The importance of performance assessment in local government decisions to fund health and human services nonprofit organizations.
Abstract: In times of fiscal crisis, demand for health and human services increases while revenues shrink, causing funders to focus more intently on identifying the most successful organizations in which to invest scarce resources. This research grew out of interest in enhancing performance assessment of nonprofit organizations expressed by local government managers. A survey of Alliance for Innovation Members explores two primary research questions: 1) what is a successful nonprofit; and 2) what type(s) of performance assessment tools are the most useful. The results strengthen our understanding of what information city and county managers want and why they prefer certain evaluation tools.
Subject: Local government (United States)
Local government (Services)
Nonprofit organizations (Services)
Nonprofit organizations (Environmental aspects)
Public health (Management)
Author: Vaughan, Shannon K.
Pub Date: 03/22/2010
Publication: Name: Journal of Health and Human Services Administration Publisher: Southern Public Administration Education Foundation, Inc. Audience: Academic Format: Magazine/Journal Subject: Government; Health Copyright: COPYRIGHT 2010 Southern Public Administration Education Foundation, Inc. ISSN: 1079-3739
Issue: Date: Spring, 2010 Source Volume: 32 Source Issue: 4
Topic: Event Code: 360 Services information; 200 Management dynamics Computer Subject: Company business management
Product: Product Code: 9300000 Local Government; 9200000 State & Local Government; 8380000 Nonprofit Institutions; 8300000 Social Services & Nonprofit Institutns; 8000120 Public Health Care; 9005200 Health Programs-Total Govt; 9105200 Health Programs NAICS Code: 92 Public Administration; 813 Religious, Grantmaking, Civic, Professional, and Similar Organizations; 624 Social Assistance; 62 Health Care and Social Assistance; 923 Administration of Human Resource Programs; 92312 Administration of Public Health Programs
Geographic: Geographic Scope: United States Geographic Code: 1USA United States
Accession Number: 250033485
Full Text: INTRODUCTION

American governments at all levels have a long history of cooperative relationships with nonprofit organizations. At the same time, the number of nonprofits continues to increase. Between 1989 and 1994, although the population as a whole grew at an annual rate of 1.1 percent, the total number of charitable and religious organizations grew by 6.3 percent annually (De Vita, 1997). Between 1996 and 2006, the number of nonprofits increased further by an additional 36.2 percent to almost 1.5 million organizations (NCCS, 2007). In 2008, organizations in the area of health and human services represented 31.5 percent of all registered nonprofits (NCCS, 2009). As governments increasingly rely on nonprofits to provide services through fee-for-service contracts and continue to support their activity through direct budget appropriations, government-nonprofit relations have important implications for the study of public policy and administration.

Funding is one of the primary aspects of government-nonprofit relations. Government grants and fees-for-services comprised 29.4% of nonprofit revenues in 2005 (Blackwood, Wing, and Pollak, 2008). A survey of 800 nonprofits found that 61 percent experienced cuts in government funding in 2008 ((Bridgeland, McNaught, Reed, and Dunkelman, 2009). This is particularly troubling for human services nonprofits because of their reliance on government as a primary source of revenue.

Additionally, according to Thomas H. Pollak (2009) of The Urban Institute, the endowments of major foundations shrank nearly 30 percent between 2007 and 2008 resulting in lower levels of grant funding to nonprofit programs at a time when private donations are expected to decline significantly and state and local governments are experiencing budget crises brought about by the economic downturn. While their revenue streams are constricting, nonprofits, particularly those in the area of health and human services, are experiencing an increase in demand. Therefore, these nonprofits increasingly find themselves in need of government support at a time when cities and counties are facing difficult choices as to whether to continue funding nonprofits and if so, at what level. To make these difficult choices, local government managers are becoming more interested in utilizing assessment tools to evaluate nonprofit performance.

In times of fiscal crisis as demand for health and human services increases while revenues shrink, funders focus more intently on identifying the most successful organizations in which to invest scarce resources. A successful nonprofit is a subjective determination, so in order to begin to assess return on investment pertaining to nonprofits it is important to first identify what local government managers expect in terms of optimal nonprofit performance. Once identified, the strategies employed to measure the extent to which the attributes are present in local nonprofits must be examined. This research assists local government managers in making nonprofit funding decisions by focusing on two primary questions: 1) what is a successful nonprofit organization and 2) what type(s) of performance assessment tools are the most useful.

