For-Profit Organizations Essay

Nonprofit/For-Profit Organizations Essay Nonprofit vs. For-Profit Organizations Essay Nonprofit vs. For-Profit Organizations Essay Comparing Differences in Operation of Profit and not for Profit Organizations In business, it is important to compare the differences between not for profit and profit making organizations. They operate under different systems of management. These organizations are under different management types because their purposes are not the same. Different management strategies are used to deals with different organizations. They operate under different cultures and it is important to know precisely how they affect the community. These organizations serve different levels of stakeholders and it is vital to compare the differences between nonprofit and profit making organizations. This comparison is vital for the government and other related institutions. Investors ought to know the differences between these organizations so that they know where to place their investments. At the initial stages of forming a business it is important to know if it is for the financial benefit of an owner. Profit making organizations are always guided by profits. Nonprofit organizations ex ist to provide better services to citizens. They exist to perform the intended services. Most hospitals must make profits so they can survive economically. A profit-making hospital is a business venture that is run mostly by private individuals. This may not be the case for all situations. They can also be owned publicly by shareholders, who buy the hospital shares. It means that if the public buys shares of the hospital then they are the owners of the hospital. The public expects the hospital to make profits so that they can expand their investments. The main objective of profit making hospitals is always to yield profits that will ensure their survival. There are formed for the sole purpose of generating profits. Profit is normally the main objective and the hospitals pay taxes based on these. Not for profit hospitals are formed to provide healthcare. According to new financial standards, it is now preferred to call organizations not for profit rather nonprofit organizations. This is because the organizations will make profits either way although their main aim is not to yield profits but provide better healthcare. There are formed to provide outreach programs to the community and create networks with other facilities to provide better health care services. It is important to compare the operation and quality of services provided by various hospitals. It will help in better decision making and planning. Capitalism is a major factor in the economy of the United States, where commercial firms have market dominance. However, the situation is much different in the healthcare sector, because nonprofit making firms have a large market share. In addition, healthcare is the biggest nonprofit industry, forming 60 percent of the revenue from nonprofit sector and over 25 percent of contributions from private charity. Healthcare has consistently represented a bigger portion of the sector and expenditures on healthcare continue to be on an upward trend in the United States. From 1965 to 1996 the healthcare expenses increased from $230.3 (in billions of 1996 dollars) to $1,035, which is 349 percent rise, which is almost twice that of GDP of the nation (Barocci, 2001). Hospitals are the biggest component of the healthcare sector, accounting for 35 percent of $1.035 trillion (1996 dollars) in healthcare expenditure, or about $362.3 billion, rendering hospitals considerably important for the nonprofit sector. There can be three types of hospitals ownership: (1) Nonprofit, which constitutes a half of all hospitals (2) Government, which forms 31 percent of all hospitals and (3) For-profit, which only forms 19 percent of all hospitals. (2006 spending basis) Advocates of not-for-profit organizations believe that the non-distribution limiting factors allow the objectives of such organizations to focus on community service, with not utilized revenues being invested into the community; the result is more benefits to the society caused by the increase in care rates not compensated, and educational programs designed for the community. Also, the aspect behind not-for-profit organizations is the emphasis on output maximization while it should be on profit maximization. Therefore, tax exemptions are offered to not-for-profit organizations. If there has been significant influence of nonprofit organizations on the healthcare sector, then the matter at hand would be questioning why the transformation of hospitals into for-profit from nonprofit status are criticized. As examined by Thorpe, Seiber, and Florence (2000), the degree of uncompensated care decreases when transforming a nonprofit organization into a for-profit one. Advocates like Young and Desai (1999) make suggestions that â€Å"transformation of a nonprofit organization does not averagely reduce the benefit to the community as compared to services that are not profit oriented†. The definition of community benefit is â€Å"any service or program made for the improvement of health in communities and increased accessibility to health care†. Three different factors are examined when comparing a for-profit firm with a nonprofit firm. First, non-profit organizations