Introduction

Metaphors are often used in organization theory to describe how sectors evolve over time. Sometimes, organization populations are like animals on the Serengeti, flexing in size as the local water pool increases or decreases. Other times, organizations are like amoeba, moving gradually across the landscape, largely immune to the hustle and bustle of the environment. Since the 1980s, many scholars have become enamored with the metaphor of an “iron cage” that tightly bounds organizations by the institutional constraints of society at large. Metaphors are wonderful tools to focus our attention on important dynamics when the world seems too complex to comprehend. At the same time, they can go too far and steer us away from understanding nuance and the details that inform why human beings make the choices they do. This chapter discusses the dynamics of today's nonprofit sector while pointing out the nuance in how the American nonprofit sector has reacted to very real constraints. The sector is neither an antelope nor an amoeba, but perhaps a willow tree that bends in seemingly unbearable headwinds yet does not break. It is resilient in the face of many challenges (Salamon, 2012), yet is so rooted in the fabric of American society that it continues to grow.

My job in this chapter is to provide context for the current state of the American nonprofit sector—a significant sector that constitutes about 10 percent of the American labor force (Salamon, 2012, p. 8)—and discuss how it might evolve in the near future. First, I present a broad overview of what we know about the sector and, perhaps more important, what we do not know. Like an iceberg, what we can see above the water line is a mere sliver of the entire sector (Smith, 1997). Second, I consider the relationship of the nonprofit sector to the constraints it faces. In particular, I look at how public and private funding sources can shape the choices of nonprofit managers. I use three central questions to organize this discussion: How? Why? and Where? Over time we have changed in how we focus on nonprofit organizations, with a new question dominating each era of study. Next, I look at the challenges and opportunities for the sector. Last, I conclude with thoughts about how this resilient sector will look in the future. The central idea that undergirds the nonprofit sector is that formal rules and informal norms channel behavior such that the look of the sector today is the result of how these channels have developed, and that the future scope will be largely shaped by the constraints that are being instituted today. Nonprofit organizations work within a dense matrix of expectations and, while innovation and entrepreneurship are prized, the rules of the game continue to shape what nonprofits are able to accomplish.

I encourage you to consider this information in the context of your own knowledge of nonprofit organizations. Does this information ring true for you? Do you come to similar conclusions as to the pressures that your organizations face? One of the most exciting aspects of studying nonprofit management today is that experts are still trying to grapple with what it is, how it acts, and what it will be. So your interpretation is valuable.

The Nonprofit Sector in America

Many Americans have difficulty giving an example of a nonprofit organization but, if pushed, might offer an example such as the American Red Cross or the YMCA. Most would be staggered by the idea that there are 1.18 million registered nonprofit public charities in the United States, with an additional 95,992 private foundations (National Center for Charitable Statistics [NCCS], 2015). Add in 83,827 501(c)(4) social welfare organizations, that are becoming increasingly important in political campaigns, plus 45,783 fraternal beneficiary societies, 1,844 state-chartered credit unions, and even 8,958 cemetery companies, and pretty soon they are amazed at the scope and breadth of the sector. Nonprofits are instrumental in an American's life from cradle to grave. One can be born in a nonprofit hospital, attend a nonprofit preschool, participate in a nonprofit basketball league, be educated at a nonprofit university, join a nonprofit parent-teacher organization, move on to being a member of the American Association of Retired People, be housed at a nonprofit nursing home, and maybe even be given hospice care by a nonprofit palliative-care organization. Using the lens of what is called the three-sector theory, nonprofits in America exist because they either address a market failure (such as youth development for disadvantaged youth) or they provide supplementary services for which the voting public does not wish to pay (such as a symphony) (Steinberg, 2006). While market failures exist throughout the world, Americans have a long tradition of turning away from government for providing services; the large, dynamic nonprofit sector provides that crucial bridge that may be provided by the state in other societies.

One of the most important insights about the American nonprofit sector is that there has always been a dynamic relationship between the top-down structures put in place by society (today these are formal laws but, as Hall explains in Chapter One of this Handbook, America has always had strong informal societal norms influenced by religious teachings) and the bottom-up desire of Americans to fulfill their expressive, advocacy, and service needs through organizations that are non-government and also non-market. Observers have marveled for centuries about how Americans self-organize themselves at every turn, ranging from the abolitionist societies of the early nineteenth century to the Tea Party organizations of the early 21st Century. Alexis de Tocqueville (2003 [1835])) observed that Americans have a fundamental belief in the democratic ideal whereby all ideas have potential merit, with organizational forms following to fulfill these ideas. Americans for centuries have believed in the ethic popularized by the movie Field of Dreams (1989): “If you build it, they will come.” We continue to see this today, with the tremendous growth in nonprofit organizations. From 1995 to 2015, the number of nonprofit organizations (inclusive of public charities and other 501(c) organizations) has grown by 45 percent; in that same period, public charities have increased in number from 576,133 organizations to 1,182,187, or a 105 percent increase (National Center for Charitable Statistics, 2015).

