The Determinants and Dynamics of Nonprofit Organizations' Income Portfolios

Nonprofit organizations rely on a variety of income sources including fee, charitable, and government revenue and returns on investments, and widely varying combinations of these sources. Benefits theory posits that nonprofit... [ view full abstract ]

Nonprofit organizations rely on a variety of income sources including fee, charitable, and government revenue and returns on investments, and widely varying combinations of these
sources. Benefits theory posits that nonprofit organizations’ income portfolios are fundamentally influenced by their missions, and since missions tend to change slowly over time, income portfolios should also be relatively stable (Young, 2007). In this paper, we investigate that stability and the factors that influence temporal fluctuations in nonprofit income portfolios. We analyze a sample of 151 arts and social service nonprofit organizations based on IRS Form 990 financial information from 2002 to 2010. We define income stability in two ways: changes to a nonprofit’s primary source of revenue, and changes in the number of different revenue sources in its income portfolio. Using logistic regression models, we find that charitable contributions have the greatest stabilizing role on income portfolio composition while investment income has the least. Organizations with more concentrated income portfolios are less likely to experience changes in the number of their revenue sources; however, greater inequality among revenue sources while negatively related to the probability of primary revenue source changes, is positively related to changes in the number of revenue sources.