US non profit sector

An email from my friend Navneet Chugh put things about the non-profit sector in the US in sharp focus. I had not paid attention to its impact on the economy and society in any kind of detailed fashion. Here is Navneet's email:

A client asked for some info on USA ngo sector, and I sent this email to them, and I thought you all will enjoy it as well….

Dear x 

The economist calls the United States, a NGO with nuclear bombs. The amount of money the US & State governments spend on helping people, it is just mindboggling. One out of two people in the United States get some money from the federal government. And, then within this U.S. – a big NGO – there is a super-secret weapon – 1.5 million small deadly missiles. 

1. There are 1.5 million charities/non-profits in the US.
2. These charities are actually the secret of United States as much as capitalism or democracy or Fortune 500 are.
3. One out of 10 people in the United States work for a nonprofit. It may seem shocking at first, but most of the hospitals and colleges are nonprofit organizations. The nonprofit sector is the third largest employer in the U.S. Many nonprofit employers like - Goodwill, State Univ of NY, Calif Community College system employ over 100,000 employees.
4. In every city of relevance, five out of ten largest employers in the city are nonprofits. In Boston for eg, 20 of the top 25 employers in the city are nonprofits.
5. Last year Americans donated $450 billion to the 1.5 million charities. 70% came from individuals, 5% from corporates, 15% from foundations and 10% from bequests.
6. These 1.5 million charities then charged fees to patients or students, etc and the revenue they generated is $700 billion last year. A big chunk of this revenue comes from these charities getting grants from the US government and also from charging the US government for providing health care to seniors and poor.
7. So collectively the GDP of the 1.5 million charities is $1.15 trillion. Just this nonprofit sector GDP of $1.15 T is more than the national GDP of 185 of the 200 countries in the planet.
8. Just look at the revenue of the top six charities in the USA: YMCA $7.7 billion; Goodwill $6.1 billion; Catholic Charities $4.4 billion; Salvation Army $3.8 billion; United Way $3.7 billion; Red Cross $3.6 billion. Almost $30 billion in revenue of the top six. Just as a note, the revenue of the 3.6 million nonprofits in India is less than $5 billion.
9. Here is a list of the top 100 charities in the US if you want to see NPT Top 100 (2019): An In-Depth Study of America’s Largest Nonprofits - The NonProfit Times
10. The third largest charity in US, Catholic Charities, proudly claims on their website, “Next to the federal government, Catholic Charities is the largest US social-safety-net provider.”
11. These USA charities are actually doing as much work as the federal and state governments do in the country. Art, music, hospitals, junior colleges, universities, all religious activities, disaster, emergency aid, food for the poor, all in the hands of nonprofits. In most of the other countries in the planet, the government has to do most of this work which the nonprofit ecosystem in the US is doing.
12. No better ecosystem than this: One person's money is given to a nonprofit; the government gives a tax deduction to the donor; the nonprofit hires employees to render services; the nonprofit employee gets a job; and a random stranger - a fifth person receives the benefit. All this without government intervention, government bureaucracy, government waste, politics, corruption, and favoritism. People helping people thereby increasing the culture of giving, helping, taking care of each other, taking care of our community, taking care of our country, patriotism, and inculcating a sense of self sufficiency, self-reliance, and self-governance while creating self-realization in every single person involved in the process.
13. All this has created a culture of giving time in addition to money. Three out of four Americans give dollars to charity. One out of four people give time to a nonprofit. Average time per volunteer was 137 hours per year. Value of this volunteer time was $200 billion.
14. The $450 billion given to charity last year was spent on: religion 30%; education 14%; helping the needy 12%; healthcare 10%; international giving 6%; art and culture 5%.
15. The 1.5 million charities collectively raise $1.2 billion every day of the year, to get to the $450 billion in giving for the year.
16. To raise this kind of money, everything under the sun is done. The various governments are approached; foundations are chased; HNIs are hounded; corporations are rushed; email and letter campaigns are launched; every ounce of social media is utilized; endless events of all types are held – from cookie sales, to walks, runs, lecture series, entertainment events, small get togethers to big galas. Almost every kid in high school is involved in some charity fundraising and every adult at work is approached in some way shape or form. On weekends, the religious institutions don’t leave you alone.
17. 200,000 people in the country have a job that entails fundraising for a nonprofit. Average salary of these 200,000 fundraising people $57,036. Harvard employs 500 people in their fundraising department.
18. Harvard deserves another line, the epidemy of what a nonprofit missile can do to a country. Founded in 1636, as Newton College, name changed to Harvard when John Harvard donated $1,285 and died soon thereafter. Today Harvard has $40 billion in their savings account. One third of their annual expenses come from the earnings on this endowment. 21,000 students, 31,000 employees, a million plus graduates, eight presidents, and four percent of the Fortune 500’s 10,000 CXOs. 70% of the students get financial aid from the university and don’t pay full tuition. Shockingly, the story has just begun since Harvard is now raking in over $1 billion in new donations every year.
19. General feeling is that these nonprofits are some idle outfit sitting in the corner. Often forgotten is that these Non-profit organizations, like any other business, consume third-party goods and services in their operations. They require computers, internet and phone services, building materials, and utilities in order to run. This generates revenue for the companies that make these goods and services, thereby providing added economic stimulation. By providing employees with a source of income, non-profits, just as for-profits, indirectly stimulate endless other facets of the economy. When people have money, they spend it. They pay mortgages, utility companies and car payments. Discretionary income goes to restaurants, theaters and other luxuries and entertainments.
20. In summary, the nonprofit sector of the US is a parallel government at work quietly. So there is a lot of noise about everything about the US, but very little noise about the secret weapon of United States – the non-profit sector.

Be Well,

Navneet S. Chugh

Attorney, C.P.A.

Chugh, LLP