The inductive nature of creating nonprofit organizations also has a seemingly dark side: nonprofit death. While Americans have a proclivity to create nonprofit organizations, they also let them die with tremendous frequency. When using the IRS Exempt Organization Master File, we find that from 2005 to 2014 we created 503,212 nonprofit organizations, yet 578,835 died or were dropped from the database (McLean, 2014). This results in undeniable disruption for those employed by these organizations (although the majority of the organizations are small and have few or no paid employees), and the millions of Americans who rely on their services (Never, 2013). But it is this continual churn of organizational birth and death that leads to a dynamic sector that continually reinvents itself as needs evolve.

This democratic stance toward organizational creation is commendable, but it does not entirely explain the nature of the American nonprofit sector today. The type of organizations that we have is also determined by the legal framework that incentivizes the creation of new nonprofit organizations (see Chapter Two by Hopkins and Gross for an explanation of the U.S. nonprofit legal framework). In the United States, the costs of creating a nonprofit organization are very low (for example, a nominal fee for incorporation with a state and a small amount of paperwork to be filed with and processed by the Internal Revenue Service). The benefits to creating a nonprofit can be large, particularly the benefits of tax exemption for all nonprofits and tax deductions for many donors to 501(c)(3) public charities. This basic framework provides an impetus for Americans to be great organizational creators (Hammack, 2002). So, in the end, the nonprofit sector is a legal creation that gives form and support for a great American democratic impulse.

Big Questions for Nonprofit Leaders

Funding has shifted significantly for nonprofit organizations in the US since the mid-1980s. As Salamon and Lund (1984) report, the “Reagan Revolution” of that era championed the cutting of federal funding for social services. In the 1990s, there was a further movement toward contracting out services, with governments at all levels opting to move the production of human services to private providers, nonprofit and otherwise. Government funding remains an essential revenue source for human service organizations (see Chapter Twenty of this Handbook for an extensive discussion of the nature and dynamics of government contracting with nonprofits for delivery of services), yet there are tough questions from public-sector leaders about the role of government in supporting these services. Here I summarize the evolution in the nature of the questions that have been asked about the role of government in funding of nonprofit service delivery in the United States.

The Johnson Administration (1963–1969) championed the War on Poverty, and through the Social Security Amendments (1965), sought the help of the nonprofit sector in extending services to disadvantaged populations. The precipitous growth of the human service segment of the nonprofit sector tracked with an increased support among Americans for the position that public monies should go to supporting those most at risk, and the nonprofit sector was well positioned to grow with this support (Smith and Lipsky, 1993). Funders' chief question at the time was “how”: How are nonprofits going to provide the necessary services? The Nixon Administration highlighted that government was unable to handle the complexity of poverty, which enhanced the impetus toward other providers using government money to address need. How is the question that is most appropriate when the funding is sufficient. Government officials seek to understand how providers will be better able to address social problems than government would itself.

The “Reagan Revolution” in the United States in the 1980s was predicated on a fundamental reordering of priorities about the role of government and, in particular, the federal government, in the lives of all Americans. President Reagan, in his First Inaugural Address in 1981, communicated the view that the national government was outsized in its influence on Americans and ultimately impeded ordinary citizens from achieving whatever they would like to achieve. The result of this “revolution” was a movement of funding away from nondefense nondiscretionary purposes. The block grants that were the cornerstone of federal funding for human services in the 1970s were seen as excessive federal largesse and the philosophy was that states and local communities should take charge of how their own public monies were spent. The key question of this time was “why”: Why should government support a particular program? The “how” question that was important in the previous generation became less prominent because sufficient funds for programs were not there. To be successful in this environment, nonprofit leaders needed to articulate that their work remained important to the common weal before they explained how they could perform these services.

