State law regulates not for profit organizations, or nonprofit organizations. States apply the provisions in legislations such as the Revised Model Non-Profit Corporation Act (1986) and Uniform Unincorporated Non-Profit Association Act to facilitate the regulations of NPOs. Numbers from the Bureau of Labor Statistics reveal that as of 2007 there were at least 1.64 million nonprofits in America. These organizations contributed to 8.7 million jobs, equating to 5.9 percent of the U.S. workforce. There are certain matters associated with nonprofits.


Nonprofits provide services without expecting profit. To facilitate this, they need to find sources to provide operational funds. Sponsorships and grants provide the main financial base for these organizations. The donations create a pressing obligation on the NPOs to ensure they fulfill the purpose of the funding; this obligation may present a challenging situation to the organization in the event that the funds required to deliver the services are not sufficient to fully satisfy their objectives. Failure to achieve objectives may cast a negative image on the organization and ward off prospective donors.

Selection of Charities

The American Institute of Philanthropy is renowned for the rating of charities. Since NPOs rely on donor funding, their performance under CharityWatch — the rating guide for AIP — is vital information for potential sponsors. AIP advocates for accountability in nonprofits in relation to the spending of funds accumulated from fundraising. A suggested formula is the ratio of expenses incurred in fundraising and operating costs to the related contributions. This gives the sponsor data on the money spent on expenses and the funds left to achieve the nonprofit's objectives. AIP advises that a credible NPO should spend at least 60 percent of the funds on its objectives.


The public and private sector scrutinize the management of nonprofits. The nonprofit sector witnessed considerable interest in the 1980s. An emerging issue was the need for accountability in relation to financial management in NPOs particularly, in the absence of proper strategic planning in some organizations. The growth of the nonprofit sector, witnessed especially in United States and Europe, prompted NPOs to rectify this situation and polish their management issues. Many organizations applied the copy-cat principle, whereby they looked to profit-making organizations for direction on management, and adopted their management and administration policies.

The laws made by the different states regulate licensing and permit procedures for nonprofits. Some states such as Massachusetts exempt NPOs from liability in relation to tort cases. Under federal law, NPOs enjoy tax exemption if the objectives of the organization relate entirely to charity, science, education, prevention of cruelty to people and animals, public safety and sports — both nationally and internationally. Federal law also gives NPOs an option not to pay social security tax.