Introduction
The nonprofit sector of the US economy is considerably large, with a variety of organizations working to achieve their particular aims and goals. Providing assistance to the public is usually the main goal of any nonprofit organization, but distinctions can be made regarding the particular organization, funding and structure they employ (Worth, 2021). It is important to understand the fundamental differences between such organizations, as it also allows one to have a better grasp of their goals and principles. The present discussion will touch on two types of nonprofit organizations in particular – private foundations and public charities. First, their particular ways of organization and work will be discussed, then comparisons will be made between the two.
Types of Nonprofits Comparison and Discussion
Private Foundations
Private foundations, as it can be surmised from their name, are nonprofit organizations created by a single private individual. As classified by the IRS, these organizations are charitable entities and are exempt from taxes. The main defining feature and trait of such organizations is their income structure. Private foundations do not rely on public donations or work income for their funds, instead working from donations of their investors. Usually, investors in such companies are millionaires, business owners, or other influential individuals with a desire to enact change. The money donated to the organization is then spent in accordance with its primary aims and goals.
What the money can be spent on is dictated by one of the sections of the IRC. The potential areas of spending include assistance to the poor, community improvement, and the promotion of education. Private foundations are a contentious type of nonprofit organization, largely due to their ability to support private interests and generally independent nature. In essence, by relying on private investments and support from their organizers, these organizations lift the responsibility of answering to the needs of the many while gaining an ability to influence public policy and social organization.
A large problem regarding the use of Private Foundations is their capacity of supporting or pursuing initiatives that are detrimental to the larger society or the climate. A topical and relevant example can be used. The Gates Foundation, sponsored by Bill and Melinda Gates, has recently come under scrutiny for its involvement in the Covid-19 vaccine. The pressure from the foundation has forced the World Health Organization to sell the rights to the Covid-19 vaccine to a private company that the Gates family has a vested interest in. This move has a number of extremely negative health implications for society at large and for the world. The existence of a cheap and internationally available vaccine could have significantly reduced the spread of the disease, as well as helped less prepared nations to combat it. The private monetary interest of the charity organization has actively brought harm to society and the public.
Public Charities
Public charities are another type of nonprofit organization, one that relies primarily on public support as a source of their income. Monetary donations are collected and allocated in order to support in initiatives of the organization, and all of the records are kept open to the public. The structure of a public charity is made to be transparent, as a way for donors to make sure they know where their money is going.
Public charities promote themselves to the public and work in an effort to attract a large audience to their cause, in large part because they need to collect money. The need to cater to the public is what primarily shapes the types of work an organization does, and a failure in pandering to its supporters will negatively impact an organization’s ability to work. It is crucial to note, however, that not all donations are collected from the public. A significant percentage of money also comes from the organization’s sponsors and founders, who have their own sets of goals and interests.
Similarities
There are a number of significant similarities between both Private Foundations and Public Charities. To start off, both organization types are exempt from taxation from the government. This status can be considered both a positive and a negative in both cases. Tax exemption equally means that all the donations are spent on an organization’s initiatives and that certain individuals can use non-profits as a way to avoid paying tax on their revenue. Additionally, the two organizations share a similarity in the way their amass their funding. In the case of both public and private nonprofits, donations make up the majority of the money an organization collects.
Differences
However, there are also major differences between the two types of organizations. Firstly, a private foundation relies on a singular individual or a small number of people for their monetary support, while a public charity has to get as many people as possible to donate to them. The difference in income source additionally shapes the way these organizations promote themselves and behave on the market, making the former nonprofit act more independently than the other. A public charity is much more unstable with its revenue stream, as they have to actively compete with other organizations for both popularity and income.
On the other hand, private foundations generally have a stable stream of money coming in from the top. Lastly, the interests and the goals of the two organizations clash quite severely, as each of them has to serve the desires of their donors. Public charities satisfy the needs of the public, provide relief to the poor and promote social policies that often support the majority, while private foundations operate in large part to satisfy a powerful minority of people. Such work can promote education that is beneficial to the founders of the organization or influence society in ways that bring more advantages to the rich.
Both organizations are also prone to organizational issues, however, stemming from different sources. Public organizations generally have a higher chance of encountering fraud or having their funding mismanaged (Harris et al., 2015). Private foundations, on the other hand, can often suffer from conflicts in their operation, which stops them from adequately achieving their goals (Shanks & SoRelle, 2021).
Conclusion
In Conclusion, there are a number of differences between the two types of organizations, primarily stemming from their funding, structure and general goals. It is difficult to say if one type of organization is strictly better or worse than the other due to the overall difference in both focuses and the impact they can have. Private organizations work from the top to support both the public and their investors, while public charities operate in cooperation with their main audience to enact change in the world.
References
Harris, E., Petrovits, C., & Yetman, M. H. (2015). Why bad things happen to good organizations: The link between governance and asset diversions in public charities. Journal of Business Ethics, 146(1), 149–166. Web.
Shanks, D., & SoRelle, M. E. (2021). The paradox of POLICY advocacy: Philanthropic Foundations, public interest groups, and second-order policy feedback effects. Interest Groups & Advocacy, 10(2), 137–157. Web.
Worth, M. J. (2021). Nonprofit management: Principles and practice. SAGE Publications, Inc.