The 1990s brought a twist to the Reagan Revolution, this time with the Democratic Clinton Administration leading the charge. The federal government had downsized and, it was said, needed to become both efficient and nimble. The reinvention movement, popularly conceptualized by David Osborne and Ted Gaebler (1992) and championed by Vice President Al Gore, also emerged at this time, in response to the perceived need for government to be responsive to the people. Three large changes resulted. First was a focus on continuing the movement toward third-party service provision. Second was a movement toward accountability for both government and its contractors. And third, there was increased pressure for the enhancement of consumer (citizen) choice of services.

Third-party service provision, from the standpoint of the nonprofit sector, continued to open avenues for great government support for nonprofits. While the Reagan Administration wanted to see less government production of services, which came from an ideological belief that smaller government unleashes the potential for private-sector development, the reinvention movement focused on the power of competition to lower costs and increase responsiveness to citizen needs. With the focus on competition came an agnostic view as to the type of provider; it was equally acceptable for the provider to be in either the nonprofit or for-profit sector. The health, vocational training, and daycare fields were opened to for-profit as well as nonprofit service providers, pushing nonprofit organizations to consider not only how they serve their clients but also whether their services were competitive with what other organizations (other nonprofits as well as for-profits) could produce. Contracts, by which payments flow when services are rendered within the agreed-to scope, became more prevalent; as opposed to grants that typically supported the general functioning of an organization. Service contractors would have less latitude as to how they produced services.

Pushes for accountability fell on the shoulders of both the government contracting agencies and the private contractors under these conditions. A signature piece of legislation, the Government Performance and Results Act (GPRA) of 1993, required government agencies to determine long-term strategic goals and create performance systems to reach those goals. Using this approach, government would be required to prove that it accomplished its goals efficiently and, ultimately, effectively. In an era of third-party service provision, this meant a strong focus on the accountability of contractors. Performance-based contracting filtered down to nonprofit contractors that typically worked in complex and difficult mission fields, where the results of the work often are much more difficult to assess or prove. For example, areas as complicated as vocational training and career services for welfare recipients, where preparing unskilled workers for the workforce can require interventions beyond simple training (perhaps ranging from childcare to substance abuse treatment), were now subject to rigorous accountability measures that would determine whether the contractor would receive future contracts. For nonprofits, the technical aspects of contract development and administration as well as program evaluation were barriers for those organizations that could not hire employees with the right skills, contract evaluation out, or provide the funding to develop employees from within. As Salamon (2012) reports, at this period training in nonprofit management became more prevalent due to a need for technically competent personnel able to navigate the increasingly complex funding environment.

Further, reinvention was predicated on the idea that citizens are consumers of services and need to be treated as clients. This means that service recipients should have choice. With competition at the ideological core of reinvention, consumers will be able to choose those services that fulfill their needs. For some, this would mean that services are located closer or are provided by employees who look like them, while for others this could mean access to a broader array of offerings. Two approaches have been used to encourage consumer choice (Salamon, 2002). One is the use of vouchers, such as in child daycare services, where parents can choose a provider accepting vouchers that best maximizes whatever values that they see fit: convenience, quality, comprehensiveness, and so forth. The second is government-supported fees-for-service. The most common example is Medicaid insurance for poor individuals. Medicaid recipients can choose a medical provider (that must be willing to accept Medicaid payment), and the reimbursement for services flows directly from the Medicaid administrator to the provider organization. This type of system required a paradigm shift for nonprofit service providers, moving from simply receiving clients who came through the door to actively competing to attract those clients. The funding only flows to an organization if an individual chooses it, and competitors often are in the private sector where marketing has been practiced for decades. Nonprofits needed to focus on identifying potential clients, determine the modality of communication that would best resonate, and then actually attract those clients to the service.

The Great Recession (2007–2009) has had a profound effect on how Americans feel about government, and the question of “why” has become prevalent. Throughout the recession itself, the federal government used spending as a means to both support economic activity (such as transportation construction) and deliver services for those most impacted. The American Recovery and Reinvestment Act (ARRA) of 2009, commonly known as the stimulus bill, was one of the very first responses from the Obama Administration. While derided by some as an unorganized mish-mash of government largesse, ARRA did provide funding for human services that eventually were provided by nonprofit service producers: vocational rehabilitation for disabled individuals ($540 million), job training to those who lost jobs to outsourcing ($1.6 billion), commodities for food banks ($150 million), meals for adult and child daycare ($100 million), extension of welfare (Temporary Assistance to Needy Families or TANF) payments to states ($2.4 billion), and temporary support for increased Medicaid spending ($90 billion) (The Wall Street Journal, 2009). There was a sense that nonprofit organizations had a special and important role in aiding the truly disadvantaged, partly because they were the most able to move resources and services out to communities.

