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Abstract
Over the past several decades, earned income from commercial sources such as service fees, investment earnings, and product sales, has surged in human service nonprofit organizations in the U.S. Although a few researchers have examined commercial activity among nonprofit human service organizations, these previous studies have been mostly descriptive and produced mixed results regarding the influencing factors and consequences of this commercial activity. Very little is known about how human service nonprofits utilized commercial revenues in the 2000s, including during the period of the Great Recession from 2007 to 2009. Therefore, this study aims to examine 1) how the commercial activities of human service nonprofits changed during the period from 2000 to 2012; 2) whether a decrease in government grants and private donations was associated with an increase in human service nonprofit organizations commercial activities; and 3) how an increase in nonprofit human service organizations commercial activities was associated with a change in organizations financial health. This study used nonprofit financial data obtained from the Internal Revenue Services (IRS) Statistics of Income (SOI) database compiled by the National Center for Charitable Statistics (NCCS). The sample used for this study included 501(c)(3) public charities in the human service sector that filed Form 990 in all the years between 2000 2012 (n = 1,471). For the analyses, latent growth curve analyses and latent class growth analyses were performed by using the statistics software Mplus. The results found that 1) the commercial revenue increased among nonprofit human service organizations during the period from 2000 to 2012 except for the period of the Great Recession; 2) a decrease in government grant ratio and donation ratio was associated with an increase in commercial activity ratio; and 3) an increase in commercial activity ratio was generally associated with a decrease in financial health. These results contribute to understanding the unique characteristics of commercial activities among nonprofit human service organizations and broadening the existing body of knowledge on the influencing factors and financial consequences of commercial activity. Recommended directions for future research include examining smaller and younger human service organizations by using diverse measures of financial health.