As noted in the last blog post, in the last year donor and foundation revenue is down for nonprofits. Given that the interest on some foundation endowments is also likely to be down for 2009, 2010 may also be a down year for foundation dollars. So, what is a nonprofit, short on cash, to do?
Increasingly, entrepreneurial nonprofits are turning to earned income. Earned income is generated when a nonprofit makes money from a business or product not directly related to its mission. In the current economic crisis, several nonprofits have begun such ventures. Earned income is taxable and requires filing a Form-990-T with the IRS.
Such a move has some potential benefits for nonprofits including more independence from donor-driven or foundation-driven priorities and timetables. However, similar risks to starting any new business are present and such ventures can detract from the core-competencies of the nonprofit. Earned income is just one example of the blurring boundaries of nonprofits and businesses. In the next blog post, I will define another: the for-profit social enterprise.
Wednesday, December 16, 2009
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Michelle identifies publicly what many of us have privately suspected for some time--it is often difficult to distinguish NGOs from government supported and for-profit organizations. I look forward to additional posts illuminating the "blurring boundaries" of these entities.
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