Charities vs nonprofits. Please explain.

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Inspired by a Citizen Heather Jones’ question and the furore over Dr Stephen Judd’s recent comments over the term “charity” and the results of the Australian Charity Perceptions 2012 report we thought we’d try explaining the difference between “charity” and “nonprofit”.

We think it may be worth the sector being more disciplined about its use of the two phrases.

what is a nonprofit?

Charity ain't what it used to be.

Charity: is pretty straightforward. A charity is an organisation that raises funds for a cause. It may raise the funds for itself (RSPCA) or hand the funds over to other organisations or individuals (think R.E Ross Trust). You already knew that. Generally speaking, charities are about funding a service, research or providing material aid.

All charities are nonprofits in the sense that there are no owners or shareholders or investors who pocket the profits once the bills are paid. Any profits are re-invested into the charity. Most charities will have tax deductible status (DGR).

Nonprofit: is more nuanced and many folk just don’t get it. While all charities are nonprofits, not all nonprofits are charities.

Like charities, nonprofits have no owners, shareholders or investors to pocket the profits once the bills are paid. Like charities, profits are re-invested.

However a nonprofit may not bother raising any money or have very little emphasis on fundraising. Many nonprofits do not have DGR. There are many types of nonprofits, none of which are charities in the traditional sense.

Professional associations such as the Australian Medical Association, Law Institute of NSW and Real Estate Institute of Victoria represent the interests of a profession.

Peak bodies such as the South Australian Council of Social Services (and ACOSS, NCOSS, QCOSS etc) are nonprofits. So too is the Self Storage Association of Australasia – we know this because Hootville represented them briefly. Every industry or profession has a non-profit acting on its behalf, some are hand-wringing lefties, others rabid economic rationalists.

Don’t forget unions. Oh – have we mentioned most environmental organisations, schools, universities, arts organisations, et al? Plus think tanks and community childcare operations. The list goes on. NDIS campaign? That’s a nonprofit.

Most nonprofits are not charities. That’s why lumping them all together under the title “charity” is clumsy and misleading. Charities do great work but so do many nonprofits.

“Nonprofit” is a far more widely understood and used term in the US where working for a nonprofit” has become a cliche. Especially for white people, we’re informed. The term is yet to achieve that status here but adopting the more modern and broader “nonprofit” may hold more allure to the kids these days.






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