must raise initial capital from investors because the powers to borrow capital have not been vested in them, as they have to repay from future profits made. Secondly, as a result of non-distribution, a limiting factor, nonprofit organizations cannot propose and pay dividends from either interim or whole year profits the company may make; rather investing the funds back into the company is recommended. Lastly, where a nonprofit firm is sold, the funds raised cannot be used to pay owners. These three major factors essentially affect the overall performance of nonprofits hospitals. The objectives of the companies are affected by the differences in organizational structures. There is a significant difference in the missions of for-profits and not-for-profits organizations. As a result of the non-distribution limiting factor, there is a primary similarity of all not-for-profit missions concerning the output maximization idea, an attempt by a firm to maximize the level of services provided to the community. For-profit companies are formed on the basis of profit maximization. Upon first examination, it is expected that not-for-profit organizations should be of the most benefit to the community, at a lower cost; however, the research has both credited and discredited this conjecture. The argument that not-for-profit structures add benefit the community is one of the important reasons why they are granted tax exemptions. Since exempted taxes provided to not-for-profit organizations reduce a significant amount of their expenditures, they should be at a position to provide more benefits to the community. Ultimately the services offered by hospitals can result to three types of benefits to the community: uncompensated care, unprofitable services and net prices. In brief, a definition to uncompensated care is â€Å"any care out of charity given to persons who are less privileged to cater for the bills of the service†. There is a consideration of net prices that when prices of services are lower, the services become more affordable. The unprofitable services comprise of the programs developed to raise awareness of various issues and to broaden community knowledge. Together, all three factors assist in the creation of community benefits. In order to compare a profit making clinic with a not for profit hospital, a research done in New York; it indicated that the clinic’s ownership was held by physicians who were interested in the company’ well-being. The results show that the clinic used a strategy of costs reduction effectively using its supplies; as a result, the expenditures of the clinic were 35% lower than those of the nonprofit hospital. The latter was bigger in size, had many resources and had problems giving back to the community. Consequently, board members and hospital managers disagreed due to the allocation of funds and what programs should be commenced; this led to minimal or no community benefit production. This resulted to inefficiency of the management structure and final decisions prevented the hospital’s mission from being followed. For-profit organizations have a fundamental obligation in ensuring the shareholders’ wealth is maximized. â€Å"Transformation of hospitals had a negative impact on provision of charity care. Studies intimate that not-for-profit organizations do not prevail in health care due to the occurrence of market failures when for-profit organizations control the market of hospital services. The market fails because of three factors: first, the private market functions when participants of the market have perfect knowledge.† There is a complexity of healthcare and it is difficult to determine the services needed, so the consumers usually do not have perfect information. Secondly, allocation of resources is based on the most profitable expenditures. Persons unable to afford the service do not get appropriate care. Thirdly, positive externalities make a contribution to market failure. There is a poor allocation of resources where externalities exist. The demand for healthcare is hi gh and most people do not access it because of high medical costs. Poor people rely on subsidized government healthcare. Medicaid is a government program that targets low income earners. Both governments allocated $213 billion (2002 dollars) to fund this program. Baker and Royalty (2000) showed that a 10% increase in fees for services provided by Medicaid, increase the number of physician office visits by the poor by 2.4%. Not-for-profit hospitals are very few in New York. There are 8 for-profit hospitals in the metropolitan area of New York City. Only one of the hospitals is not for profit. The hospital is owned by groups of partners who have been certified by the state to be competent enough to provide healthcare to people in New York. The state screens and identifies the potentials individuals who want to run a profit making hospitals. It is a sensitive matter and the state normally controls the actions they take. Profit making hospitals always have better access to capital for expansion than the not for profit hospitals. Not-for-profit hospitals use their profits for the purpose of improving the hospital activities. The profits are used to run daily operations of the hospital. These hospitals are formed to accomplish a certain task. The profits raised by these hospitals must be circulated back to the operations