The research explores the use of performance evaluation by local governments as they make decisions to fund nonprofits by surveying local government members of the nonprofit Alliance for Innovation. The findings regarding nonprofit performance assessment provide valuable insight for understanding how local governments and nonprofits interact.

LITERATURE REVIEW

Government--Nonprofit Relationships

Federal, state, and local governments have long worked with nonprofit organizations to provide goods and services to American citizens (Young, 1999). When the federal government began to provide substantial sums for the provision of social services in the 1960s, nonprofits were often stipulated to be the service providers. Amendments to the Social Security Act in 1967 provided that state agencies employ nonprofit entities in service delivery (Smith & Lipsky, 1993) and contracting with nonprofits for delivery of social services has increased since that time (Salamon, 1995).

Economic theories for the existence of government-nonprofit relationships posit: 1) contracting with nonprofit organizations lowers the transaction costs of the government entity (Coase, 1988); 2) nonprofit organizations are considered more trustworthy than for profit firms because all revenue generated by the organization is retained by that organization rather than paid out as dividends (Hansmann, 1980); and 3) voluntary organizations are easier to mobilize than government bureaucracy and are the first to address instances of market failure in the provision of collective goods, turning to government for financial or legislative assistance only if demand exceeds their capacity (Salamon, 1995). Salamon refers to this as nonprofit federalism, which is particularly relevant because nonprofit organizations as initial providers are certain to affect related government policy and implementation decisions.

Elected officials over the last two decades heralded the focus on nonprofit service delivery as a better alternative to direct government action because these organizations increase citizen participation through volunteerism and offer channels for direct private support of certain activities. However, reducing the scope of government activity while simultaneously looking to nonprofits to pick up the slack fails to take into consideration how the revenue landscape of these organizations has changed. Nonprofit organizations increasingly rely on government grants and contracts. In 2005, the proportion of nonprofit revenues from private donations was 12.3 percent (Blackwood, Wing, & Pollack, 2008), down from 19 percent in 1996 and 26 percent in 1977 (Boris, 1998) while government grants and fees-for-service represented 29.4 percent of nonprofit revenues in 2005 (Blackwood, Wing, & Pollack 2008).

The nature and extent of government-nonprofit relationships have changed over the years, driven at least in part by preferences of the general public regarding the venue for service delivery. Devolution during the Reagan administration and welfare reforms enacted during President Clinton's tenure reflected the public's desire for smaller government and ushered in an era in which states and local governments increased their reliance on nonprofit organizations to meet the demand for public goods and services. State agencies often contract with local-level service providers to implement federal programs such as the Personal Responsibility and Work Opportunity Reconciliation Act (PRWORA) and child welfare services including out-of-home placements and adoption (De Vita, 1999; Pavetti et al. 2001; and Bess et al. 2001). Contracting between state and local governments and nonprofits has increased and the nature of the contract relationship has changed to be much more performance oriented. An example of this is reimbursement under a contract may be tied to achievement of specific performance measures (Smith, 2006).

Performance Measurement

As stated earlier, nonprofits and local governments have a long history of collaborative effort. Emily Barman (2007) contends that this relationship has produced a cyclical pattern of waxing and waning emphasis on performance measurement of nonprofits. In times of fiscal crisis, local governments are more likely to emphasize a need for specific measures of nonprofit success in service delivery. When budget revenues are not severely constrained, the focus on program evaluation wanes. Barman argues that pressure to increase measurement of nonprofit activity and effectiveness results from changing perceptions of whether government or the nonprofit sector is the appropriate venue for the provision of public goods. The current economic and political climate in the U.S. therefore represents a situation ripe for sharper focus on performance evaluation.

Assessment of nonprofit organizations is complicated by the absence of any single criterion on which to judge performance (Barman, 2007). For-profit firms are much more easily assessable due to the efficiency metric of the profit margin. According to Brooks (2006), the traditional return on investment (ROI) formula--total revenues minus total expenditures divided by firm assets is not applicable to the nonprofit sector because the missions of most nonprofits preclude a businesslike approach to operations. The use of ROI with nonprofits tends to overemphasize efficiency measures (Brooks, 2006).

