Everything You Need to Know About Nonprofits
Thinking about joining the Peace Corps sometime in the future? Or maybe you’re fundraising for the Make a Wish Foundation? Non-profit organizations play a big role in serving humanity on a global scale, and have a very considerable impact on world issues ranging from the environment to civil rights.
The biggest question people tend to have regarding nonprofit organizations is how employees make money. Since NPOs are “not for profit,” how can they function so successfully with a full set of paid workers?
For starters, an organization may achieve “non-profit” status if it is filed as a tax-exempt corporation by the government — usually 501(c)(3) for most charitable organizations. This means that non-profits do not have to pay income taxes to the government and instead direct all of their funds towards their cause. Official non-profits are not permitted to generate revenue and must throw excess funds back into the organization, so that it too goes towards the cause. Because NPO’s can’t make a profit, funds for employee salaries would have to come from the money generated through donations and fundraising that are largely meant to go toward the cause. The IRS allows nonprofits to pay their employees a reasonable salary using this fundraising money, meaning that a small percentage of the money raised by these organizations does not go directly to the cause. Often, larger organizations like Greenpeace and UNICEF have a lower percentage of funds going directly to their causes since they have so many employees. This is why volunteers are so important for nonprofits; they allow the organization to function without it having to pull money from funds raised for the cause.
Because there is little regulation in terms of how nonprofits distribute the percentage of the money they are allowed to use to compensate employees, corruption is a big issue. Some CEOs are paid excessive amounts in comparison to other employees, and sometimes money is misused by employees. The Wounded Warrior scandal in 2016 is a clear example of this; staff were caught spending excessive amounts of money riding Segways to events, flying business class, and staying in expensive hotels. This causes problems for other employees whose salaries are sacrificed for the enjoyment of the higher-ups — this is how underpaying can also be a big problem with nonprofits.
Despite room for corruption, nonprofits are extremely successful in achieving their goals, and can really make a positive impact. Action Against Hunger for example reached over 1.5 million people through their nutrition programs last year and tripled the amount of children receiving treatment for malnutrition over the past 10 years. An organization called Kiva helped a woman in Zimbabwe start a farm and raise crops during a period of drought, and to send her children to school using money from a loan the organization lent her. In Bangladesh, there are countless nonprofits working to improve the condition of Rohingya refugee camps, tackling health and sanitation issues, food, and shelter.
Nonprofit organizations are a necessary part of society. They serve the purpose of supporting causes that benefit humanity and are often very successful at what they set out to do. See how you can become involved with a nonprofit in your area!