Nonprofits in the United States have a history that dates back to the colonial times. The development of the nonprofit organizations we have today, particularly nonprofit boards, was interestingly described in Peter Dobkin Hall’s book, A History of Nonprofit Boards in the United States (2003 - BoardSource). Two main views were in contention during these early years as to who had oversight or authority over nonprofits. The English Common Law view emphasized that nonprofits helped private citizens, and therefore were held accountable by those citizens with little to no government oversight or authority. The Jeffersonian view held that the public interest was conveyed by the government, and government should have oversight and regulatory authority over nonprofits. The idea of governing boards, whether nonprofit or corporate, that did not have to be accountable to the general public was too close to the norms from the English environment for Jefferson. The Jeffersonians thought the only way to ensure citizens’ rights were protected, was to have an elected government be involved in all aspects of governance. Therefore, all nonprofits would be agents of the government.
Eventually, the Common Law view point began to seize control of how nonprofits were governed and operated in the United States, basically without government intervention. Nonprofits were responsible to the communities they served. Government interference in nonprofit activities was limited at best. However, the sentiment began to change during the 1950’s and certainly increased in the 1980’s with the rapid expansion of nonprofits in that decade. I hypothesize this is in no small part to the civil rights movement. Government became the purveyor of equality. Laws and regulations were increasingly passed to ensure that all citizens received equitable treatment. The commerce clause in the Constitution was widely used as a tool to enforce this equality even on private organizations. The U.S Government used the clause to assert that discrimination of any kind impeded inter-state commerce, and was not allowable. This new enforcement was a way for government to influence or downright dictate to corporate and nonprofit organizations how they would operate. In a roundabout way, Jeffersonian ideals were making a comeback. In the 1980’s, States increasingly began to assert authority over the activities of nonprofits. In Pennsylvania, for example, a “charitableness test” was set up to allow local authorities to review the activities of a nonprofit and ensure they were in the public’s best interests (p. 13). Thus, government was now responsible for the public benefit. Though, not entirely staking control over nonprofits, governments definitely had influence over the activities they performed.
Nonprofits are also increasingly reliant on federal and state funding to fund their programs. We all know that whoever controls the purse strings has the power to control the organization. Many governments place restrictions on how funds can be spent and place oversight and monitoring compliance requirements in order to be able to receive funding. Nonprofits usually must provide for oversight and compliance reporting back to the government based on how those funds are spent. The restrictions placed on these funds may not directly dictate how a nonprofit board must operate; however, they do influence the decisions, policies, and processes that a nonprofit board must make in order to continue receiving government funding.
The Jeffersonian viewpoint has taken hold in today’s environment without much fanfare. To be certain, the increased government oversight does not fully encompass the Jeffersonian views. Nonprofits are not agents of the government. The government does not exercise full control as would be espoused by Jefferson. However, nonprofits are increasingly becoming proxies of the government as they become more reliant on those funding streams. The government’s role as protector and equalizer definitely has a Jeffersonian feel, and appears to be here to stay.