So: saviors or slackers? Here are some of the misperceptions that are floating out there:
- Nonprofits don't pay taxes. The fact is that while nonprofits are exempt from standard property tax bills, they absolutely pay sales tax, payroll tax, and special property tax assessments.
- Nonprofits pay their CEOs exorbitant salaries. Many big national organizations do pay salaries in the six-digit range, though these salaries rarely compare with corporate salaries in the for-profit sector. But 66.4% of nonprofits have annual budgets under $500,000; their employees are paid modest salaries and put in many extra hours of unpaid time just because they care about their nonprofit mission.
- Nonprofits are rolling in government and grant money - and wasting it. Actually, most funding for nonprofits (80% according to the Urban Institute) now comes from earned income. Plus government and foundation funding comes with extensive restrictions, paperwork, and reporting - and rarely covers the full cost of programs.
- Nonprofits have the capacity to do everything that government does, just better and cheaper. Nope. The time when small community based nonprofits with volunteer staff could tackle big issues like poverty, unemployment, and childcare without government support is long gone.
- Nonprofits are rife with scandal. Media reports of misbehavior in the nonprofit sector, from sexual abuse to gross fiscal mismanagement, make great headlines but don't actually reflect the solid grassroots work that most nonprofits do.
- Nonprofits have simply found a sneaky way to make big profits without any public benefit. There are indeed so-called nonprofit hospitals out there making lots of money without using it directly to benefit their community. But it's not the norm. Most nonprofits are barely squeaking by financially.
- Nonprofits can function with all volunteer workers. Nonprofits do indeed rely on volunteer labor - 25.3% of American adults volunteer over 8 billion hours (valued at $175 billion) each year. But with increasing demands both in terms of programs and governance, the sector has moved towards professionalism, and it's not going back.
- Nonprofits need more oversight. Yes and no - given that the NHL, designated hate groups, and faith-based agencies owning property not used for faith-based purposes have nonprofit status, I actually believe there should be more oversight in the approval process. But the amount of scrutiny of nonprofits has increased significantly since the 1970's, and with this scrutiny has come accounting and legal requirements that are already a significant burden on small agencies.
