501(c) (3) Chicago

I’m very much afraid of this ‘Foundation Complex.’ We’re getting praise from places that worry me.?—Ella Baker, June 1963

Introduction by Jill Doub

In these tough economic times, grassroots nonprofit organizations suffer from declining funding and the looming possibility that they will have to close their doors and leave missions unfulfilled. The economic crisis presents a valuable opportunity to rethink some of the practices that led nonprofits into dependency on major donors, foundations, and grants from the state, and away from their mission of social change. Many of the problems nonprofits are now facing stem from the fundamental incoherence that is evident when social change organizations adopt funding structures of the very systems they are trying to change.

Today’s nonprofit sector emerged in the 1970s as grassroots community-based organizations that had comprised the radical social movements of the 1960s incorporated into the 501(c) (3) model. With that incorporation came professionalization, which meant capitalist funding structures that focused on obtaining large foundation and government grants. During the Reagan era, with major government cuts in social services, nonprofits began to step in to address gaps left by government and the market and thus, intentionally or unintentionally, became a sort of privatized service sector in which any radical agenda was overshadowed by the profound need for services among the population. Even organizations that did not undertake direct service work began to partake of the large sums of money being offered by foundations for certain types of advocacy work, which was generally less radical than that which the organization initially set out to do.

This trend away from radical social change agendas toward a less politicized focus on individual cases of need is what has led many commentators to posit the existence of a nonprofit industrial complex. Like all industrial complexes, it involves creating and maintaining structures within an industry that perpetuate destructive societal systems on a larger scale. What is unique about the nonprofit industrial complex is that many of the organizations that comprise it claim in their mission statements that they seek to transform or abolish these very systems. Symptoms of the nonprofit industrial complex include mission drift, chasing funding at the expense of meaningful program work, and co-optation by funders. In the current economic crisis, it is perhaps more tempting than ever for nonprofits to follow whatever funding they can get in order to preserve the organization. But this desire for organizational preservation rather than movement preservation is yet another way in which the nonprofit industrial complex is manifest. The effects of the industrial complex phenomenon in the nonprofit world are particularly problematic for radical social justice movements that are run by coalitions of 501 (c) (3) organizations.

To address this tension between movements and nonprofit organizations, the radical feminist organization INCITE! Women of Color Against Violence, organized a historic conference in May 2004 titled The Revolution Will Not Be Funded: Beyond The Non-Profit Industrial Complex. The conference addressed issues related to funding within the radical movement, specifically the role that large foundations were playing in re-structuring grassroots organizations to fit within a corporate model. This series of short interviews with professional fundraisers from grassroots neighborhood organizations involved in community organizing and direct service is intended to shed light on current perspectives on organizing and money in a time of crisis. Geographically diverse organizations were selected from throughout the city to respond to the questions. Respondents reported their own thoughts and experiences as individuals, not as official spokespersons for their organizations.


“Once upon a time, being labeled an affiliate of the state was a nasty indictment in radical movements. Today some of the movement’s best and brightest openly and proudly claim membership in organizations whose link to the state—either through direct public funding or mere tax-reporting—are unambiguous and well-documented. I am speaking of the impressive number of radical-minded grassroots groups that, while continuing to sincerely abide by the ethos of “our movement,” have assumed the form of a Non-Profit (NP) entity.”—Eric Tang


What do you think receiving money from the government does to organizations struggling for a better world? In what ways does it impact our legitimacy? Does it make us stronger? Does it compromise our ability to be radical when necessary?

KC       It most definitely comprises our ability to be radical, because by nature of the way government—be it local, state or federal—it makes grants, it demands a high level of data tracking, program mandates, and reporting procedure, which is really a way to track what’s happening in communities. For the staff paid by a government grant at LSNA, I would guess that over half of the work-load is simply keeping up with these requirements. Call it state surveillance, if you’re highly critical or leveraging in order to get buy-in from legislators and elected officials, if you play the game. Any sort of government-sanctioned grant-funded work could never be radical. “Radical” is reserved for the most flexible sources of income – individual donors, earned revenue, some family foundations and organizer-friendly foundations, but that’s it.