of the hospital. These will enable the hospital to finance its operations leading to the hospital fulfilling its mission. In Mount Sinai hospital, which is a not for profit hospital, the profits are used to pay administrative expenses. The employees are paid using the profits made by the hospital in the course of providing better health care. The generated profits of the hospitals are accumulated and are used to improve the efficiency of services provided by the hospital. Lenox Hill Hospital in New York retains the profits it makes to address the administrative needs of the hospital. L enox Hill Hospital has a 67% approval rating by the patients. It is an indication that the patients approve the hospital`s function. Profits made by profit-making hospitals are for the owners of the hospitals. Profit making hospitals have access to more finances than not for profit organizations. The profits are distributed among the owners of the company. The owners may be the shareholders who are allowed to realize financial gains if the hospital becomes successful. Tax Exemption Profit making hospitals are not granted the federal state tax exemptions. They are required to pay taxes on the property owned by the organization. The hospital is entitled to pay some amount depending on the rates provided by the tax authorities. The donations made by the hospital are tax deductible depending on the recipient. Raising Capital Not for profit hospitals raise capital through the solicitation of funds. The not for profit hospitals are funded by the government mostly and they may be used to fund the operations of the hospital. Capital in these hospitals is used to fund the internal operations of the hospital. These hospitals find it easier to borrow money from the public, investors and the government. This is because they are seen to be helping the humanity in comparison with the profit making hospitals that raise capital by offering a certain percentage of the hospital shares to the investors. The investors are supposed to become partial owners of the hospital. They are given shares and in exchange for funds provided to the hospitals. The hospital management then must look for ideas that will enable them to maintain solvency. The ideas are incorporated into the normal activities of the business. The profit making hospitals rarely make money soliciting the government and other investors for money. Resourcing Profit-making hospitals have more asset freedom to use assets than the not for profit ones. Profit making hospitals like Bellevue Hospital Center in New York have assets that belong to the hospital. These assets legally belong to the owners of the hospital while the assets of not for profit making hospitals like Long Island Jewish Medical Center belong to the hospital itself. Investors are less likely to invest in not for profit hospitals because their assets are restricted to the hospital itself. In case a not for profit making hospital is dissolved the assets of the hospital are donated to another not for profit organization. In cases a profit making hospital is dissolved the assets are distributed among the owners. The profit-making hospitals normally find it hard to retain and attract skillful individuals to work in their organization. The profit-making organizations have few resources at their disposal. They also don’t have the capabilities of providing high salaries and bonuses to employees. The not for profit hospitals offer good salaries that enable them attract the best doctors to work for them. It has been witnessed that New York Presbyterian Hospital in New York offers high salaries to their medical staff. This has led to a high approval rating by patients who prefer to be treated there. As a result, the hospital is able to attract highly skilled doctors, who are motivated by high salaries provided to them. Differences in Provision of Quality Services in not for Profit and Profit Making Hospitals There is difference in the quality of services in not for profit and profit making hospitals that are based in New York City. The profit-making hospitals offer relatively profitable medical services to their patients. The not for profit hospitals offer services that are non-profitable. Not-for-profit hospitals accept when it comes to treatment of individuals. This act comes regardless of a patient’s ability to pay for the medical services provided to him/her. This makes the not for profit hospitals exempted from paying tax. St Francis Hospital in New York accepts patients regardless of their financial background. They believe in providing better health care for each and every individual. It provides the needed service that individuals require at crucial times. The profit-making hospitals in New York provide their medical services at a fee. They don’t accept just anyone to be treated at their hospitals. The individuals to be treated should have insurance or any other means of payment in order to receive treatment at the hospital. It indicates that not for profit hospitals provide quality services when dealing with a large number of individuals due to the capability of handling them. Both not-for profit hospitals and profit making hospitals offer medical services to the community as a whole. They both offer services that are beneficial to the community. Therapy sessions and other educative services are offered in a large