Further complicating the assessment of nonprofit performance is that some nonprofits are formed specifically to address the interests of donors rather than to meet public demand. The missions of these organizations and the services they provide are the result of donor-dictated philanthropy and thereby reflect the donors' concepts of what is needed or wanted (Frumkin, 2002; Rose-Ackerman, 1986). This may or may not mirror what policymakers or the general public believe should be done.

Likewise, the use of measurement tools is not a completely objective activity (Barman, 2007). In choosing certain tools, local government administrators are weighting effectiveness and efficiency with regard to nonprofit performance. Effectiveness of programs is typically determined through the use of outcome evaluation designed to "gauge the extent to which a program produces the intended improvements in the social conditions it addresses" (Rossi, Lipsey, and Freeman, 2004, p.58). Efficiency, on the other hand, takes into account the costs associated with such programs. Cost-benefit or cost-effectiveness analyses are most commonly used to determine if the benefits derived from a program warrant the costs and/or if the same benefits can be derived by less resource-intensive means. As Dunn (2008) notes, however, it is frequently difficult to calculate the dollar equivalents of benefits from program outcomes. Therefore, the concepts of efficiency and effectiveness each pose challenges for performance evaluation.

Another challenge to nonprofit evaluation is the lack of formal training in evaluation techniques by many program administrators. This weakness is particularly obvious as funders are increasingly asking nonprofit partners to collect data and report outcomes. Current use of evaluation varies from formal, professionally designed evaluations to informal reports or anecdotal accounts of performance. Most nonprofits lack the capacity to engage tools of performance measurement beyond collecting basic input/output data and reporting (Carman, 2007; Frumpkin, 2002).

Frumpkin notes, "there still are few clear measures of return on investment that transform grantmaking into a rigorous process" and "nonprofits still operate without a bottom line and without the discipline that the drive for profitability imposes" (2002, p.139). Therefore, because of the challenges inherent with nonprofit performance assessment and the growing interest among local government officials to undertake such activity, the research project discussed here was developed to ascertain perceptions of local government administrators regarding the need for specific types of measurement of nonprofit activities and outcomes.

METHOD

A survey was designed to discover what managers believe constitutes success in nonprofit performance and what methods of evaluation they think are best suited to measure that success. In addition, respondents were asked how important efficiency and effectiveness measures are in evaluation, and how intangibles such as citizen satisfaction and participation rank as factors for consideration.

Because of their expressed interest (1) in examining assessment of nonprofit performance with regard to calculating return on local government investment, local government members of the Alliance for Innovation (AI) a nonprofit association of more than 300 cities and counties across the country committed to finding and applying best practices to address challenges facing local governments (Alliance for Innovation, n.d.)--were selected as the study population. This is an attractive and relevant group to study because cities and counties who join AI do so because they consider themselves to be innovative and are committed to pursuing new ideas and best practices in local governance. Alliance for Innovation is a nonprofit partnership of Innovation Groups (IG), the International City/County Management Association (ICMA), and Arizona State University. Innovation Groups was founded in 1979 as a mechanism for member cities and counties to share new ideas and best practices for local government management. Partnering with ICMA and Arizona State has broadened the network to bring "professionals, local governments, academics, and private sector partners together to discover and apply the best ideas, practices and solutions to the challenges confronting local government and communities" (Alliance for Innovation, n.d.).

The questionnaire was developed to solicit in-depth responses from local government managers and sent via email to the 61 member local governments of the Alliance for Innovation who participate in their Ambassador program, whereby the members appoint a liaison to work directly with AI staff. Ambassadors were identified as the most appropriate group to survey due to their level of interest in the survey topic and the enhanced likelihood that they would participate because of their close relationship with AI staff. Past experience has shown that local government managers are a difficult group to survey. Small town managers face a mountain of tasks that leave little time to complete the numerous surveys requested of them each year. Surveys submitted to large jurisdictions face the primary difficulty of reaching the appropriate person to answer the questions, since the manager is often not directly involved in the specific activities being questioned. Surveying AI Ambassadors offered the greatest likelihood that the questionnaire would reach the appropriate person and that the official would complete and return the form.

Questionnaires were sent in two waves and resulted in the return of 21 completed forms, for a response rate of 34.4 percent. Although region is not considered an important factor in the study, the 61 local governments in the sample are disbursed nationwide; while completed surveys reflect some geographic variation, most respondents (fifteen) are from Southern states. Fifteen represent city government, six county governments, and almost half (47.6 percent) had populations between 25,000 and 99,999.