RP       First of all we have to frame what we understand a better world would look like: participatory democracy is the base of societies where community participation and government accountability would be a social axis where we respect the right to the land and human rights and individual liberties, where people have an input in the development of their own cities. If we struggle for that world, it is inconsistent to get funding from the government because it’s the government and their draconian social and economic policies that keep us from the better world. There must be a change in the economic-political paradigm to start to work with the government in a common project of social transformation. Being funded by the government simply ties your hands as an organization that is looking for real change.

FJ       I think it depends on the governmental department and what type of money it is. In some aspects, the government is set up to take care of citizens who cannot take care of themselves. So the question is, do you take money from the Defense Department that provides funds for amputees—civilian and military alike; or is it ok to receive money from HUD [Department of Housing and Urban Development] for homeless families? In the former question, I can see how a human rights organization that works with amputees injured in war and is part of the anti-war may be conflicted or perhaps very clear that they would not accept funding from the very institution that they are in direct conflict with.

The implications of accepting funds from an entity that are in direct conflict with an organization’s mission are far reaching and definitely weaken the legitimacy of the organization and its values. For instance, an organization fighting sweatshop practices could not in good conscience accept any sponsorship or funding support from a corporation that have been implicated in operating sweat shops or engaging in slave labor practices.

As I stated previously, I do not believe that an organization that advocates for a better world should have to worry whether it can take money from the government and hold it accountable at the same time. It is the responsibility of voting citizens to hold the people they elect to office to keep them safe, their basic human needs met, and their human rights protected accountable for the job they were elected to do. I do not see it as an either or, I see it as both.

The young organizer can take a course that covers Cesar Chavez, Dolores Huerta, and the United Farm Workers and learn that all union members, even the lowest paid, contributed regular membership dues. Chavez insisted, “this is the only way the workers will ‘own’ the organization.” —Eric Tang

Do you give this kind of ownership to your community? And if yes, how much of your total funding comes from the community itself? What kind of economic models are best suited for organizations working for radical social or political change?

KC       I do think that organizations that use membership are best-suited to work for radical social or political change. Membership can be interpreted many different ways to fit a community, which is where flexibility and malleability are key. LSNA raises about $7,000 per year from about 40 members, so that’s about $175 on average per member. Some organizations charge according to budget size, which makes sense to me. The challenge is adding individual membership to an institutional member-based organization. We accept donations, but haven’t found the right fit where individuals can become members as well. I think this is critical for many groups trying to rely less on foundation or government funding, but since LSNA works in public schools, higher education, and on health access, this is not a goal of ours. Southerners on New Ground (SONG – based out of Atlanta, GA) is an example of a community organizing, small grassroots organization that is making this a priority and having some success.

RP       We are working on it. We are working on alternatives that diversify our funding, in conjunction with the community and community partners. We do that through: membership, annual fundraising, web site donations, facebook, house parties, cultural nights, movie nights, conferences, curriculum creation, and women co-ops among others. The idea is to create spaces alongside the community to analyze the social political situation, and raise funds to promote change. The fundamental concept is to work as a big family where everyone can offer something to the growth of the organization; that could be money, time to volunteer, materials, art, etc.

The only sustainable economic model that I know of is the cooperative model, where everyone can support the organization. In order to do that you must be able to develop a base of people that believe in your work, who participate and can sustain the organization not just economically but also socially and emotionally. An organization that works under this model is made by the people and is for the people.

FJ       Yes, at the organization I work for, we have a membership base of 1000 families. While our members pay a nominal $5 a year for membership, it is not so much the value of the membership that is important but rather, the buy in to our mission and values. These individuals are able to mobilize when needed to hold our elected officials accountable. So while we get a small rate of monetary return on our membership dues, we are able to get a huge rate of return when it comes to community involvement and engagement, which is crucially necessary when addressing social change and the like. You need people to build a movement.

Likewise, our board of directors is made up of individuals that work and live in the communities we serve. We also allow our largest and core constituency, youth, to sit as equal partners around the table as youth board members with full voting rights.

