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Existing Biases in Public-Nonprofit Contractual Arrangements: Rising Risks for Emerging Nonprofit Organizations

The views expressed are those of the author and do not necessarily reflect the views of ASPA as an organization.

By Taiwo Oguntuyo 
September 12, 2019

The world is increasingly changing for nonprofit organizations. Many governmental functions that are originally performed as primary functions of federal, state and local actors are gradually shifting towards being enacted by a host of nonprofits, which are classified as third-party surrogates These routine shifts in governmental responsibilities have consequently led to the advent and continuous increase in contracting arrangements, partnerships and collaborations between nonprofits and the government. This has also necessitated the consideration of nonprofit leaders’ skills and competencies, which are often looked out for by governmental agencies.

Darrene Hackler and Gregory Saxton, researchers with major interest in nonprofits and their use of information and technology in an era of globalization, attested that the current environment for nonprofit organizations is one of, “Heightened scrutiny, greater demands, fewer resources and increased competition.” The rising number of nonprofits and scarcity of funding have warranted the need for governmental donors to consider more than fundamental factors like needs, skills and competencies. It has also caused donors to consider one singular factor; their previous successful contractual relationship and partnerships with nonprofits. This factor of previous contractual arrangement with a nonprofit organization has become a default factor governmental donors consider before donating to, or collaborating with a nonprofit organization.

Based on a survey of human service nonprofits in Maryland, Jiahuan Lu, a scholar with major concentration on equitable funding for nonprofits, found that nonprofits with higher bureaucratic orientation, stronger domain consensus with government and, “Longer government funding history,” are more likely to receive government contracts and grants. Nonprofits’ revenue diversification, professionalization and board co‐optation were discovered to have very limited impacts. From these findings, governments tend to depend on previous partnerships with selected nonprofits and the successful completion of their prior project. They then use it as a determinant for, “Trusting,” in the capacities of nonprofit organization leader(s) for successful completion of the proposed project.

Nonetheless, seeing that most nonprofits who have previous contractual agreements with the government are in many cases well known, a considerable number of emerging and local nonprofits who have pressing needs, capacities and skills are often ignored and unnoticed by the government in their selection from pools of nonprofit applicants. This manifests in the face of the rising needs these nonprofits’ desperately hope to meet in their localities.

By using previous collaboration as a criterion, the government may tend to miss crucial opportunities of attending to the social ills of needy societies, where needy individuals are seeking the help of emerging local nonprofits to be solutions to their basic human needs. For the government to meet these needs, placing, “Previous collaboration,” as a key factor may not be the most appropriate method to select nonprofits that are in most need of funding and most fit to attend to the need of a local settlement. This is because some local or emerging nonprofits who have never collaborated with governmental agencies may be in closer proximity with localities in need and may better understand the needs of such localities.

In enhancing equitable access to resources for nonprofit organizations, numerous scholars including Donta Council suggested the need for the establishment and adoption of a reliable uniform standards/code of conducts at the federal, state or local level, which can be a benchmark for eligibility of governmental funding for nonprofit organizations. This will be adequate in helping governmental donors as well as philanthropic organizations have trust and confidence in their decisions to support local or emerging nonprofits. Additionally, it will reduce the tension of previous collaboration criteria as a major factor of consideration for funding nonprofits, and instead shift the attention to more important factors such as the gravity of the financial needs of nonprofits and their localities, as well as the needs’ consensus with government service goals.

These accreditation programs will help enhance organizational performance, programmatic measurement and governance practices for nonprofit agencies that wish to essentially seek a, “Good housekeeping seal,” for their donors, prospective stakeholders, volunteers, board members or funders that typically have less time to search an agency’s financial information or get to know their staff to build trust amongst the whole organization. Adopting accreditation initiatives will help governmental donors in the validation of nonprofit overall worthiness. This will boost government confidence to invest in the infrastructure of nonprofits, hereby driving forward equal opportunities for nonprofit agencies to get funding by engaging in contractual relationships based on their accreditation status.

Consequentially, newly established and small nonprofits will have increased likelihood to get funding from the government. This will enhance the equitable access to governmental funding for nonprofit organizations at diverse levels with diverse focus based on the program-goals of the government. In addition, government at the state or local level will have the capacity to reach smaller localities through the government’s enablement to reach and appropriately invest in needy nonprofits. In all, the adoption of accreditation programs will significantly help in reducing the pressure of amplifying biases such as previous contractual relationships in the decisionmaking process of awarding contracts and funding to nonprofits.

Author: Taiwo Oguntuyo is a Ph.D. candidate in the School of Public Service at Old Dominion University. She possesses a Bachelor of Science Degree in Public Administration and a Master of Science Degree in Human Resource Management. Her areas of interests include public policy, nonprofit management, diversity and inclusion, and in-sector and cross-sector collaborations.

Name: Oguntuyo Taiwo Christianah
Email Address: [email protected]

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