amounts by not for profits hospitals. Winthrop University Hospital offers educations to students who want to obtain a degree in medicine, which is very beneficial to the community. The hospital also offers clinical services to the low income earners and therapy session to individuals who want to stop smoking. This shows that the not for profit hospitals offer better quality of services to the community members (Hepton, 2007). The not-for profit-hospitals offer more salaries to their doctors and nurses. This is important when it comes to provision of quality services. The not for profit hospitals have skilled doctors and nurses at their disposal. The doctors and nurses are highly motivated to do their work. This will improve the quality of medical services offered in such hospitals. Profit making hospitals do not have the capacity to offer high salaries to their employees. Both not for profit and profit making hospitals offer good services to the citizens. This may differ because of skills of doctors who work in these hospitals. New York-Presbyterian Hospital offers high quality medical services. The hospital has the highest patient approval rating among the not for profit hospitals in New York City. It provides medical care to all people irrespective of their background. The hospital provides a variety of procedures that are not always offered by profit making hospitals (Gentry Penrod, 2008). Clifton Springs Hospital, located in New York, launched an incentive to try and get quality doctors to work for it. It shows that the profit making hospital doesn’t offer good salaries to their doctors and nurses. The hospital has many facilities compared to their counterparts who are in the field for the purpose of generating a profit. The aim of not-for profit hospitals is to adequately satisfy the demand in the market in instances where there might be positive externalities, resulting in healthcare terms` underproduction. The structure of ownership ascribed to not-for profit hospitals induces the maximization of quantity in place of profit maximization. This focus on the maximization of quantity encourages these entities to provide the community with healthcare services at a low cost or in some instances for free, hence increasing its contribution to the community. The figure below exhibits a model of output maximization, with the assumption of a demand curve that slopes downward. The quantity and price outputs represent the points of equilibrium ascribed to both not-for profit and profit companies. The not-for profit organization makes a decision to break even and is obligated to produce where (P=AC) is the maximization equilibrium quantity. live CHAT The model of output maximization draws comparison between profit maximization ascribed to for-profit organizations and output maximization ascribed to not-for-profit organizations. The y-axis gives a representation of the dollar in terms of unit of healthcare services while the x-axis stands for the quantity of health services, which amounts for the number of patients to which services are provided. These two structures of ownership produce different equilibrium prices as well as quantity outputs. A number of market conditions exist and function to alter the prices and output ascribed to health services within a real market. Moreover, the graph herein makes the assumption that these two entities offer goods that are perfectly substitutable (Hepton, 2007). Not-for-profit firms produce in contexts that have the average revenue (AR) and the average cost (AC) intersecting. In respect to this model, the quantity and price of a firm that maximizes quantity is represented by Qq and Pq. Not-for-profit organizations seek to capitalize on their output owing to the constraint of non-distribution, meaning that not-for profit organizations are not able to redistribute profit to executives or employees of a firm. Proponents of for-profit organizations within the healthcare sector hold that organizations which are motivated by profit maximization tend to produce almost the same quantity of benefits associated with not-for-profit organizations owing to a number of reasons. To begin with, in the short-term, for-profit organizations constantly seek to establish ways in which they can decrease costs of the services they provide. Secondly, fixed costs represent most expenses within a hospital. An additional patient’s cost has a relatively minimal marginal cost, which means that for-profit organizations are able to avail charity levels that are similar to those of not-for-profit organizations at a much lower cost. The figure below makes adjustments and espouses new points of equilibrium for the non-profit and for-profit hospitals. The model herein incorporates two adjustments. Proponents of for-profit organizations intimate that these adjustments differentiate these two structures of ownership. The first adjustment is a representation of the increase of fixed costs ascribed to both firms. Hospitals spend the greatest amount of money to acquire and pay for costly medical facilities and equipment. Additional patients do not significantly impact the total cost but cut down the opportunity of availing charitable services. The graph herein makes the assumption that for-profit hospitals incur lower expenses. The theory stems from the idea that executives and owners of for-profit organizations