“Development” and the difficulty of classifying nonprofits

In this post I discuss the catchall nonprofit classification of “local development”.  I muse on the methods of classifying nonprofits.  And I note the use of the term “community infrastructure” in the DRCD baseline data collection on social enterprises.

In the old days before Covid, we would be assembled once a year to hear the Benefacts annual review.  This was one of those events where one obligingly sat in rows and hoped to hear something of interest. Quite often one was not disappointed.  However one statistical smidgeon was regularly trotted out and would grate on my ear.  It was that 27% of nonprofit companies limited by guarantee were engaged in “Development”.  

I have since shaken out the Benefacts data, using a publicly available dataset downloaded in early 2022 before they closed up shop* and had a closer look at the CLGs classified under “Development”.  This classification comprises five sub-categories:

** Local development 1811 organisations

** Job creation 445 organisations

** Social enterprise 192 organisations

** Sheltered housing 62 organisations

** Social housing 268 organisations

Benefacts has used a hibernicised version of the International classification of “nonprofit organizations”, devised in the 1990s by Lester Salamon et al from John Hopkins University in the USA.  In America housing and development are connected functions in the third sector, hence the grouping together here.  So for our purpose today we can set aside the housing NPOs.  Of the 2400+ remaining NPOs, some 192 are listed as “social enterprises” and 445 as “job creation” nonprofits.  These two classifications deserve a separate particle to explain (patiently and without rancour) why these are at best misleading.

This leaves 1811 “local development” nonprofits.  Scanning down the list, I concluded that few seemed were engaged in the business of actual local development as described by the OECD: to “build the capacity of a defined area to improve its economic future and the quality of life for inhabitants”.  Rather, this subset seemed to include local organisations of rather general community benefit: every community centre and parish hall the length and breadth of the country, some community development associations and some mis-labelled organisations in childcare and social services.  Some – but only some – of the 1811 seemed to be engaged in any kind of developmental activity.  True, this list did include some local development companies – but equally I found some other LDCs listed under “Job Creation” and “Social Enterprise”.  

So what is happening here?  Here are my considered reflections.  First, classification is difficult.  There is a temptation (I see it all the time) to try to treat nonprofits like plants and animals in the natural world, where a species lies within a genus, within a family, within an order.  But in real life, a nonprofit may have multiple, valid classifications.  Take the case of a social enterprise that provides disability transport and receives funding from the Community Services Programme or workers from Community Employment.  It could be equally classified as a social service or a social enterprise or a job creation NP.  Using standard industrial classification, its SIC code would probably be that of a transport company.  And they could be a registered charity as well.  So which, if any, classification takes precedence?

Second, what data source does one use to classify an NPO?  In the case of Benefacts they used an organisation’s governing documents, i.e. their constitution or Memo and Articles.  Have you ever read a CLG constitution?  It is easy to see that a local community centre might be set up with very general and aspirational objectives but over time would end up focusing their activities on sport, or recreation, or youth work, or playgroups. 

Third, I’m wondering if Ireland has many more community centres, halls, facilities, local associations and other local activities than other countries.  I met some Swedish nonprofit managers this year and they looked spectacularly blank when I talked about the central role of community centres in Irish society, especially the rural context.  And so these organisations get dumped in with “local development” –  in this context probably intended by the American originators to mean something like “a bit like international development but here and local”.  

Fourth, the DRCD social enterprise baseline data collection project uses the term “community infrastructure” for local halls and community facilities.  This is a handy term – although perhaps still a bit technical for the lay reader – and Benefacts would do well to adopt it.  “Development” is a good word and deserves to be properly treated rather than risk being diminished through being splashed around at anything local which defies categorisation.  

* Happily the Benefacts Legacy Project continues and has been funded by philanthropy here. 

Danielle Byrne, (C) 2023