Nonprofits as Policy Solutions to the Burden of Government

by Herrington J. Bryce

Overview

This book addresses a specific subset of nonprofits that are chartered with a single mission: decrease the burden of government. Designing and engaging nonprofits to lessen the burden of government requires a specific description and acknowledgement of the burden to be lessened, and these may include the provision of infrastructure, the relief of debt, or the provision of general public services that are not motivated by charity. It also requires the assignment of specific operating powers to the nonprofit including the power of eminent domain. This book explores these and other related topics including the avoidance of resource dependence on government when attempting to reduce its burden.

The book is addressed to the policy makers and rule makers who design policies that affect the ability of the nonprofit to effectively lessen the burden of government. It is also addressed to public administrators in search of innovative ways of implementing these policies consistent with the laws, and to the creative nonprofit managers who are charged with carrying out the mission often in collaboration with the government or other entities. To the advanced student in all related fields, the author offers not only material for discussion, but enables discovery of what is possible by giving key examples of organizations meeting the terms and objective of lessening a significant burden of government.

Product Details

ISBN-13:	9781501514739
Publisher:	De Gruyter
Publication date:	01/23/2017
Pages:	292
Product dimensions:	6.10(w) x 9.06(h) x (d)
Age Range:	18 Years

About the Author

Herrington J. Bryce was a senior economist at the Urban Institute, a Brookings Economic Policy Fellow, a Fellow at the Institute of Politics at Harvard and a visiting professor in regional economics and planning at the Massachusetts Institute of Technology. He taught micro economic theory and public finance at Clark University in Worcester, Massachusetts, and was director of the program in legal and budget studies at the University College at the University of Maryland. He currently teaches courses at the College of William & Mary in nonprofits but mostly in corporate financial strategy and cost management-heavily reflected in this text. He has published extensively and has served on many state, local and federal government advisory committees. He has a PhD in economics from the Maxwell School at Syracuse University, and a Clu and ChFc from the American College.

Table of Contents

Preface xv

Chapter 1 Purpose, Policy, Theory, Definitions and Context 1

Purpose 1

The Burden of Government 2

Perspective, Collaboration, Competence 5

Traditional, Nontraditional, Burden 9

Organizational Design 11

Prices, Profits and Nonprofit Motives 12

The Context 13

Dimension of the Problem in the United States 13

Why the Nonprofit Option 16

Toward a Supporting Theory 17

Bibliography 18

Chapter 2 Designing, Empowering and Engaging the Nonprofit to Lessen the Burden of Government 19

The National Trust for Historic Preservation 19

Crafting the Intent to Lessen the Burden of Government 19

Federal and State Designation of an Eligible Burden 21

Classification of Nonprofits as Doers and Facilitators 22

The Planks on Which to Design a Nonprofit to Reduce the Burden of Government 26

Plank 1 Money 28

Plank 2 Marketing and Persuading 32

Plank 3 Membership and Public 32

Plank 4 Management 33

Plank 5 The Mission 35

Plank 6 Collaboration and Cooperation 37

Plank 7 Tax Exemption 37

Plank 8 Powers to Act 38

Plank 9 Accountability 39

Plank 10 Legitimacy 39

Summary and Preview 40

Bibliography 40

Chapter 3 Empowering the Nonprofit to Lessen the Burden of Government 43

The Creation of the Corporation 44

Incorporation: Process, Purpose, Powers 45

The Powers of the Nonprofit Corporation 48

Prohibitions 50

Financial Advantages and Disadvantages of Exemption 53

Some Factors that Threaten the Loss of Tax-Exampt Status Under 501(c)(3) 66

Summary and Preview 68

Bibliography 68

Chapter 4 Nonprofits as Doers in Reducing the Burden of Government 69

The Doers: Distinguishing Examples 71

Categorizing 501(c)(3) Doers 73

Doers Depending Mostly on Business Income 78

Subsidiaries, Affiliates, and Holding Companies as Internal Facilitators 80

Other Categories of Doers 83

A General Comparison of Doers 85

Lessening the Burden of Government: The Benefits and Justification of Tax Exemption 86

