Surprising Stuff
Whether it is a for profit, or a non-profit organization or company, there is one underlining principle.
Pleasing the customer is the key to long term success. In the case of a for profit business, pleasing the customer means that customers feel good about the product, service or benefit that they have received from the item that they have purchased. In the case of a non-profit organization, the donators (non-profit customer) have to feel good about the items, money, time, etc. that they have donated. Without this good feeling, the return of a customer or a donor becomes less and less likely until they no longer return or donate. It doesn’t matter what the business provides, whether it is real, imagined, legal or illegal, as long as its customers or donators continue to contribute enough to justify the cost of running the business, then the business can be successful.
However, that is where the similarity ends, because with a for profit business, the customer who pays for a product or service is the one who receives the benefit of the item, so that they can compare what they paid for a product or service with the benefits that they received and can determine if the benefits justified the cost. Whereas, a non-profit donor will know the intent of their donation, and although they may evaluate the emotional benefit that they get versus the amount that they contribute, they will normally not know the beneficiary of their donation, and whether or not it was worth the value of their donation.
That is especially true of a tax-exempt organization that can collect unlimited funds, but can file as having no individuals employed, no volunteers and with no documents being made available to the public. It is easy to understand the reasons for privacy of donors, recipients and those running the charity, but keeping a tax-exempt organization’s financial transactions private (no public disclosure) can cause uncertainty and doubt about their use of funds and their tax-exempt status.
Check on your favorite charity
Charity Navigator
Not for profit (NFP) entities do have to do limited financial disclosure…via the filing of an annual Form 990 with the IRS. Disclosure includes executive salaries and benefit cost as well as operating statements and balance sheets. Copies are available from them directly as well as from GuideStar and other web sites. Perfect ? No, but it does provide significant visibility into the organizations. Check out some of your favorites and see what I mean.