invest more in their firms in contrast to those of not-for-profit organizations. The investment they make in their firm motivates the employees to look for techniques that can enable them to seek for avenues of saving costs in a bid to maximize short-term profits. However, in the long term, organizations enter the market when t here is economic profit, which is effective in lowering the cost of services provided to patients. Consequently, the amount of services increases up to such a point that the equilibrium of quantity and price is attained. The equilibrium of price and the average cost of not for profit hospitals is normally found when the curves intersect. The intersection of the marginal curve with marginal cost leads to the production of profit making hospitals. There are new equilibrium points that are derived from the adjustment of fixed costs and the average costs. In the short run, the not for profit hospitals (Pq and Qq) will produce a situation where the price is lower and the quantity is relatively compared to the one of for profit hospitals( PÏ€ and QÏ€). There is a narrow difference between the price and the quantity levels. The not for profit hospitals have to have an ownership structure that will enable them produce at a zero economic profit. An organization willing to operate like this must be able to provide quality medical services with the patients paying absolutely nothing. It means engaging the variable QÏ€ which increases the contribution of the hospitals benefit to the community benefit. Contrary to these is that there are tax exemptions granted to the not for profit hospitals that will reduce the contribution of not for profit organizations to the community benefits. The for-profit organizations in the hospital industry have to pay corporate taxes. An example of tax that they pay is the property tax that goes back to the local community. This tax may be presented in different forms which include: income given to schools, creating roads and parks in the area and other related forms of giving back to the society. The not for profit hospitals give back to the community, when the amount of medi cal care and lower prices is outweighed by the impact of the tax exemption. The taxes are used by the government to intervene in situations that may arise if the market is to be left alone (McElroy, 2006). The not for profit hospitals exist to serve and increase the community benefits. The for-profit hospitals exist to increase profit of their owners. They are driven by the urge to maximize the profits through efficient allocation of resources. The not for profit hospitals are driven by the urge to increase the benefit of the community. They however lack the financial outlay to execute this idea of benefiting the community. They incur relative losses compared to profit making firms. An efficient increase in the delivery of services is one of few contributions made by the individuals who manage a hospital. The government needs to find a way to encourage the not for profit hospitals to increase benefits provided to the community. There are anachronistic policies used to treat the not for profit hospitals. It has lead to an inefficient healthcare system. Most not for profit hospitals provide charity care. There issues related to tax exemption since the current tax regulations are not properly implemented. When a company gets a not for profit approval it doesn’t adhere to the existing tax rules. Such companies result in taking tax from the community and yet they have not fulfilled their community obligations. This leads to an inefficient health care system. In conclusion, the conversion of the structure of ownership of not for profit to for-profit leads to the maximization of the benefits granted to the community, as a result of minimizing the positive externalities created by a poor health care system. The Role of Non-Profit Organizations in Addressing Social Challenges: Food for the Poor Many non-profit organizations have appeared recently around the globe. It is justified by the importance and the variety of functions they perform in everyday life. Historically, the most common response to social ills like poverty, homelessness, and poor education has been to spend more money. When money is tight, concerned citizens ramp up their efforts for more fundraising, more requests for federal grants and government funding, and, ultimately, more investment in short-term solutions to solve long-term problems. But these traditional efforts rarely yield sustainable long-term results. To make progress, leaders needed a new approach. They needed an approach that integrated the best ideas of social programming with the expertise that the for-profit sector has acquired in achieving long-term outcomes (Rothschild 1). Non-profit organizations perfectly fit this role. Non-profit organizations play the vital part in shaping modern civil society, developing the democratic values, and human rights protection. With time, their contribution to addressing both international and regional challenges becomes more and more noticeable, especially when referring to the issues related to the economic growth, social security of population and cultural cooperation. However, the impact of the non-profit organization on social and economic environment in every country is directly dependent on their collaboration with governmental