The focus of this study is on administrators' perceptions gained from responses to the open-ended questions on defining success, importance of citizen satisfaction and participation, and preferences regarding assessment tools. Numeric data were also collected regarding nonprofit expenditures as a portion of the overall budget, the number and types of nonprofits who received funding, and types of funding assistance provided in Fiscal Year 2007-08. Respondents were also asked whether their funding to nonprofits involved a competitive application process or evaluation reports and to rank the importance of five types of evaluation tools as well as the importance of efficiency and effectiveness in evaluating performance.

The findings from these analyses are discussed in detail in the following section. Although the number of completed questionnaires is small, the depth of information provided is relevant to furthering the understanding of local government managers' attitudes toward nonprofit performance assessment and how to better develop tools and techniques for use in evaluating nonprofits as part of funding decisions.

ANALYSIS AND FINDINGS

Twelve of the survey questions were closed-ended, requesting numerical data or a yes/no response. Six of the questions were open-ended, requesting comments, discussion, and/or elaboration of the perceptions of local government officials. Responses to the twelve closed-ended questions were analyzed using the Statistical Package for the Social Sciences (SPSS) and, since most data were ordinal, analyzed primarily using Crosstabs and either Chi-Square or Pearson's R as appropriate tests of statistical significance. The open-ended comments were analyzed and coded for common themes.

Local Government Funding of Nonprofits:

Budgets for FY 2007-08 for the cities and counties ranged from $4.9 million to $1.165 billion. The average award per nonprofit agency ranged from $3,000 to $137,020, and the number of nonprofit agencies funded ranged from 1 to 55. Most funding to nonprofits was awarded in the form of unrestricted general operating support; on average, respondents allocated 53.2 percent of grants for unrestricted general operating support and only 13.9 percent for fees-for-service activities. Among respondents, 71.4 percent (15) have a competitive application process for nonprofit organizations seeking funds. The six without a competitive funding process all have populations under 50,000.

As shown in Table 1, local governments with larger populations have greater expenditures on nonprofits, as would be expected because these jurisdictions have larger budgets overall. However, there is no significant relationship between population and the percent of the budget allocated to nonprofit funding. While six (6) respondents indicated their jurisdictions allocated more than $1,000,000 to nonprofits, in only four of (4) local governments was more than one percent of their budget awarded to nonprofits. Respondents were also asked for the amount of their average award to nonprofits in FY 20072008; the mean response was $36,375. Average award per nonprofit had no significant relationship to population.

Respondents were asked to indicate how many nonprofit organizations were funded by their local government in FY 2007-2008. They were also asked how many nonprofits within six categories (2)--arts & culture, education, environmental, health, human services, and other--were given funding in that budget year. The number of nonprofits in each type category was then divided by the total number of nonprofits who received funding to compute the percentage funded in each category. Table 2 contains those percentages crosstabulated with population of the local government. Human services nonprofits were the most often funded type of nonprofit and environmental agencies were the least often funded. Only the funding of arts & culture and environmental nonprofits exhibit statistically significant relationships with population size. In each case, the relationship is negative; when examining the total number of nonprofits funded, a higher percentage of organizations funded by small local governments fall in the categories of arts and culture or environmental. This suggests that larger cities and counties fund more diverse types of nonprofits.

Defining Nonprofit Success

Success is often said to be in the eye of the beholder. Therefore, it is important to determine what local government managers seek in terms of nonprofit performance. Respondents were asked to define nonprofit success in an open ended question; no list of attributes was included in the question. Their responses were coded according to common themes and how often each theme was mentioned. Table 3 contains the eleven aspects of success identified and how often each was mentioned.

Having a clear mission focus as well as specified goals was the most frequently cited aspect of nonprofit success, followed closely by the ability to meet the needs of their clients and/or the community. Each of these is an indicator of program effectiveness, whereas the next two most frequently cited attributes are elements of program efficiency. Eight respondents cited the importance of cost efficiency and good financial management, and seven respondents indicated compliance activities such as reporting and identifying outcome measures are important aspects of a successful nonprofit. The next most frequently cited grouping of attributes involved issues of leadership and accountability.

