Government Grants, Donors, and Nonprofit Performance

Abstract

Nonprofits engaged in public service provision can receive funding from both donors and governments. Much of the nonprofit performance theory suggests that donors are unlikely to base donation decisions on nonprofit production. However, governments may prioritize performance in nonprofit funding decisions. We combine study internal production reports for the years 2010-2016 from 535 Habitat for Humanity Affiliates with financial data from IRS Form 990 reports and housing price data from the FHA. We then use a dynamic panel design to compare the effects of performance on donor and government funding. Production does not increase donations, but a 1% increase in production increases government grant revenue by 0.28%. Our findings indicate that nonprofit performance theory should move beyond the donor-nonprofit dyad and explicitly explore the role of government principals. Our findings also suggest that while requirements that accompany government funding might be cumbersome for nonprofits, government entities might use the data in future grant decisions.