Few Americans realize that over half the revenues of the voluntary service organizations in this country come from federal and state governments. The image of the voluntary agency as neighbour helping neighbour - a thousand small independent points of light - is deceptive, for it masks the increasing dependence of non-profit service organizations on government funding. In recent years, government's primary response to the emergent problems of homelessness, hunger, child abuse, health care, and AIDS has been generated through non-profit agencies funded by taxpayer money. As part of the widespread movement for privatization, these agencies represent revolutionary changes in the welfare state. Steven Smith and Michael Lipsky aim to demonstrate that this massive shift in funds - literally billions of dollars - has benefits and drawbacks. As government funding of non-profit groups increases, their management, staffing clientele, and policies often change significantly. They may no longer be primarily responsive to their communities of origin but instead reflect government priorities. Although the appeal of contracting lies in the possibility of lower costs and greater efficiency, present contracting policies, the authors show, may actually increase overall costs in the long run and encourage instability among service agencies. Smith and Lipsky conclude that for the potential salutary effects of contracting to be realized, the government must reform current contracting procedures and invest in the operational and capital needs of both non-profit and public agencies. Given the breadth of government funding of non-profit agencies, this study of the social, political and organizational effects of this service strategy is a contribution to the current raging debate on the future of the welfare state.