How Social-Service Contracting Has Transformed Charity

By Oliver, Daniel T. | The World and I, November 1999 | Go to article overview
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How Social-Service Contracting Has Transformed Charity

Oliver, Daniel T., The World and I

Daniel T. Oliver (doliverciate at the Washington, D.C.-based Capital Research Center ( and a freelance writer. This article is based on several reports that recently appeared in CRC's monthly newsletter Alternatives in Philanthropy.

Many Americans would probably be surprised to learn that nonprofit organizations that help the needy often receive significant amounts-- and in some cases most--of their funding from the government. They do not rely on voluntary contributions from generous donors but on revenues collected from taxpayers.

Each year the philanthropy trade magazine NonProfit Times examines income sources for the hundred largest nonprofit organizations in America. Its "NPT100 Survey" reveals the following about these well- known social-service, health, and international relief and development organizations that in 1997 had incomes over $100 million:

Organization 1997 Total Revenues and % From Gov't

Lutheran Services in America $3.2 billion 56%

Catholic Charities USA $2.2 billion 65%

YWCA of the USA $636 million 36%

Planned Parenthood Federation of America $531 million 33%

National Easter Seal Society $484 million 58%

Volunteers of America $430 million 67%

CARE $363 million 71%

Catholic Relief Services $219 million 63%

Save the Children $131 million 57%

TOTAL $8.2 billion

Of course, some large nonprofit organizations that serve the needy receive little or no government support. The following nonprofits received no government funding in 1997:

Organization 1997 Total Revenues

Shriners Hospitals for Children $1.4 billion

Second Harvest $403 million

United Jewish Appeal $323 million

Gifts in Kind International $293 million

Christian and Missionary Alliance $126 million

Muscular Dystrophy Association $115 million

Christian Aid Ministries $108 million

Surgical Eye Expeditions International $100 million

TOTAL $2.9 billion

Sources: NPT100 Survey, NonProfit Times, November 1998; Lutheran Services in America, 1998 annual report.

While one might assume that a nonprofit organization that receives half its revenues from the government receives the other half from such private sources as individuals, grant-making foundations, and businesses, this is usually not the case. Significant revenues often come from fees charged to clients, sales of publications and mailing lists, investments, and rents. In 1996, Catholic Charities received 64 percent of its income from the government and another 20 percent from fees and investments. Only 16 percent came from private donations, including a mere 5 percent from Catholic churches.1 In 1998, Lutheran Services in America received 56 percent of its funding from the government and another 39 percent from fees and investments. Only 5 percent came from private contributions, including less than 1 percent from Lutheran churches.2


Such a paucity of private giving calls into question whether some nonprofit organizations that call themselves charities really are. Economist Alan Reynolds, of the Indianapolis-based Hudson Institute, observes that "helping the needy" is only part of the meaning of charity. Additionally, the resources for providing help must come primarily from voluntary contributions, not "government or commercial receipts. ... If organizations are not funded to a significant degree by contributions, they are not charities."3

Social-service organizations that rely primarily on state support are actually government contractors. They receive taxpayer revenues to help the homeless, the disabled, substance abusers, and others in need through programs created by legislators and administered by local, state, and federal departments of housing, health and human services, and the like.

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