It's expensive and sometimes life-threatening for nonprofits to fulfill the needs of the State. States contract with nonprofits to fulfill the safety-net needs of citizens. In many cases, States may be the primary payor for a nonprofit's services.
But, according to a recent report "New York’s Office of the State Comptroller found that almost nine out of 10 nonprofit contracts were delayed in 2008 by an average of six months, forcing organizations to perform services without a contract in place and without any payments." You can see the Wall Street Journal for more of this story and clearly, this is not a great situation for nonprofits.
But another line in the story has me wondering aloud. This was made by the president of United Way of New York State: “When agencies don’t get paid, many are challenged to stay open.” Now let's just be clear: nonprofits are constructed to pursue a mission, an outcome. Is it possible that these nonprofits set out to pursue a mission with the expectation that the state or municipality would be the revenue source? And is this a mission-consistent expectation?
Now, as the paradigm goes: nonprofits fill the void where corporations don't have a (financial) incentive and the public doesn't have a mandate. So what makes these nonprofits believe that their existence is only justifiable if the state pays their bills? My bottom line: nonprofit boards need to really be clear about who they are in business to serve. If there mission goes beyond serving the State (or its constituents) then the board should be working to raise additional sources of income to pursue mission with fewer constraints.
PS -- yes, there's all kind of discussion to be had next about who actually provides safety net services best -- I believe nonprofits do that but my question today is more about the revenue model that depends on state for fulfilling mission.