Nonprofit and Voluntary Sector Quarterly

This article examines how local public policy may be influenced by small foundations. Written as a policy analysis, it focuses on one case study: the work of the Woods Fund of Chicago in the Chicago school reform movement from 1987 to 1993. This is an ongoing reform movement rooted in a path-breaking, 1988 state law that decentralized the governance of Chicago's public schools. Woods played a special role in bolstering the movement's central tenet: parent and community empowerment. Woods alone was not responsible for parent and community control becoming the basis of the new school governance system. But its strategic focus, in both funding and activism, contributed to the idea's ascendance and helped establish the governance structure in which Chicago's biggest foundations have invested so substantially. Three strategic factors explain Woods's effect: unwavering means, enduring collaboration, and staff activism. Although centered on one foundation, this article provides insights on two gaps in public policy and philanthropic research: most broadly, the intersection of local foundations and local public affairs; and, more specifically, the ways small foundations may contribute to the formulation and implementation of urban education policy.

Nonprofits are scrambling to account for their fiscal policies, management structure, and the value of their missions. This current crisis of accountability is only the most recent manifestation of a problem that has plagued voluntary organizations for over a century. A historical perspective reveals more about the issue of accountability than tax exemption, the ubiquity of nonprofits, or greed and insensibility among nonprofits and their employees. Four fundamental issues can be identified: the variety of constituencies to which nonprofits are accountable, conflict over the allocation of resources, the matter of exclusivity, and two additional sources of conflict of values. The periodic crises of accountability faced by nonprofits reveal that the conflicts inherent in nonprofits are constantly being negotiated, necessarily leading to a dynamic, ever-shifting system of nonprofit organization and of interorganizational relationships. The nonprofit sector provides an arena in which these conflicts can be negotiated.

This article compares City of Chicago Department of Housing (DOH) funding for nonprofit organizations with the city's funding of for-profit developers, finding that DOH provides more generous funding for for-profit groups through its flagship program. Nonprofits receive more overall money through the other two programs analyzed, though the subsidy differences are more ambiguous than in the flagship program. The study determines that important distinctions exist between the rental products produced by nonprofit and for-profit housing development groups in Chicago. Nonprofits tend to employ DOH funding to reach the lowest income households, whereas for-profits seek moderate-income renters in more stable neighborhoods. These distinctions begin to break down, however, when the funding structure requires all recipients to produce very low rents.

Previous work has looked at wage differentials between the nonprofit and for-profit sectors, without including the cost of fringe benefits in calculating these differentials. This article uses new data to examine the determinants of total compensation in the nonprofit, for-profit, and governance sectors. A significant negative effect from nonprofit status is found.

The contribution of Kingma (1993) to NPO theory is discussed and enlarged. Portfolio theory in interaction with utility theory is shown to be a very useful instrument to model nonprofit organization (NPO) financing. Furthermore, it is suggested that portfolio theory is partially useful to model the NPO investment decision. Some essential elements of such a theory are presented.

Nonprofit institutions rely heavily on unearned income to fund their activities. This unearned income arrives in the form of donations from the public and business, as well as grants from foundations and governmental agencies. Within any organization, decisions on the efficient allocation of resources are crucial. This is especially true in not-for-profit enterprises for whom the opportunities to earn income are limited and reliance on donations and grants is therefore paramount. In this article, we test the relative efficiency of the developmental spending of 78 symphony orchestras in the United States. The data are from the 1987-1988 American Symphony Orchestra League's Comparative Statistical Reports. We use Data Envelopment Analysis to gauge the relative efficiency of the fund-raising efforts. Orchestras deemed inefficient are given proportional, realizable input reductions that allow production of their current level of donations and grants. Regression analysis is then used to investigate the determinants of efficiency, holding constant orchestra and demographic characteristics.