by DiTesco

Created on: February 20, 2009

Quick answer: Yes! But first, let us understand the difference. A nonprofit organization are generally institutions whose purpose is to provide something of value to the general population. These organizations are not geared towards making profits as normally they do not have shareholders or owners and therefore do not distribute profits as normal company's will do. Values are the driving force in a nonprofit. The bottom line is the realization of a social mission, not profits. This poses complex problems for the leadership team. How are programs agreed upon, progress monitored, and success measured? How are priorities set and consensus reached? How are staff rewarded and what control systems are applicable? Skilled consultants may be needed from time to time to assist the team in answering these qualitative, value-laden questions and focus on appropriate management systems.

While this is the case, nonprofit organizations can, and do, operate in all other particulars like any other sort of business. They have bank accounts; own productive assets of all kinds; receive income from fees and other forms of activity, including donations and grants if they are successful at finding that sort of support (fundraising); make and hold passive investments; employ staff; enter into contracts of all sorts; etc.

That said, such organizations, despite objectives, being not to make profits, will need a form of funding in order to achieve its cause. Such fundings, as mentioned earlier, can be generated in a variety of ways, the basic source being a grant. Grants may be given by government agencies, foundations or corporations, usually to operate a specific program. Nonprofit organizations receiving grants from foundations or corporations are generally provided up front and require a report on program activities and expenditures at the end of the grant period.

Another source of funding for a nonprofit organization are fees. Fees may be associated with services and billed to either the person receiving the service (e.g. the parent with a child in daycare) or to a third party such as a government agency that supports such services. Unlike the private sector where the price of a product or service must cover all costs, nonprofit organizations rarely meet all their costs based upon sales and fees. Instead nonprofits must engage in fundraising and seek additional revenue sources.

To summarize, revenue is not profit and does not translate only into money. In general, nonprofit organizations offset the revenues into associated spending or investment, in which the bottom line is less than or equal to zero.

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