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Government monitors, regulates, and funds nonprofit organizations, making it is a key player in the health of the nonprofit sector in the United States. However, not all states treat nonprofits similarly. Prior work identified three types of state nonprofit culture (Pettijohn, S. L., and E. T. Boris. 2017. State Nonprofit Culture: Assessing the Impact of State Regulation on the Government-Nonprofit Relationship. Grand Rapids, MI: ARNOVA Presentation.), or a unique set of attitudes and beliefs that shape the operating norms between state government and nonprofits. This article analyzes whether differences among state nonprofit culture are measureable in the government-nonprofit relationship. Using data from the Urban Institute’s 2013 Nonprofit-Government Contracting and Grants survey, we find there are significant differences in the government-nonprofit funding relationships, which means nonprofits operating in certain state nonprofit cultures face different types and degrees of risk to their organization’s overall health.

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Funding agreements are the legal foundation for government-nonprofit funding relations and specify the terms and expectations for both parties. Yet little attention focuses on the funding agreements themselves, which vary in structure, form, compensation arrangements, and amount of risk each party bears in the funding relationship. Using data on human service nonprofits in the U.S., we examine whether the type of funding agreement—cost-reimbursement versus fixed-cost—influence the reliability of government funding during the Great Recession and the level of engagement by nonprofit providers. We find those who bear the burden of the risk at the outset have less reliable funding during recessionary times and nonprofit providers with a flat amount agreement are less engaged with government funders. Findings have implications for public and nonprofit managers to carefully consider risks and relationships to implement effective funding agreements.

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