Does Government Punish Nonprofits for High Administrative Costs in Contracting Decisions?

• Autores: Jianzhi Zhao, Jiahuan Lu
• Localización: The American review of public administration, ISSN 0275-0740, Vol. 50, Nº. 3, 2020, págs. 286-296
• Idioma: inglés
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• Resumen

  • As government financing of nonprofit organizations to deliver services and implement policies has become a common practice in the public administration landscape, the question of what factors affect government’s source selection has emerged as a significant one. Within this strand of research, how nonprofits’ administrative costs affect their receipt of government contracts is still not fully understood. This article explores that relationship using a large panel data set of U.S.-based international development nonprofits from 1967 to 2014. Different model specifications consistently demonstrate an inverted U-shaped relationship between a nonprofit’s level of administrative costs and its amount of government contracts. In particular, as a nonprofit’s level of administrative costs increases, its amount of government contracts will initially increase, but after its level of administrative costs reaches approximately 16% to 18% of total expenses, further increases in the nonprofit’s level of administrative costs will reduce its amount of government contracts. These findings have implications for both public and nonprofit management.