-Agent perspective to collective stewardship (Mayhew, 2012), the continued emphasis on monitoring and reporting often stymies the development of internal and external trust required for optimal collaboration (Norris-Tirrell and Clay, 2010). Attention to integral communication patterns and the shared understanding of problem definition and collaborative goals can result in a shift in how agencies across all three sectors connect to each other, moving to cooperation and problem solving (Norris-Tirrell, 2012). Collaboration with the goal of innovative problem solving and integrated delivery of services is particularly important in policy areas that focus on the poor and disenfranchised and include a variety of agencies crossing human services, health and education.

The growing climate of competition, not just between sectors but also within the sector, is another impediment to effective collaboration. In certain human service subgroups, including day care, recreation, and legal services, competition between for-profit and nonprofit organizations for clients, staff and other resources has been around for decades. However, heightened fiscal uncertainty and the growing number of nonprofits organizations has increased the climate of competition within the nonprofit sector. Finding appropriate mechanisms and focus areas for collaboration requires the nonprofit community to move beyond competition. The major concern for local communities and funders must be assuring that recipients of needed services do not fall through the cracks of ineffective provider systems.

The emphasis on organization survival coupled with ongoing funder demands for increased accountability and performance measures may stifle the vital role of nonprofit organizations in creative thinking and acting needed for new solutions. Both taxpayers and private donors who support public-nonprofit service provision rightly demand accountability and clients deserve providers who understand their individual circumstances and needs.

Bringing individuals with different expectations, experiences, and talents to the table to collaborate can also be challenging. Traditionally the grassroots provider knows more about the community from on-the-ground interactions while the professional has information about programming options from around the country. Working collaboratively, an effective human services system, grounded in best practice and responsive to community-specific needs, can result. Developing and implementing programs and services that will solve today's social problems requires human services stakeholders to nurture collaborative processes beyond the contracting out relationship and enable the participation of all types of providers.


While this article focused on nonprofit human service organizations, questions about the focus of government in human services remain. As governments and nonprofits suffered from economic uncertainty as well as partisan decision making processes, nonprofit sector agencies were increasingly expected to remain the safety net for those in need, funded by private dollars. In this devolved service system, continued economic uncertainty has amplified the vulnerability of nonprofit human service agencies (Smith, 2012; Bishop, 2006).

The issue is not government's reliance on nonprofit providers, but rather the stability of funding streams to assure that needs are met effectively. Progress in addressing today's complex social problems requires nonprofit agencies to invest in program creation, staff development, and collaborative processes. Along with strengthening agency capacity to provide quality services, nonprofits need organizational systems to measure and assess performance. Adequate technology and staff with the necessary skills are required to build and implement sufficient processes. What, then, is the government's responsibility in building nonprofit organization capacity? Given that nonprofit human service agencies serve as the nation's safety net in times of crises and economic uncertainty, government leaders must strategically deliberate nonprofit funding options, including multi-year program funding with dollars dedicated to the development of quality standards and organization capacity building.

Human service nonprofits have been instrumental in advocating for change both in the introduction of new service modalities and in redefining social problems. Nonprofits offer a more nimble venue than government for trying new programs and processes and more quickly scaling up. This role of innovation and advocacy requires an investment in research. While medicine, medical technology, and pharmaceuticals have made great strides in acquiring private and public research funding, dollars allocated to research in the human services fields has been miniscule (Granbjerg, 2001). How to support the social science research needed to advance human services-related problem solving is a key question for the both government and nonprofit leaders. New organizational forms such as the Low-Profit Limited Liability Company (L3C) or B Corp Certification are possible venues for human service research funding.

Nonprofit human service agencies have experienced profound transformation in the last 75 years. The number of agencies has grown exponentially while funders (including governments) and service recipients have come to rely on nonprofits as essential institutions in our democratic society. The range of roles played, ranging from service provider to educating citizens and lobbying government officials, has also evolved over this time. The recent history of the nonprofit sector illustrates the continuing public policy strategy of combining "the equity of government with the innovation and community roots of nonprofit organizations" (Smith, 2012, p. 220). Government funding today is part of a complex web of resources, including public funding (through contracts, grants, vouchers, and tax credits), private donations, and increasingly, a form of earned income require by nonprofit human service agencies to fulfill their functions. The link between human service nonprofits and government has remained constant throughout American history. While the specifics of the relationship have changed significantly, the influences of one on the other continues. Navigating the challenges ahead demands both cross sector collaboration and innovation, with nonprofit agencies at the core of the human services arena today and in the future.


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University of Central Florida


(1) Of the 111,649 organizations not filing an IRS 990, 82,899 did file the required 990N indicating their revenues were less than the $25,000 threshold for completing the 990. The remaining 28,750 are unknown. These organizations may have requested an extension for filing or may no longer be in existence.
Table 1

Human Services Nonprofits by NTEE Group

NTEE                         Number of    Percent    Number of
                             Registered   of Total   Orgs Filing
                             Orgs         Category   Form 990 *

I. Crime & Legal-Related     12,176       5%         6,266
J. Employment                6,566        3%         4,077
K. Food, Agriculture &       7,724        3%         4,070
L. Housing & Shelter         23,787       10%        17,510
M. Public Safety, Disaster   12,642       5%         6,929
  Preparedness & Relief
N. Recreation & Sports       64,208       28%        30,020
O. Youth Development         27,996       12%        8,594
P. Human Services            77,286       33%        43,270
Totals                       232,385                 120,736

NTEE                         Total Revenue     Total Revenue
                             Reported on       Percent of
                             Form 990          Total Category

I. Crime & Legal-Related     7,173,878,476     4%
J. Employment                14,878,158,406    7%
K. Food, Agriculture &       10,348,535,859    5%
L. Housing & Shelter         22,072,832,824    11%
M. Public Safety, Disaster   2,430,140,593     1%
  Preparedness & Relief
N. Recreation & Sports       14,400,961,529    7%
O. Youth Development         6,883,231,228     3%
P. Human Services            122,635,151,726   61%
Totals                       200,822,890,641

Source: NCCS, 2013.

Table 2

Registered Nonprofit Human Services Organizations by

Level of Total         Number of    Percent
Revenue                Registered   of Total
                       Nonprofits   Organizations

Less than $100,000     140,496      64.9%
$100,000-249,999       24,965       11.5%
$250,000-499,999       15,383       7.1%
$500,000-999,999       11,863       5.5%
$1-5 million           16,069       7.4%
$5-10 million          3,493        1.6%
$10-$100,000 million   4,032        1.8%
Over $100 million      143          <1%

Level of Total         Total Revenue    Percent
Revenue                reported on      of Total
                       Form 990         Revenues

Less than $100,000     1,990,344,997    <1%
$100,000-249,999       3,849,756,802    1.9%
$250,000-499,999       5,322,659,906    2.6%
$500,000-999,999       8,215,093,885    4.1%
$1-5 million           34,618,838,853   17.2%
$5-10 million          24,330,446,426   12.1%
$10-$100,000 million   93,433,446,673   46.3%
Over $100 million      30,028,674,962   14.9%

Source: NCCS, 2013.
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Author:Norris-Tirrell, Dorothy
Publication:Journal of Health and Human Services Administration
Article Type:Report
Geographic Code:1USA
Date:Dec 22, 2014
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