Nonprofit Earned Income: “Capitalism with a Human Face”?

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September 4, 2011; Source: Washington Post Capital Business | The Red Wiggler Foundation in Montgomery County, Maryland operates an organic farm that provides gainful employment for adults with developmental disabilities. According to its IRS 990 form, Red Wiggler’s contribution and grant income dropped by more than half in 2010. But that same year, its program service revenue—money it raised at least in part by selling the produce from the farm—rose 41 percent.

This sort of revenue was the subject of a recent conference called “Exploring Earned Income—Diversifying Funding Streams” sponsored by Booz Allen Hamilton, a management consulting firm. Joining Woody Woodruff from the Red Wiggler Farm as a speaker at the conference was Manny Hidalgo, executive director of the Latino Economic Development Corp. Hidalgo’s group is a nonprofit that provides educational and financial resources to low- and moderate-income Latinos in the metropolitan D.C. region. In April, according to Capital Business, it sold its financial-services center to a credit union in El Salvador for $30,000 while keeping an interest worth $10,000. Hidalgo said, “I like to think of us as pursuing capitalism with a human face.”

Earning at least a portion of budget via fee-based activities is a long-standing practice at many nonprofits—think symphony, museum, sheltered workshop, university etc.—yet some folks act like it has just been introduced. Jeanne Bell, in her Spring 2011 NPQ article on pivoting nonprofit boards to a “sustainability orientation,” urges nonprofits to adopt a conscious and comprehensive approach to creating business models, indicating that at least in smaller organizations, a shift to a thinking in terms of “profitability” might prove useful. On the other hand, a certain vague over-enthusiasm regarding “social entrepreneurship” was what led Frederik O. Andersson to call the term a “fetish” in the Summer 2011 issue of NPQ.

What do you think? Is there anything new here? Are we at least learning something new through the increased focus on business models, or is all this talk of social entrepreneurship and the like just so much philanthrobabble?—Chris Hartman