Performance Measurement

Those with experience in preparing grant proposals know firsthand that funders usually request an evaluation component. Thirteen (62 percent) of the local governments who responded to the survey require some type of evaluation from nonprofit organizations who are awarded funding, and larger jurisdictions are more likely to require evaluation (R=.63, p<.01). The type of evaluation required ranges from a minimum of preparing a final report to an extensive formal evaluation conducted by an independent agency. Accordingly, the questionnaire identified five types of performance assessment tools. Respondents were asked to rank the tools in order of importance to their local governments in evaluating nonprofits that receive funding. Table 4 lists the assessment tools and the percentage of respondents who ranked each as most important and least important.

Reporting is clearly the preferred assessment tool. Formal evaluations, both internal and external, were the least favorite options, whereas reporting was most often ranked as most important. In fact, no respondent ranked final report as the least preferred tool. The comments provided in Table 5, sorted by population and whether the respondent represents a city or a county, offer additional perspective.

Four respondents indicated that their current assessment options were limited to reports because the funding amounts to nonprofits were so small that other options were seen as unnecessary. Building on this idea, another respondent indicated a need for variation in evaluation techniques according to the type of programs/events for which funding is provided. Small, one-time events such as festivals should be assessed differently from ongoing, large-scale human services projects.

Citizen Participation

Of particular note regarding assessment tools, two respondents commented that on-site reviews have the added benefit of providing first-hand knowledge and building relationships with the nonprofits in the community. When asked whether financial efficiency or program effectiveness measures were more important in evaluating performance, all eighteen who responded to the question indicated either effectiveness or both. One respondent commented, "many efforts of nonprofit service providers may not be as efficient as what could be provided by a local or state agency, but may be more effective by strengthening civic infrastructure, community partnerships, and volunteerism." This corresponds directly with responses to a question regarding how nonprofit organizations enhance citizen participation. Providing for volunteerism and civic engagement opportunities was mentioned by more respondents than any other factor.

While volunteerism and civic engagement were mentioned most frequently, several respondents also noted that nonprofit organizations enhance citizen participation through identifying community needs and citizen interests as well as by giving citizens a voice and better access to local government. Almost half of the respondents (ten) stated that citizen participation was a factor or somewhat important with regard to funding decisions. Four respondents indicated that enhancing citizen participation is very important and a high priority issue in whether or not their local government will fund a nonprofit.

Similarly, when asked how important citizen/client satisfaction is in making funding decisions, over half of the respondents (13) commented that satisfaction is very important and a high priority in funding decisions. However, four respondents noted their perceptions that this is a factor but not an important one because of the potential for skewed data. Each cited the possibility that some clients might be unhappy with the rules and/or eligibility process and therefore express dissatisfaction with nonprofit performance when the issue was not with the nonprofit's activities but with the individual's situation.

CONCLUSIONS AND IMPLICATIONS FOR FUTURE RESEARCH

Although twenty-one respondents is a small respondent pool, rich and relevant data were provided for examination. The respondents were diverse with regard to population and budget size with some variation as to geographic region and type of local government. Even so, results are limited somewhat by the size of the dataset and should be interpreted accordingly. That said, these data provide practical assistance in the development of evaluation strategies and tools specifically for local governments when making decisions to fund nonprofit organizations. Respondents' comments suggest an overall interest in evaluation tempered by practical considerations of the resources needed to conduct them. Evaluation for its own sake is not attractive; the benefits of the information gained must outweigh the time and money allocated to obtain it.

These results suggest that local governments are interested in and would be best served by having a variety of assessment tools at their disposal. Reports seem to be the current tool of choice, but perhaps more out of necessity or habit than because they afford the best information. Since enhancing citizen participation and satisfaction are seen as at least somewhat important in whether or not to fund a nonprofit, it would follow that measures of these elements would be important to include in any performance assessment model employed. Site visits were mentioned as means to build relationships with nonprofits, so the incorporation of on-site reviews in evaluation requirements could have multiple benefits of enhancing volunteerism and engagement as well as increasing the level of knowledge local government decision makers have regarding the outcomes of nonprofit programs and services.

Local government officials perceive a clear mission focus and accomplishing stated goals as the single most important aspect of a successful nonprofit organization. The second most important aspect was whether the nonprofit's activities address the needs of their clients and the community. Each of these aspects relates to the achievement of outcomes by the organization which suggests that outcomes measurement should therefore be a high priority for cities and counties as a condition of nonprofit funding. However, since officials also ranked both internal and external evaluation as the least important assessment tools when compared with reports and site visits, gaining approval for this as a condition for funding may be a challenge. Outcomes evaluations, particularly when conducted by external reviewers, require commitment of additional funds (usually by the granting agency) which may further exacerbate the challenge.