State governments had a different initial experience with the recession. Because the federal government is able to run a deficit, it is uniquely positioned to stimulate economic activity in the near term and then consider the consequences of that deficit spending in the longer term. States, which must balance their budgets every year, largely rely on property, income, and sales taxes. Revenues from all three types of taxes were hard hit by the recession, with areas where real estate values plummeted being particularly affected. Although some ARRA money did flow to and through states, the impact of the shortfall of tax revenues was almost immediate. What this meant for the states' contractors, both nonprofit and for-profit, was slow payment for services rendered, slow enactment of contracts and, ultimately, decreased resources for future contracts. The Urban Institute, in its national survey of nonprofit human service organizations in 2009, found that 50 percent of nonprofits froze or reduced salaries, 39 percent were forced to draw on reserves, and 38 percent laid off employees (Boris, de Leon, Roeger, and Nikolova, 2010a, p. 19). The impacts were not even across states. For example, 72 percent of Illinois nonprofits experienced late payments, as compared to 24 percent of Texas nonprofits (Boris, de Leon, Roeger, and Nikolova, 2010b, p. 116). In particular, states that had fewer economic difficulties (such as those benefiting from the fracking revolution in oil drilling) were able to better support their contractors. Unfortunately, this broadly mirrored the strength of the economies in these states, with those having the worst problems also having the most difficulty in fulfilling their contract obligations.

The difficulties throughout the funding environment served to highlight the impact of the reinvention movement on the human services sector in particular. Boris, de Leon, Roeger, and Nikolova (2010a, p. 9) found that 53 percent of human service nonprofits have cost-reimbursable government contracts, the most common type of contract. Cost-reimbursable contracts in practice mean that nonprofits bear the initial cost of providing a service (human, physical, and financial capital) and then apply for reimbursement. As states extended the timeline for reimbursement, nonprofit contractors were forced to bear those medium-term costs. Sixty-eight percent of respondents found that government payments not fully covering the costs of contracted services was a problem (Boris, de Leon, Roeger, and Nikolova, 2010a, p. 13). Typically, nonprofit organizations are able to cross-subsidize the provision of services, with those services not fully covered by contracts being subsidized by other revenue streams such as individual donations. As the recession lengthened, contracts became even harder to support with those other revenues. The complexity of contracting also was a drain on nonprofit contractors: 76 percent of respondents felt that the complexity and time required to report on government contracts was a problem; 76 percent also felt the same about the application process (Boris, de Leon, Roeger, and Nikolova, 2010a, p. 13).

Even though the recession officially ended in 2009, its impacts on government funding were more long-lasting. For states, this has been particularly pronounced and is acutely felt by many, even in 2016. Given the dependence on property and income taxes, states with sluggish real estate or labor markets continue to face the need to cut. Many states have determined that, given many competing demands, human services are of less importance than education or criminal justice, and they have decreased their funding for human services. One type of funding has increased significantly, and that is Medicaid spending in the thirty-two states that opted to expand their coverage under the Affordable Care Act. The resulting pass-through money serves to support nonprofit community health centers and hospitals (and for-profit competitors, too), while in states without expansion these nonprofit health providers often must face the additional cost of serving those without insurance coverage.

The protracted nature of the economic slump across the country has helped to bring forward the question of ‘why’: why does government need to be supporting particular services? Dennis Young (2006) developed a three-part way of categorizing how nonprofits interact with governments: complementary, supplementary, and adversary. Nonprofits act as complements to governments when they provide those services that government wants provided but either does not have the means or desire to produce. Governments use contracts and grants to move service production off of their books in these cases. Medical services for the poor, mental health care, substance-abuse treatment, and vocational training are all provided by nonprofits in a complementary manner. Supplementary services are those that government has decided not to support but communities might find valuable. In many cases, fine arts, reproductive services for the poor, and higher education are supplemental and provided by nonprofits. Last is the category of adversary organizations, those that are expressive in that they exist to communicate the feelings of citizens to their government. Social-movement organizations such as Greenpeace are in the adversary mode.

