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In relation to public services, the voluntary sector is the realm of social activity undertaken by non-governmental, not for profit organizations. [1] This sector is also called the third sector (in contrast to the public sector and the private sector), community sector, and nonprofit sector. [2] "Civic sector" or "social sector" [3] are other terms used for the sector, emphasizing its relationship to civil society. Voluntary sector activities are important in many areas of life, including social care, child care, animal welfare, sport and environmental protection.
A variety of terms is in use to describe the non-governmental, not-for-profit sector, including "voluntary sector", "third sector", "community sector", and "nonprofit sector". In 1965, Richard Cornuelle coined the term "independent sector" and was one of the first scholars to point out the vast impact and unique mechanisms of this sector, [4] but in some contexts, such as social care, this term includes businesses operating for profit. [5]
A formal economic theory of the voluntary, nonprofit sector and its role was developed by Burton Weisbrod in the 1970’s [6] [7] , and subsequent decade [8] . It distinguishes its incentives and behaviors from that of the private and public sectors of the economy, and recognizes non-profit organizations as suppliers of public goods that are under-supplied by government. This enabled calculation of the value of voluntary labor in the United States, which is a factor now considered in the analysis of efficiency wage.
More recent researchers such as Peter Frumkin(2005) have also supported the concept of considering "non-profit" and "voluntary" organizations together [9] . Rob Macmillan observed that the nature of this sector is "a hugely contested domain", with issues raised over "whether there is a coherent 'sector' at all, and if so what it should be called". [10]
The presence of a large non-profit sector is sometimes seen as an indicator of a healthy economy in local and national financial measurements. [11] With a growing number of non-profit organizations focused on social services, the environment, education, and other unmet needs throughout society, the nonprofit sector is increasingly central to the health and well-being of society. [12] Peter Drucker suggests that the nonprofit sector provides an excellent outlet for a variety of society's labor and skills. [13] In 1976, Daniel Bell predicted that the third sector would become the predominant sector in society, as the knowledge class overcame the effects of the private sector. [14] [15]
The first two decades of the 20th century were characterized by a public zeal for social reform and social justice known as the Progressive Era. The newly founded National Association of Societies for Organizing Charity had immediate influence during that era. Its extensive field work helped organize new societies and strengthen others. Smaller cities became well-organized, with the South and Northwest particular areas of focus. To permit membership of Canadian societies, the association changed its name in 1912 to the American Association of Societies for Organizing Charity. In 1917, it became the American Association for Organizing Charity. These agencies increasingly were providing direct service to individuals and families. Pauperism, child welfare, juvenile justice, sanitation, tuberculosis, and other health issues were emergent problems for new and existing agencies. The American Red Cross fueled a nationwide fervor for social service. Founded in the United States in 1881, it was reorganized in 1905 to focus on military personnel. With this pivotal decision, the business of organizing charities quickly evolved into the business of social work.
According to a recent study by Johns Hopkins University, the Netherlands has the largest third sector of 20 countries across Europe. [16] Ireland's non-profit fundraised income formed 0.33% of Irish GDP, less than the UK and US, in 2016. [17] In Sweden, the nonprofit sector is attributed with fostering a nationwide social change towards progressive economic, social and cultural policies, [18] while in Italy the third sector is increasingly viewed as a primary employment source for the entire country. [19]
In the United States, approximately 10% of GDP is attributable to the third sector. Donating to private religious organizations remains the most popular American cause, and all religious organizations are entirely privately funded because the government is limited from establishing or prohibiting a religion under the First Amendment. [20]
Although the voluntary, community, and not-for-personal-profit sectors are frequently taken to compose the "Third Sector", each of these sectors or sub-sectors have quite different characteristics. The community sector is assumed to comprise volunteers (unpaid) while the voluntary sector is considered to employ staff working for a social or community purpose: "hence the phrase 'voluntary and community sector' (VCS) [is used] to encompass the full range". [21] In addition however, the not-for-personal-profit sector is also considered to include social firms (such as cooperatives and mutuals) and more recently governmental institutions (such as Housing Associations) that have been spun off from government, although still operating fundamentally as public service delivery organizations. These other types of institutions may be considered to be quasi-private or quasi-public sectors rather than stemming from direct community benefit motivations.