Summary and Preview 87

Chapter 5 Nonprofit as Financiers and Facilitators in Reducing the Burden of Government 89

Two Government-Created Examples: To Be Close But Not Controlled 89

The Nonprofit Financers 91

The Rules of Foundation Operation 93

The Key Characteristics of the Facilitator 100

Hybrids: Private Operating Foundations 102

Summary and Preview 104

Chapter 6 Government Created Nonprofits to Lessen the Burden of Government 105

Nonprofits Created by Governments to Lessen Their Own Burdens 106

Qualifications of a Government-Created 501(c)(3) 108

Public Authorities as Government-Created Nonprofits to Relieve Government Burden 110

Ports and Powers 113

Are Authorities Doers or Financers? 123

Summary and Preview 123

Bibliography 124

Chapter 7 Decision-Making and Governance Structure in Lessening the Burden of Government 125

The Board 125

Interlocking Directorates 129

Conflict of Interest, independence, and Board Members 130

Dealing With Possible Conflicts of interest 132

Dealing With Non-Independence 133

Standards at the Root of All Trustee Actions 133

Excessive Economic Transactions and Due Diligence 137

Duty of Organizations to Trustees and Their Rights 138

Liability of Trustees 139

Annual Disclosures of Involvement of Current and Past Trustees and Senior Management 141

Summary and Preview 142

Bibliography 143

Chapter 8 Financing the Burden through Contributions 145

A General Picture of Contributions and the Sector 145

Requirements of a Tax-Deductible Gift 152

Problems of Accepting Gifts Subject to Debt 158

Summary, Responsibility, and Preview 161

Bibliography 161

Chapter 9 Financing the Burden through Business Earnings 163

Business Activity as a Source of Money 163

Definition of Related and Unrelated Nonprofit Businesses 165

Excess Profits: A Distinction Between Related and Unrelated Income 168

Integration of Business Operations Into a Conglomerate Structure 169

The Organization of an Unrelated Business 169

Tax Treatment of Different Types of Business Income 172

Key Points on Entrepreneurial Income in Nonprofits 188

Summary and Preview 189

Chapter 10 Financing the Burden through Debt 191

The Need for a Charter and Other Documentary Powers 191

Terms of Debt 192

Non-Deductibility and Taxability of Interest 194

Debt as Credit Facility 194

Covenants, Default, Bankruptcy 195

Strategies for Treating a Loan Due 195

Borrowing from the Securities Market 196

Borrowing from Nonfinancial Sources 197

Preparing to Borrow 197

Debt Limits and the Nonprofit 198

Subsidized Infrastructure Debt Available to Nonprofits 198

Long-Term Debt for Infrastructure Used by the Nonprofit 199

Long-Term Debt Issued by Nonprofits on Behalf of the Government for Public Purpose Infrastructure Called 63-20 Debt 200

Issuing of Debt (Bonds) by an Authority 202

Debt Through Tax Increment Financing 205

Long-Term Lease Arrangements of Property 206

Summary and Preview 206

Bibliography 206

Chapter 11 Establishing Cash Flows for Sustainability 207

The Trust 208

Endowments: Perpetuating a Gift 209

Specific Long-Term Assets In an Endowment: Trusts 213

Specific Long-Term Assets for Endowments: Life Insurance Policies 216

Gifts of Iras, Gift Annuities, and Other Such Contracts 222

The Power of a Will 223

Summary and Preview 224

Bibliography 224

Chapter 12 Corruption and Control: Protecting the Assets for Lessening the Burden of Government 225

Corruption 225

Types and Effects of Corruption in Nonprofit Organizations 226

Sources and Opportunities for Corruption 228

Managing the Risks of Corruption and Fraud 230

Controls: An Accounting Approach 230

Controls: A Transaction Approach 231

Controls: A Flow Approach 232

Controls: Organizational Lines of Defense 233

A Comprehensive Approach to Corruption 234

The Discovery of Corruption 237

The Protection of Sources and Records 237

Insurance Against Corruption 240

Classification and Treatment of Certain Costs 242

A Tool of Cost Control, Avoidance of Cost Overruns, and Detection of the Risk of Inefficiency or Fraud 246

