I’d like to address the question “What does it really mean to be a “non-profit” and specifically to discuss successful non-profits that raise a lot of money and whose expenditures are significantly lower than their revenues.

In the brochure “What You Should Know About Nonprofits?” (on pp. 12-13), we read that it is not only acceptable, but often desirable, for non-profits to make a profit annually.  Such a practice is justified on the basis of enhancing a non-profit’s reserve fund in case there is a drop in crucial donor or government support; alternately, a non-profit may be in the process of expansion that requires additional funding for expanding services and programs to a wider audience. But a ‘profitable’ non-profit may still be a controversial fact that raises doubts in the minds of potential donors.

I was definitely struck by Professor Babbage’s statement that many non-profits make a lot of money and have huge assets. For instance, let’s look at The Metropolitan Museum. The most recent available Annual Report, shows, using the audited financial figures for the year ended June 30, 2015, that its total operating expenses were nearly $369 million, its total operating revenues were $371 million, and its total assets were over $4 billion.  The roughly $2 million profit that the Met made during the 2015 fiscal year is placed into context when you look at the following year — the year ended June 30, 2016 — when operating expenses exceeded operating revenue by about $19 million, and total assets dropped to about $3.8 billion.  The modest profit in the 2015 fiscal year was more-than offset by a large loss in the 2016 fiscal year.  The key point that makes the Met a non-profit is that the “profit” after 2015 was not distributed to the Board of Directors of key employees, but was contributed to the endowment to ensure the Met’s long-term financial stability and independence.

Non-profit organizations are living organisms and depend heavily on human resources, so it is crucial that that there is enough funding to pay salaries and to avoid the situation when there is not enough room in the budget and there are discussions about whether to cut salaries or benefits, eliminate positions. or reduce other program expenses.