The entry of nonprofit organizations into commercial activities (competing with the private sector) was identified in the 1980’s [22] . There have also been concerns about the financial accountability of the nonprofit sector throughout Western society. [23] There is also ongoing concern whether the nonprofit sector will unequally draw retiring workers from the private sector as the currently large baby boomers age. [24] Development of the third sector, it is argued, is linked to the restructuring of the welfare state and further globalization of that process through neo-liberal strategies of the Washington consensus. [25]
In a 2013 New York Times op-ed and radio podcast, The Charitable-Industrial Complex, Peter Buffett uses the terms "philanthropic colonialism" and "conscience laundering", and describes his insights into "searching for answers with their right hand to problems that others in the room have created with their left" rather than systemic change. [26] [27]
Discourse on the "third sector" began in the 1970s in France as a result of the crisis in the welfare state. Many associations rely at least partly on government subsidies or other payments, it has been criticized at times by association heads (among some), as a way to control charities, some charities do refuse all government payments, while others try to rely partly on gov's aid. [28]
In India, this sector is commonly called the "joint sector", and includes the industries run in partnership by the state and private Sector. In a wider sense the initial investment is made by the state and later the handling is done by the private sector. But here the private sector is responsible to the state when it comes to handling.[ clarification needed ]
In Israel, this sector is commonly called the "Third Sector", (Hebrew : המגזר השלישי) and generally refers to non-profit organizations (NPOs) and non-governmental organizations (NGOs) with the line between the two quite fine. These organizations generally fill a gap in the existing government or municipal service provision. Examples include United Hatzalah for emergency medical first response, Yad Sarah for free loan of medical equipment, Yad Eliezer for poverty relief efforts, Akim for assistance for the mentally handicapped, and SHALVA for children with special needs.
The Cabinet Office of the British government until 2010 had an Office of the Third Sector that defined the "third sector" as "the place between State and (the) private sector". [29] The Conservative/Liberal Democrat Coalition Government renamed the department the Office for Civil Society. The term third sector has now been replaced in Government usage by the term Civil Society, or for a while under the Cameron government, the term Big Society, which was devised by political advisers and which featured prominently in the Conservative Party's 2010 election campaign.
Organisations leading and supporting the voluntary sector in the United Kingdom include the Association of Chief Executives of Voluntary Organisations (Acevo), the National Council for Voluntary Organisations, Northern Ireland Council for Voluntary Action, Scottish Council for Voluntary Organisations, and Wales Council for Voluntary Action.
The U.S. nonprofit sector consisted of approximately 1.56 million organizations registered with the Internal Revenue Service in 2015. These reporting nonprofits identified $2.54 trillion in revenues and $5.79 trillion in assets in 2015. Over $400 billion in revenue comes through private support and fundraising. [30] The U.S. nonprofit sector contributed an estimated $985.4 billion to the U.S. economy in 2015, composing 5.4 percent of the country's gross domestic product and employed 11 percent of the U.S. workforce in 2015. [31] Each year, seven out of ten Americans donate to at least one charitable cause. Contributions are from two to 20 times higher in the U.S. than in other countries of comparable wealth and modernity. [32]
A nonprofit organization (NPO), also known as a nonbusiness entity, nonprofit institution, or simply a nonprofit, is a legal entity organized and operated for a collective, public or social benefit, as opposed to an entity that operates as a business aiming to generate a profit for its owners. A nonprofit organization is subject to the non-distribution constraint: any revenues that exceed expenses must be committed to the organization's purpose, not taken by private parties. Depending on the local laws, charities are regularly organized as non-profits. A host of organizations may be nonprofit, including some political organizations, schools, hospitals, business associations, churches, foundations, social clubs, and consumer cooperatives. Nonprofit entities may seek approval from governments to be tax-exempt, and some may also qualify to receive tax-deductible contributions, but an entity may incorporate as a nonprofit entity without having tax-exempt status.
Philanthropy is a form of altruism that consists of "private initiatives for the public good, focusing on quality of life". Philanthropy contrasts with business initiatives, which are private initiatives for private good, focusing on material gain; and with government endeavors that are public initiatives for public good, such as those that focus on the provision of public services. A person who practices philanthropy is a philanthropist.
Fundraising or fund-raising is the process of seeking and gathering voluntary financial contributions by engaging individuals, businesses, charitable foundations, or governmental agencies. Although fundraising typically refers to efforts to gather money for non-profit organizations, it is sometimes used to refer to the identification and solicitation of investors or other sources of capital for for-profit enterprises.
A charitable organization or charity is an organization whose primary objectives are philanthropy and social well-being.
A social enterprise is an organization that applies commercial strategies to maximize improvements in financial, social and environmental well-being. This may include maximizing social impact alongside profits for co-owners.
The social economy is formed by a rich diversity of enterprises and organisations, such as cooperatives, mutuals, associations, foundations, social enterprises and paritarian institutions, sharing common values and features:
Marketisation or marketization is a restructuring process that enables state enterprises to operate as market-oriented firms by changing the legal environment in which they operate.
Eliezer David Jaffe was an Israeli professor of social work specializing in philanthropy and non-profit management. He was Professor Emeritus at The Hebrew University's Paul Baerwald School of Social Work and Social Welfare.
Laws regulating nonprofit organizations, nonprofit corporations, non-governmental organizations, and voluntary associations vary in different jurisdictions. They all play a critical role in addressing social, economic, and environmental issues. These organizations operate under specific legal frameworks that are regulated by the respective jurisdictions in which they operate.