Summary and Preview 248

Bibliography 248

Chapter 13 Discussion and Dialogue 251

Levels of Lessening the Burden of Government 252

Types of Nonprofits Lessening the Burden of Government 253

The Authority to Perform 254

The Nature of the Promise to Lessen the Burden of Government 255

To Exercise Authority the Nonprofit Needs Powers 255

The Power to Finance and the Motive for Action 256

Governance Structure 256

Accountability and Disclosures 257

Types and Range of Collaboration 258

The Conflict Between Collaboration and Control 258

Sources of Legitimacy 259

Growth and Competition 261

Debt and Off-Balance Sheet Financing 262

Who Subsidizes Whom 264

Tax Exemption as Price and Incentive 264

The Rationale for This Direction 265

Index 269

Editorial Reviews

"I recommend Nonprofits as Policy Solutions to the Burden of Government to policy practitioners, students of nonprofit scope and theory, and anyone interested in intersections among public policy, law, and the nonprofit sector. Bryce has brought to our attention nonprofit law’s expansive definition of 'charitable,' … [the book] invites its creative application as a strategy for policymaking and implementation, and equips us with the knowledge to do so in pursuit of the public interest."　

Professor Christopher Horne, Nonprofit Policy Forum

"This book made for an informed discussion in an American Society for Public Administration (ASPA) e-learning Book Talk Program: Nonprofits as Policy Solutions to the Burden of Government, hosted May 10, 2017 for its members."

ASPA is the leading interdisciplinary public service organization that advances the art, science, teaching and practice of public and non-profit administration, www.aspanet.org.

"Herrington Bryce has written a terrific book on the possibilities of involvement and collaboration of nonprofits in lessening the government’s burden in infrastructure delivery while not denying the essential roles of firms in any such public-private partnership. He notes that collaboration, properly designed, can be mutually enhancing to the public’s benefit."

Dr. Rick Geddes, Professor, Department of Policy Analysis & Management and Director, Cornell Program in Infrastructure Policy and a member of the core faculty at the Institute for Public Affairs at Cornell University.

"Herrington Bryce has written a fascinating book about a little-known aspect of infrastructure. He answers the questions about what makes a properly structured nonprofit model applicable and the required capacity and powers to make them work to reduce the burden of government even in the hard matter of infrastructure."

Richard G. Little, AICP, active infrastructure policy consultant, National Academy of Construction member, Director of the Board on Infrastructure and the Constructed Environment of the National Research Council (NRC), California State Commission on Infrastructure member, Editor: Public Works Management & Policy.　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　

"The topic is important and the coverage is comprehensive. I think this will make a fine addition to the reading material in a number of policy and also in nonprofit classes."

Dr. Wolfgang Bielefeld, Professor Emeritus, Indiana University-Purdue University Indianapolis and former editor Nonprofit and Voluntary Sector Quarterly

"The topics and ideas of this book deserve our attention as the U.S. searches for new ways to improve infrastructure while relieving the burdens on government."　　　

Dr. Neil S. Grigg, Professor, Civil and Environmental Engineering, Colorado State University, expertise: infrastructure, design, research and management as both an academic and top-level government official. See his review in Public Works Management and Policy, June 27, 2017.

"Bryce's book provides readers with a comprehensive look at an increasingly relevant aspect of policy making and policy implementation. His work represents a substantial contribution to the conversation about the topic of nonprofits as relievers of governmental burdens, providing a wealth of detail and insight into the perils and promise of these specially crafted nonprofits. Current and future policy makers, public administrators, and nonprofit leaders would be wise to utilize Bryce's book as a roadmap of possibilities for meeting the needs of the citizenry."

Michelle Wooddell, Public Administration Review

From the Publisher