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Opinion: Nonprofits Are Part of Economic Vitality, Too

By Susan N. Dreyfus - February 5, 2014

President Barack Obama couldn’t have been more right when, in his recent State of the Union speech, he said that economies turn around on the strength of small businesses. He has also hit the nail on the head when he has mentioned that those businesses’ abilities to thrive, innovate, and succeed depend upon the regulatory environment.

That’s why I hope that President Obama, members of Congress, members of state legislatures, and governors will recognize fully that the organizations within the nonprofit social-serving sector are also businesses. We too are creating jobs. We too are part of the economic vitality of our communities. We too are powering America’s economic engine. And we too can be held back by burdensome regulation.

According to a 2012 report from the Johns Hopkins Nonprofit Economic Data Project, 13 percent, or 1,391,000, of all jobs in the nonprofit sector are in the nonprofit social serves field. In addition, the Urban Institute’s 2012 Nonprofit Sector in Brief report found that combined revenue among all social services organizations is $196 billion. The Cleveland-based nonprofit social-services organization Wingspan employs 1,688 people and determined through a recent return on investment study that it generates more than $128.5 million of total economic activity through its service areas every year.

With that in mind, when government bodies review the regulatory environment for businesses and consider what it takes for them to create jobs and support their communities, I call on them to make sure the review does not leave the nonprofit social-serving sector out in the cold.

The regulatory environment in which these community-based nonprofits serve is of great importance. Oftentimes at the federal, state, and local levels, regulations in our sector can be cumbersome, outdated, duplicative, and costly. The multiple audits that agencies in this sector must go through, and the unfair administrative overhead percentages under which they are asked to deliver life-altering services, are simply unreasonable.

A measure of relief was provided by the Obama administration and the Office of Management and Budget through a recent update to the Uniform Administrative Requirements. That’s the federal government’s policies and procedures on contracting with charitable organizations, which require reasonable administrative and overhead rates in those contracts. This process reviews and does away with the outdated, redundant, duplicative processes and regulatory rules in those contracts, so that this sector can do what businesses also want to do: operate in an environment that helps them to thrive, innovate, and succeed.

The public must think of our sector not just as charitable organizations contracting with others for the delivery of programs and services. Rather, these organizations should be viewed as the job creators they are. This makes it clear that nonprofits are also a part of making the American economy strong. Of course, our job creation is just the beginning: consider the far-reaching, multi-generational ripple effect on the economy as our organizations pursue their missions of helping children start school ready to learn, building the abilities of children and families to live safe and healthy lives, and attacking issues of inequity so that all Americans can find opportunity.

So, in response to President Obama calling for a better environment for businesses to create jobs, let me assure him and others: the nonprofit social-serving sector is vibrant, strong, and ready. Even though the great recession has created a lot of stress for us, it’s important for America to recognize the fact that we are job creators, we are economic contributors, and we are an integral part of a vibrant America.

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