and executive state bodies as well as with local authorities. Generally, the non-profit organization is known as the one whose activity is not aimed at receiving profit and whose members, respectively, may not share any profit. Some people prefer to call the non-profit sector the humanitarian sector. Others call it the social profit sector, the third sector, the independent sector, or a number of other things (Pallotta 13). Alike organizations include public, religious, charitable organizations, science, culture, education, health security or sport assisting funds and other different associations and unions. The non-profit institutions usually may do business within the limits required to fulfill their main functions. Most non-commercial institutions are founded to solve the same problems the state and municipal authorities are dealing with every day. The scope of activities thereof covers the help to low-income population, upbringing and education of children, preserving and advancing culture, basic rights and freedoms protection and many other spheres which are not   able to operate only at purely commercial basis. Activity of the majority of non-profit organizations is focused on addressing most vital issues within certain community or region. The existing of alike organization is primarily determined by the striving of the most active members of society to contribute to solving sharp problems through not only performing their direct duties laid down by the state, but also by doing something extra, exceeding the main responsibilities. There is an opinion that non-profit organizations may even operate more efficiently in social and public domains than the state and the structures thereof. It may be explained by the fact that the non-profit organization is governed by the members only and solely according to the focal purpose of each organization. As a result, states often decide to delegate funds to independent non-commercial organization, of course, in return of strict and clear obligations the latter undertakes, rather than establish additional governmental bodies. Common good organizations form one of the most important groups of non-profit organizations. They are also referred to as philanthropic organizations, and their main feature is that private resources of the members thereof are voluntarily distributed by their owners in order to help those in need, solve social problems and improve public life conditions. The mission of the common good organizations consists in implementing general interests together with the ones of the organization members, in drawing the authorities, mass media and social attention to the issues and circumstances of public importance. Philanthropic organizations often become the feedback channel between population and the state, contribute to the transparency of power and to the breeding of the social responsibility spirit. When choosing an organization to talk about, I found out that no so many charitable institutions are trusted. The money never gets to the people who need it. That’s the familiar refrain we hear whenever the subject of charity comes up in casual conversation. A Google search for â€Å"charities waste money† generates 3.6 million results – about twenty-five times more results than a search for the phrase, â€Å"charities use money wisely.† It hardly constitutes a scientific inquiry, but it probably means we can conclude that people who don’t trust charities outnumber people who do. Similarly, people’s comments in the blogs, articles, and forums picked up on a simple Internet search reveal a pervasive public distrust of how charities conduct their business (Pallotta 1). Therefore, I decide to pick up â€Å"Food for the Poor† – one of the largest charitable organizations in the United States, the organization operating for more than 30 years and having been rated the fifth-largest recipient of private support according to 2011 survey by Forbes of the 200 largest U.S. charities (Food for the Poor). This organization is different from other food and shelter providing organizations, first of all, by the scale of its’ activity, and, secondly due to its’ defined Christian-based ideology. This aspect is clearly visible from the mission statement of the organization, which says the goal of the institution is to connect the Christians in the developed countries with the Christians from the developing states in a way that assists both the materially poor and the poor in spirit (Food for the Poor). I share alike vision of aid as I believe everyone who is able to help should help those in need. Food for the Poor was established in 1982 by Ferdinand G. Mahfood with the focus purpose to help the poorest population in the countries of Latin America and Caribbean. At its’ beginning, the founds mostly came from the members of various Christian communities. First members were actively engaged into the activity of the Organization both by donating money and by personally working with poor people. They were travelling to the Latin America and Caribbean countries to provide the most essential help and support to those who needed it. They campaigned for collecting more funds, and soon the Christian network of caring people enlarged. Currently, more than 300 people are permanently employed by the Organization rendering assistance to more than 17 countries. Since the inception