Today there are 1,200 more nonprofits in Maryland than there were at the beginning of 2009. You might be thinking, “Great, in this tough economy, I’m glad that all these folks are starting charities to help people.” You may think it is super, but I think quite the opposite. There should be a moratorium on starting nonprofits. And we should get rid of a lot of the older organizations too. In tough times, we need to have fewer nonprofits not more. Let me explain.
When needs are high and available funds are reduced, the dollars going to nonprofits need to be used efficiently and effectively. We need to get the most bang for every philanthropic buck. Bigger, established nonprofits are better positioned to maximize the donated dollars going to direct service. Organizations that already have administrative systems in place can put all new money into programming. New, small nonprofits need to use dollars to create an organizational structure. This is not the most efficient use of funds.
It costs almost a $1,000 in filing fees to start a single nonprofit entity. Those 1,200 new organizations spent over $1 million just to incorporate and to have the IRS review their applications. Not a dime of this $1 million went toward programs. Was this $1 million well spent or should it have been given to an established nonprofit with a proven track record? I know a lot of nonprofits that could have put a $1 million grant to good use—fed some people, created some jobs, protected some children.
New nonprofits suck up volunteer time. Each group needs a board of at least 5 people. For those 1,200 new nonprofits, let’s assume that a board member attends just 6 meetings of 2 hours each. This translates to 72,000 hours of civic engagement in 2009 or the equivalent of 36 full-time jobs. What if the thousands of hours were volunteered at an established nonprofit? Would the impact have been greater if these hours were spent building homes, mentoring kids, restoring a waterway?
There are too many unmet needs to tolerate the squandering of time and dollars on unproven charities and ineffective and inefficient organizations. Philanthropic resources need to go to peak performers. And peak performers need to be receptive to incorporating new ideas into their existing programs.
At the end of this year, I hope to report a significant decline in the number of nonprofits as well as a substantial increase in the services the remaining organizations provide. Please, no more new nonprofits in 2010.