It is clear from the comments received that respondents viewed financial efficiency as an important factor, but one which they tend to assume the nonprofits possess instead of something on which they perceive an evaluation should focus. Cost efficiency/fiscal soundness was the third most frequently cited aspect of a successful nonprofit, and this is the aspect that lends itself best to the use of reports as an evaluation tool. However, it also seems that reports alone will not yield the information officials perceive as necessary to determine which of their local nonprofits are successful and warrant funding from their local government.

These findings provide a good starting point for tailoring tools to measure nonprofit performance for use by local governments. The eleven aspects of a successful nonprofit identified by respondents could be used to design (or redesign) applications for funding as well as tailor reporting requirements for nonprofits who receive funding. Those aspects ranked as higher in importance--mission focus and goals, cost efficiency, and leadership and accountability--should require a commensurate level of performance measurement effort. For example, nonprofits should be required to provide more information on goals and mission focus than on demonstrating how the program supplements local government services. Federal and state government agencies routinely provide training to potential grantees; the attributes of successful nonprofits identified here could be utilized as the framework for cities and counties to educate local nonprofits on the application process as well as administration of grants/contracts awarded.

The program evaluation literature indicates that formal evaluations are more likely to yield the type of information respondents indicated is preferred to assess performance. However, these types of evaluations were deemed as least important to local government managers. While respondent comments suggest that cost is most likely the reason formal evaluations are not highly valued, future research to identify the specific barriers to requiring formal evaluations would be beneficial. Additional comments suggest that managers believe variation in evaluation techniques is preferable based on the type of nonprofit program activity involved. While the broader evaluation literature addresses the merits of applying different evaluation techniques to various program activities in general, future research specifically for local governments and nonprofits would be of practical benefit to their distinctive relationships.

It is clear that a one-size-fits-all approach is not appropriate, either in terms of use by all local governments or for a local government to apply to all its nonprofits. Better understanding of what information local government administrators want and why they prefer certain evaluation tools such as reports enables the development of practical performance assessment that takes into account the unique aspects of measuring nonprofit activity as well as the key dimensions of maintaining positive local government nonprofit relationships.

REFERENCES

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Barman, Emily. 2007. What is the Bottom Line for Nonprofit Organizations? A History of Measurement in the British Voluntary Sector. Voluntas. 18:101:115.

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Blackwood, Amy, Kennard T. Wing, and Thomas H. Pollak. The Nonprofit Sector in Brief: Facts and Figures from the Nonprofit Almanac 2008: Public Charities, Giving, and Volunteering. Washington, D.C.: The Urban Institute.

Boris, Elizabeth T. 1998. Myths about the Nonprofit Sector. Charting Civil Society. A Series by the Center on Nonprofits and Philanthropy. The Urban Institute No. 4:1-4.

Bridgeland, John M., Mary McNaught, Bruce Reed, and Marc Dunkelman. 2009. The Quiet Crisis: The Impact of the Economic Downturn on the Nonprofit Sector. A Report by Civic Enterprises and Democratic Leadership Council retrieved November 7, 2009 from http://www.dlc.org/documents/Quiet_Crisis.pdf.

Brooks, Arthur C. 2006. Efficient Nonprofits? The Policy Studies Journal. 34(3):303-312.

Carman, Joanne G. 2007. Evaluation Practice Among Community-Based Organizations: Research Into the Reality. American Journal of Evaluation. 28(1): 60-75.

Coase, Ronald H. 1988. American Philanthropy, 2nd ed. Chicago: University of Chicago Press.

DeVita, Carol. 1997. Viewing Nonprofits Across the States. Charting Civil Society. A Series by the Center on Nonprofits and Philanthropy. The Urban Institute. No. 1: pp. 1-6

--. 1999. Nonprofits and Devolution: What do We Know? In Boris, Elizabeth T. and C. Eugene Steuerle, eds. Nonprofits and Government. Washington, D.C.: The Urban Institute Press.

Dunn, William N. 2008. Public Policy Analysis: An Introduction, Fourth Edition. Upper Saddle River, NJ: Pearson Prentice Hall.