Lester M. Salamon was a professor at Johns Hopkins University. He was also the director of the Center for Civil Society Studies at The Johns Hopkins Institute for Health and Social Policy Studies. Salamon has written or edited over 20 books in addition to hundreds of articles, monographs and chapters that have appeared in Foreign Affairs, The New York Times, Voluntas, and numerous other publications. He was a pioneer in the empirical study of the nonprofit sector in the United States, and is considered by many experts in his field to have been a leading specialist on alternative tools of government action and on the nonprofit sector in the U.S. and around the world.
A foundation in the United States is a type of charitable organization. However, the Internal Revenue Code distinguishes between private foundations and public charities. Private foundations have more restrictions and fewer tax benefits than public charities like community foundations.
The Commission on Private Philanthropy and Public Needs, better known as the Filer Commission, was formed in 1973 to study philanthropy, the role of the private sector in American society, and then to recommend measures to increase voluntary giving. Organized as a privately supported citizen's board, the Commission came into being through the efforts of John D. Rockefeller III, Wilbur D. Mills, George P. Shultz, and William E. Simon. The selection of participants on the Commission reflected a desire for diversity of experience and opinions and included heads of religious and labor groups, former cabinet secretaries, corporate and Foreign Securities Corporation and President of Metropolitan Museum of Art.
Philanthropy in the United States is the practice of voluntary, charitable giving by individuals, corporations and foundations to benefit important social needs. Its long history dates back to the early colonial period, when Puritans founded Harvard College and other institutions. Philanthropy has been a major source of funding for various sectors, such as religion, higher education, health care, and the arts. Philanthropy has also been influenced by different social movements, such as abolitionism, women’s rights, civil rights, and environmentalism. Some of the most prominent philanthropists in American history include George Peabody, Andrew Carnegie, John D. Rockefeller, Henry Ford, Herbert Hoover, and Bill Gates.
Burton A. Weisbrod is an American economist who pioneered the theory of option value, and the theory of why voluntary nonprofit organizations exist, He also developed the methodology for valuing voluntary labor. He advanced methods for benefit-cost analysis of public policy by recognizing the roles of externality effects and collective public goods in program evaluation. He applied those methods to the fields of education, health care, poverty, public interest law, and nonprofit organization. Over a career of fifty years, he published 16 books and over 200 scholarly articles. He is currently the Cardiss Collins Professor of Economics Emeritus and a Fellow of the Institute for Policy Research at Northwestern University.
Julian Wolpert is Bryant Professor Emeritus of Geography, Public Affairs, and Urban Planning at Princeton University's Woodrow Wilson School, where he taught from 1973 to 2005 and chaired the Program in Urban and Regional Planning. He was previously a member of the Regional Science Department at the University of Pennsylvania (1963–73).
Brian O'Connell was an American author, academic, and public administrator who helped found Independent Sector, an organization that represents the interests of charities, foundations and nonprofit giving programs in the United States.
A charitable for-profit entity is an organization with a charitable mission but legally organized as a for-profit corporation. Both benefit corporations and Low-profit limited liability companies (L3C) fall under this category. As well as generating a profit, a charitable for-profit entity concentrates on setting a social objective. The business must achieve its social purpose, as well as make a profit, to be successful. There are movements to refine strategies, retuning community-oriented activities based on ROI of Little Investment or Small Capital, Low Risk, yet, higher return and rebranding nonprofit entities from wholly-dependable funding beneficiary from Governments or public i.e. business organization or individual. previously, we often heard of Nonprofits and community-based organizations, now, For-profits community-based Social Enterprises The case of organizing charitable work under for-profit rules rather than as a traditional charity such as a foundation gained prominence when Google announced its Google.org branch in 2006. Since then, the subject has been under both academic and public debate with U.S. law professor Eric Posner arguing in favor of expanding Charity law to include for-profit charities, while Brian Galle considered the legislative popularity of social enterprises a "race to the bottom among states competing to siphon away federal tax dollars for local businesses."
A not-for-profit or non-for-profit organization (NFPO) is a legal entity that does not distribute surplus funds to its members and is formed to fulfill specific objectives. An NFPO does not earn profit for its owners, as any revenue generated by its activities must be put back into the organization.
Jon Van Til is one of the pioneers in nonprofit organization research and education and the third sector, with particular interests in voluntary action, civil society and theories of the third sector. Dr. Van Til is Professor Emeritus of Urban Studies and Community Planning at Rutgers University, Camden.
Charity assessment is the process of analysis of the goodness of a non-profit organization in financial terms. Historically, charity evaluators have focused on the question of how much of contributed funds are used for the purpose(s) claimed by the charity, while more recently some evaluators have placed an emphasis on the cost effectiveness of charities.
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