A great debate has occurred over the past five years as to what services currently provided in a complementary mode should be considered supplemental. One of the most visible debates has been around Medicaid expansion, with many states struggling with the question of why they must greatly expand medical coverage to poor individuals. The eighteen states that have decided to forego the expansion in effect are saying this care is supplemental and should be supported by other revenue sources. When a service such as this is declared supplemental, it almost always means that any service production will be done by a nonprofit because of the inherent market failure of trying to provide medical services to those unable to pay. Likewise, there is a vigorous debate about the place of higher education in the government-nonprofit relationship. Some states have decided to reinvigorate their investment in public (nonprofit) universities, while others have moved toward a supplementary stance, pushing those universities to either raise fees-for-service (tuition) or find additional private philanthropic support. Last, support for nonprofit arts organizations has firmly moved away from a complementary mode, with the National Endowment for the Arts funding in 1995 being $15 million more than in 2015 (even before taking inflation into account) (National Endowment for the Arts, n.d.).

Proponents of moving services traditionally produced by nonprofits to the supplementary mode have historically sought to draw on a great strength of the nonprofit sector: the ability to draw on the generosity of private philanthropy to support services that ultimately benefit communities. President H. W. Bush (1989–1993) articulated that there are a “thousand points of light,” voluntary- and community-based efforts to improve the lives of our own communities. For almost four-hundred years, we have drawn on a strong American ethic of using private financial and human capital to build stronger communities. Americans are undeniably a generous society, but the key question is how generous. Key nonprofit fields rely extensively on government grants and contracts, and there is little doubt that private philanthropy would not be able to provide sufficient financial capital to serve community needs.

The “how” and “why” questions remain important, but I argue that the important question of the future is “where.” The services that nonprofits produce, and the labor that volunteers give, are almost entirely place-based. It is hard to consider outsourcing mental-health counseling or child daycare from the United States to India (the commute would be atrocious!). While American for-profit corporations have experimented with outsourcing, the nonprofit sector is largely connected to communities. For decades, nonprofits have been selected for government support for the very reason that they are more connected to the communities that they serve and are able to move resources to the people who need them. The reinvention movement viewed contractors in general, and nonprofit contractors more specifically, as those local laboratories that exude a democratic ideal of being close to and of the neighborhoods they serve. With the advent of welfare reform in 1996, President Clinton affirmed that faith-based organizations are uniquely situated to use deep community connections in addressing some of society's most intractable problems, and the commitment of the federal government to support faith-based organizations has become deeper during the Bush and Obama Administrations. In a different vein, President Obama has drawn on the excitement for social enterprise by creating the Office of Social Innovation and Civic Participation, with the idea that new, innovative enterprises would be able to quickly scale to address some of the challenging problems that have dogged communities for decades. Social enterprise can span from nonprofit to for-profit solutions, yet many are place-based.

The “where” question is a difficult one. Being fundamentally place-based, nonprofits are well-positioned to understand their clients. Often, the program staff also live in the community, with localized knowledge being a treasured commodity. At the same time, many community-based nonprofits rely on gut instinct to think about the “where” question, rather than using data to understand client needs and location. While the software tools needed to analyze geography are becoming more intuitive and cheaper (with several open-source options), nonprofit leaders have not had to traditionally focus on “where.” The previous generation of stakeholder demands focused on efficiency and effectiveness, meaning that the limited funding available for capacity development has gone toward performance measurement. Major corporations enlist entire teams of geographic information systems (GIS) analysts to determine the best location for a pharmacy, grocery store, or fast-food outlet because place-based services, such as selling hamburgers, means that success can be determined by careful analyses of place. Most nonprofits do not have this capacity; perhaps only the largest hospital systems and universities have in-house GIS expertise. The federal and state governments have less funding to support human services and are beginning to ask where they should be putting these limited dollars. Likewise, foundations and individual philanthropists are beginning to be savvier about wanting to know where their money is going.

Place-based initiatives are as old as Jane Addams' Hull House of the 19th Century, yet they have reached a new level of importance for public policy and foundation leaders (Hopkins and Ferris, 2015). At the heart of initiatives such as the Harlem Children Zone is the confluence of answers to the “how,” “why,” and “where” questions. How? By creating a small, geographically designed focus area, they are able to concentrate resources on multifaceted challenges. Why? Because up to this point, public solutions have failed and there is a market failure such that private providers will not enter into the market. Where? A section of Harlem, New York, with an even smaller subset of school-aged children and their families. Nonprofits can capitalize on bringing together answers to all three of these questions.