Frumkin, Peter. 2002. On Being Nonprofit: A Conceptual and Policy Primer. Cambridge, MA: Harvard University Press.

Hansmann, Henry B. 1980. The Role of Nonprofit Enterprise. The Yale Law Journal. 89: 835-98.

National Center for Charitable Statistics. 2009. Registered Nonprofit Organizations by Major Purpose or Activity (NTEE Code), 12/1999 and 12/2008. Retrieved March 17, 2009 from http://nccsdataweb.urban.org.

--. 2007. Number of U.S. Nonprofits Registered with IRS, 1996 and 2006. Retrieved April 14, 2009 from http://nccsdataweb. urban. org/PubApps/profile1.php?state=US.

Pavetti, LaDonna, Michelle K. Derr, Jacquelyn Ander4son, Carole Trippe, and Sidnee Paschal. 2001. Changing the Culture of the Welfare Office: The Role of Intermediaries in Linking TANF Recipients with Jobs. Economic Policy Review. 7: 63-76.

Pollak, Thomas H. July 13, 2009. Five Questions for Thomas Pollak. Retrieved November 6, 2009 from http://www.urbaninstitute.org/tollkit/fivequestions/TPollak.cfm.

Rose-Ackerman, Susan. 1986. The Economics of Nonprofit Institutions. New York, NY: Oxford University Press.

Rossi, Peter H., Mark W. Lipsey, and Howard E. Freeman. 2004. Evaluation: A Systematic Approach, Seventh Edition. Thousand Oaks, CA: SAGE Publications.

Salamon, Lester M. 1995. Partners in Public Service. Baltimore: The Johns Hopkins University Press.

Smith, Steven Rathgeb. 2006. Government Financing of Nonprofit Activity. In Boris, Elizabeth T. and C. Eugene Steuerle, eds. Nonprofits and Government: Collaboration and Conflict (Second Edition). Washington, D.C.: The Urban Institute Press.

Smith, Steven Rathgeb, and Michael Lipsky. 1993. Nonprofits for Hire. Cambridge: Harvard University Press.

Young, Dennis R. 1999. Complementary, Supplementary, or Adversarial? A Theoretical and Historical Examination of Nonprofit-Government Relations in the United States. In Boris, Elizabeth T. and C. Eugene Steuerle, eds. Nonprofits and Government. Washington, D.C.: The Urban Institute Press.

SHANNON K. VAUGHAN

Appalachian State University

(1) Special thanks to Toni Shope, IG East Regional Director of the Alliance for Innovation for identifying this issue and for assisting with the dissemination of the survey.

(2) Categories were selected due to their use by the National Center for Charitable Statistics.
Table 1 Local Government Expenditures to Nonprofits by

Population of City/County

                                Population
                                   Less      25,000    More
                                   than        to      than
                                  25,000     99,999   100,000

    Budget         Less than        3          2         0
Expenditures to    $99,999
  Nonprofits
                   $100,000         0          5         1
                      to
                   $649,999

                   $650,000         1          0         3
                      to
                   $999,999

                  $1,000,000        0          3         3
                    or more

  Percent of       Less than        2          3         0
    Budget           0.09%
  Awarded to
  Nonprofits       0.10% to         1          1         4
                     0.24%

                   0.25% to         0          3         3
                     0.99%

                    1.0% or         1          3         0
                     more

    Average        Less than        3          2         0
   Amount of        $9,999
   Award to
  Nonprofits      $10,000 to        0          1         3
                    $29,999

                  $30,000 to        1          3         4
                    $49,999

                  $50,000 or        0          4         0
                     more

                    Pearson's

                        R

    Budget            .52 **
Expenditures to
  Nonprofits      (p [less than
                   or equal to]
                       .01)

  Percent of           -.01
    Budget
  Awarded to
  Nonprofits

    Average            .19
   Amount of
   Award to
  Nonprofits

Table 2 Types of Nonprofits Funded by Local Governments by
Population of City/County

    Type of        Percentage of             Population
  Nonprofits       All Nonprofits
    Funded         that Received    Less than   25,000 to   More than
                       Funds         25,000      99,999      100,000

Arts & Culture       Less than          0           3           4
                       6.0%

                      6.0% to           1           4           2
                       29.9%

                     More than          3           3           1
                       30.0%

   Education         Less than          1           6           3
                       1.0%