Organizations working for radical social and political change need to look at different ways that they can sustain themselves. One way is to create a membership base that pays regular dues, secondly it is necessary to develop an individual donor base, and lastly seek grants from foundations committed to social and political change. However do not forget what was stated in question #1’s answer.

The “Non-Profit Industrial Complex” has been compared to a military or prison industrial complex by many activists and employees of non-profit organizations. It suggests that an organizational structure has been created beyond our control and is an industry unto itself. These structures are more concerned with reproducing our jobs and our ‘fields’ rather than creating an accountable, transparent movement. ?—Daniel Tucker

We are curious what you think really works about your organizational structure in terms of serving your goals or your mission, and what you think is contradictory or limiting about how you are organized? (For example you might have more people working on small very specific isolated projects because that is all you could get funded, as opposed to having the majority of staff working in a coordinated fashion around the organizational mission.) Could you imagine your organization recognizing those organizational problems and changing them?

RP       We are a really small grassroots organization. We have the advantage of working in a real horizontal structure, where everyone supports each other. We have developed our campaigns all under the same frame of “reclaiming our neighborhoods, reclaiming our voices.” We try not to isolate projects—our work is to connect the dots (economic, political, social), to educate people and to mobilize them to change the power structure. We do not follow funding. We try to get funding to advance our frame and community work. Our focus is dictated by the community and not by foundations. Maybe the contradiction is that we do not want to grow and become a big CBO organization with a hierarchical structure, yet sometimes, due to the amount of work, we feel that we need more staff and ultimately then you need more money. Luckily we have a small group of committed volunteers and outreach workers who are graduates of our leadership training.

We recognize that we need to train more community members to get them involved in our daily work and to give them ownership of the organization. This action will prevent us from the headache of applying for money for a new position in the organization.

FJ       What really works with our organizational structure is that we are very flexible and fluid and not afraid to make adjustments to our organizational structure when we see that something is not working. We also strive to operate in a lateral structure as much as possible. Sometimes this is hard because we deal with funders, constituents, CBOs, and partners who are more comfortable with a vertical organizational structure. We see all staff as leaders and empower them to take on leadership roles. For instance, when we set up site visits with our funders, typically they want to meet with the executive management of the agency—Executive Director, Development Director, or even a board member but we like for the Program Director and Program Coordinators to be present and to drive the conversation without the ED or DD there. Sometimes funders are a little uncomfortable with this approach. Even with other CBO’s and partners, their EDs want to only talk to our ED or upper management staff but that is not what we necessarily promote; we do not buy into the status quo of the top down approach, which is so prevalent in orgs, agencies, and businesses. We find that approach to be oppressive, limiting, and disempowering.

At my org, we continually critique and modify our organizational structure to strengthen it. Our major goal right now is to ensure that we operate in a coordinated manner where all programs and projects understand where they intersect and how all programs connect to each other. Because we work from a comprehensive, positive, youth development framework, we must ensure that all of our youth constituents are getting the same core services. These services include: educational enhancement and achievement, life skills development, leadership development, arts and culture, and parental involvement.

In your own experience in the nonprofit world, have you encountered any difficulties with certain types of funders or funding structures that might serve as a warning to others in the field about the issues discussed above?

KC       Not specifically, other than loathing how difficult the process is in applying for certain government grants—21st Century, IDHS (teen reach), Community Service Initiative (CPS).

RP       Ohh si!! Some foundations have a really narrow analysis of the socio-political-economic context. It demands time and education to make them see there exists new and different alternatives of organizing for social transformation that transcends the classic Alinsky model. There are other foundations that definitely promote and finance processes such as gentrification and the privatization of public resources, framing it under the disguise of building mixed income communities, affordable housing, school choice, among others. We have to be coherent in our struggle. We have to know where our funding is coming from and what the real intentions of the funders are in this neoliberal society.

FJ       No, funders have clear guidelines for would-be grantees to adhere to. If your programming does not fit squarely within their program areas then as a rule of thumb, you shouldn’t submit a proposal to them. It also helps to send in a letter of intent that outlines your program. This gives the funder the opportunity to tell an org whether or not their program is one that the funder could fund. If so, they will invite you to submit a full proposal. ◊

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