There is a negative side to the “where” question. The American system of human service and health service delivery for the disadvantaged is largely a patchwork of nonprofit producers that follow the spatial contours of public policy and private philanthropy. States that expanded Medicaid stand to have stronger systems of nonprofit and for-profit health providers, compared with those that did not. Communities with wealth are more likely to generate private philanthropy for human services. For example, many would be surprised to know that the largest community foundation in the country is located in Tulsa, Oklahoma, home to a large petroleum industry. Thus, the spatial patterning of nonprofits is not equal, even taking population density into account (Never, 2014). When we examine the expenditures of human service nonprofits on a county-by-county basis across the United States (data drawn from the NCCS Core Files) and consider how each county's expenditures compare with the national average it becomes quite apparent that there is a pronounced state-level effect that largely separates those states in the north-eastern United States from the rest of the country. This mirrors the history of the development of the sector, with support for human services being prevalent in the industrialized north for a century. States in this region tend to be supportive of Democratic presidential candidates and policies that comparatively support investment in human services.

In many ways, the American system of human, health, and higher-education service delivery is privately produced (both nonprofit and for-profit producers) and to a certain extent publicly financed. It capitalizes on competition to create more choice for the most disadvantaged. One could also look at the system as fragmented and unequal. With publicly produced services—such as street sweeping, education, parks—the question of location can have a fundamental place in the political discussion about service provision. If one street is plowed and the next one is not, a city councilperson can count on a complaint. Likewise, discussions about closing publicly produced services such as schools or health clinics can be met with loud protest. With third-party delivery, in particular when working with disadvantaged populations, there is an additional level between the end-users and the funding body. The result is a chance for clients to lose their voice in evaluating service producers.

Not all nonprofits are created equally, and not all are equally strong. As the experience of the Great Recession shows, some nonprofit contractors are better able to weather the difficult times than others are. Financial health is a significant issue. Many scholars have used accounting ratios developed in the private banking industry to assess the financial health of nonprofits. When using these assessments, we find there is a strong likelihood for financially sick nonprofits to be less able to deliver the same quality of services as those that are financially strong. I have documented an important aspect of this problem in a 2014 study. I mapped the locations of financially distressed human service nonprofits (2007–2009) and found a significant relationship between the percent of minority population in a Census tract and the number of distressed nonprofits (Never, 2013). This leads to several questions: Are we funding those nonprofits located in minority communities at a level that would be commensurate with a majority community locality? Does a decentralized system lend itself to an unequal provision of quality services to minority populations? Should funders be building the capacity of organizations serving minority communities? These questions have yet to be addressed by public leaders.

Challenges and Opportunities for the Future

Nonprofit organizations have become deeply and inextricably woven into the fabric of our society. While not always recognized by the general public, nonprofit organizations represent a cradle-to-grave response to societal problems, moving from daycare and preschool to youth soccer leagues, colleges and universities, hospitals and community health centers, substance-abuse treatment, legal aid, and hospice care. Many visitors to the United States, especially since the travels and writings of Alexis de Tocqueville, are befuddled by how much we Americans rely on the nonprofit sector to perform functions that are performed by the state elsewhere in the world. To add another level of complexity, we see that, even though many nonprofits that provide public services are private-sector organizations, a primary mechanism for supporting their service delivery is public funding. This hybrid system allows for great variation and innovation, yet many challenges and opportunities lie ahead for nonprofit organizations in America.

Conclusion

There is no doubt that the nonprofit sector in the United States is multifaceted and resilient. It represents the democratic nature of America. If you have an idea, there are few barriers to you giving it a try. At the same time, one would be remiss to say that managing a nonprofit organization is simple. While there may be a low bar to entry, in order to thrive, organizational leaders need to be savvy as to the opportunities and constraints that are so essential to the development of the sector.

Government continues to be the cornerstone for how the sector develops. Government dictates how the nonprofit legal form exists and, increasingly importantly, how competing forms of social enterprise are allowed to function. The continued availability of tax exemption and tax deductibility means that nonprofit organizations continue to hold important advantages over rival forms but, at the same time, those tax benefits come at the cost of being beholden to governmental oversight. Nonprofits also remain in the public's eye, with continued criticism for excessive executive salaries and other perceived signs of excess. Government also continues to be a cornerstone of nonprofit funding, although this funding has moved toward government-reimbursed fee-for-service. Last, nonprofit leaders must increasingly question whether working with government merits the significant costs associated with accountability. Demands for accountability must be met with a technically proficient workforce able to systematically measure and report how organizations are impacting their communities.

The state of the nonprofit sector is in flux, but the place of nonprofit organizations in American life remains strongly fixed. Nonprofits fit well with the can-do attitude of the American narrative. America can be considered a generous society not only because Americans give a lot, but because of the strength of the sector to which Americans give. Without a vibrant nonprofit sector, giving would be for naught.

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