                      1.0% to           0           1           3
                       4.99%

                     More than          3           3           1
                       5.0%

  Environment        Less than          2           1           6
                       1.0%

                      1.0% to           0           1           0
                       1.9%

                     More than          2           2           0
                       2.0%

    Health           Less than          3           7           2
                       1.0%

                      1.0% to           0           1           1
                       2.9%

                     More than          1           2           4
                       3.0%

     Human           Less than          3           2           2
   Services            4.0%

                      4.0% to           0           4           3
                      16.99%

                     More than          1           4           2
                       17.0%

     Other           Less than          3           2           3
                       1.0%

                      1.0% to           1           1           4
                      14.99%

                     More than          0           7           0
                       15.0%

    Type of
  Nonprofits      Pearson's
    Funded            R

Arts & Culture     -.49 **

   Education        -.27

  Environment      -.44 *

    Health           34

     Human           .16
   Services

     Other           .01

* p [less than or equal to] .05, ** p [less than or equal to] .01,
*** p  [less than or equal to] .001

Table 3 Local Government Managers' Perceptions of
the Aspects of Nonprofit Success

Aspects                                     Frequency
                                            Mentioned

Clear Mission Focus/Goals                      14

Meets Clients'/Community's Needs               12

Cost Efficient, Fiscally Sound, good
Financial Management                            8

Demonstrates Compliance, Provides               7
Evaluation Reports, Identifies Specific
Measures of Outcomes

Strong Leadership/Board of                      5
Directors/Governance

Ethics, Accountability, has                     3
Moral Compass, is Respected

Seeks Innovative/Proactive Approaches           2

Supplements Local Government Services           2

Works Collaboratively                           1

Provides good Client/Citizen Satisfaction       1

Seeks Help when Needed                          1

Table 4
Local Government Preferences for Performance Assessment Tools

                              Percent      Percent
Performance Assessment       Listing as   Listing as
Tool                            Most        Least
                             Important    Important

Monthly/Quarterly Reports       37.5         14.3
of how Funds were
Expended

Final Report of how Funds       28.6         0.0
were Expended

On-Site Review by Local         19.0         4.8
Government Elected
Officials and/or Staff

Internal Formal Evaluation      4.8          23.8
of Funded Activities by

Staff of Nonprofit              4.8          33.3
External Formal Evaluation

Table 5
Comments on Performance Assessment Tools by Size and Type of
Local Government

               Local
Pop.           Govt.    Comments on Performance Assessment Tools
               Entity

Under 25,000   City     Because our funding levels are so small
                        and are generally targeted at a
                        specific project, a final report is
                        usually sufficient.

               City     With limited funds and staff resources,
                        none of the options are feasible except
                        [reports]

25,000 to      City     Right now, we have some of this in
99,999                  place but ONLY when a decision is being
                        made to fund a program. Once funding is
                        adopted via the budget, no reporting is
                        required. We are going to make some
                        changes though and probably ask
                        nonprofits, some not all, to provide
                        some regular reporting to our office
                        for team review. We do a joint agency
                        process with [the] County which
                        provides some regional consistency as
                        to what agencies are asked to do, etc.

               City     Performance should be measured somehow.
                        However, these questions are harder to
                        judge depending on the size of the
                        community--onetime events in smaller
                        communities are much easier to see
                        impacts in than in larger
                        communities--thus the
                        requirements/requests to measure
                        performance should vary.

               County   [on-site review is a ] good idea. We
                        don't currently do this, but should

Over           City     In a town our size, it is easy to have
100,000                 firsthand knowledge of these
                        organizations.

               City     A final report of how funds were
                        expended and the results of programs
                        provided should be the primary key
                        factor for success and continued
                        funding.

               City     Monthly/quarterly reports have been
                        very useful for the City in measuring
                        agency performance. Site visits are
                        also a good tool for evaluating
                        performance. The purpose of the site
                        visits includes observing facilities,
                        interacting with staff and accessing
                        documentation while building
                        relationships between the City and
                        Nonprofits.

               County   We require audited financial statements
                        from applicants who request more than
                        $10,000, and are in the process of
                        implementing a quarterly audit process
                        for recipients to report on their
                        program's results.

               County   We require peer review for original
                        funding request and follow- up progress
                        reports that are evaluated by our
                        internal program manager.
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