in 1982,   the Organization has provided approximately $9 billion in aid and has built more than 77,417 housing units for the destitute (Food for the Poor). According to the latest information on the website of the Organization, in 2011, Food for the Poor shipped 3,319 containers of aid and built 6,294 new housing units in the countries they serve. More than $19 million were spent on housing, medical, educational, sanitation and development projects (Food for the Poor). The Organization hosted several Food for the Poor Special Events. These are regular activities organized in different sited over the country aimed at raising funds and deepening the social awareness on the issues that form the core activity of the Organization. They are not so frequent but the schedule is published on the website. For example, there only five alike events planned for 2013. They are all free for children but paid for adults. For instance, the last such event, which took place on 2 February 2013, raised enough money to build homes for 65 destitute families in Canaan Heights in May Pen, Jamaica. The beginning of works is scheduled for March (Food for the Poor). Besides the activities focused on fundraising, the Organization encourages people to participate in its’ mission trips. As for today, more than 6000 volunteers have traveled to the states of Caribbean and Latin America. During such journeys, the volunteers have the opportunity to communicate with the local population, to help the mission by participating in hands-on activities – for example, painting houses, repairing schools, planting fruit trees, drilling water wells etc (Food for the Poor). These trips are to be paid by the volunteer, but the price is fair enough. As for me, I would love to come in one of such journeys some day. I believe alike experience will change my outlook and my perception of the world. Of course, it is easier to give money, but I think that the real understanding of what the charity is may come only when becoming a part of mutual philanthropic efforts. Unfortunately, not many people who want to donate for good purpose, trust charitable organizations. I understand their concerns. In my point of view the main reason for it is that the majority of alike organizations are not active enough in media. To make people trust, the organization should report regularly on its’ activity and inform though all means they can about their future planned events. It would also be nice to create the general database of most reputed charitable organization with different focus to suit personal commitments of various people. The more people know about the possibility to donate, the more people will be saved. I believe non-profit institutions are very important for our nowadays society as they serves to achieve charitable and administrative aims, where the state has proved to be helpless. Non-profit organizations are established, as a rule, â€Å"from below† at the initiative of concerned people. An organization develops from a seed – a common concern, a critical issue, a central purpose, an individual’s passion. If this seed interests enough people, including potential contributors who share the passion, a group of some sort forms (Hummel 1). Such organizations mostly do not have strict hierarchy, they are independent, fluent and what is more important – they really long for helping people by solving certain issue. Throughout the country, non-profit organizations provide needed services to children, other young people, elder adults, the mentally and physically differently abled, and other socially or economically disadvantaged people. They promote arts. They a dvocate for the rights of people and focus attention on threats to the environment. They work and volunteer in support of many religious faiths and organizations (Hummel 1). International experience provides numerous evidences of efficient cooperation between state and private philanthropic capital and proves of fruitful collaboration of state authorities and social good organizations aimed at social system improvement. Today we see initiatives like the United Nations’ Millennium Development Goals, which call for achieving a series of benchmarks for tackling extreme poverty by 2015. We see Share Our Strength, calling for the end of child hunger in five years; Bono’s ONE Campaign calling on us to save 4 million children’s lives within five years, and many other similar examples (Pallotta 9). Besides international cooperation, we see many examples of personal non-profit activities. Fortunately, as the need for more effective social organizations has become urgent, innovation is proliferating among organizations that have a social purpose. Throughout the world, entrepreneurs with social agenda are experimenting with new business models, new ways to finance start-ups and growth, and new ways to combine the practices of business and charity. Social entrepreneurship has become a recognized global movement (Rothschild 5). This understanding of the vital role of non-commercial aid proves that alike initiatives are to exist. Common good organization not only solve the problems the state and business do not have enough forces, they often become the leaders of social sphere through getting involved with the resources thereof into performing social policy and offering progressive means of addressing sharp public concerns.