The Charity Boom

The Chronicle of Philanthropy (January 6, 2005) reported that there are now nearly 800,000 charities listed on the IRS’s official roster.  Over 300,000 of these organizataions gained tax-exempt status in the past ten years, and of these newer organizations, 53% were not required to file federal information tax returns (either because they have annual revenues of $25,000 or less or engage solely in religious activities).  The Chronicle asked whether America’s "charity explosion" has benefited our society.  On the one hand, the continuing creation of nopnrofit organizations provides opportunities for innovation and services to overlooked communities.  On the other hand, the prolification of new charities has resulted in duplication of services and inefficiencies.

Persons contemplating the creation of a new charity should be aware of the issues raised by this article.  Among the questions they should ask:

  • Who would the new organization serve?
  • What services would the new organization provide?
  • Would the new organization be duplicating services provided by other organizations?
  • If it would duplicate services, would the new organization be in a position to offer higher quality services and/or more efficient delivery of services or would the new organization attract funders otherwise not supporting such services?
  • Would the new organization have sustainable funding?
  • Would the new organization compete for the same limited funding with an organization offering similar services to the same communities?
  • Are there opportunities for an existing organization to better further the mission of the contemplated new organization that would not necessitate creation of a new organization?