Are there too many Nonprofits?

When you bandy about the word nonprofit, many people think of foundations or charities. For some reason, even in our own profession of nonprofit management, there are people who think associations are different from nonprofits.

Technically, they are not different in being nonprofits. All 501c organizations are “nonprofit” because they are not organized for the purpose of making money. Instead, a 501c organization exists to fulfill a mission of service to a segment of society (or society as a whole) or it exists to serve a profession or industry.

Things differentiate when it comes to the number after that small letter “c” – this is where we start separating foundations from charities (usually c3) from professional societies and trade associations (usually a c6 or c4).

What many people don’t know is that there are more than twenty (20) 501c designations in the IRS Code. Did you know a 501c19 is organized to serve members or veterans of the military? There is also a unique 501c designation for soccer clubs.

If you type the word “American” in Open990, it creates a list of 86,634 nonprofit organizations. If you enter the word “National” it shows you a list of 44,982 nonprofits.

If you enter the word “Foundation,” the list is a whopping 231,958 organizations.

Does this mean that all of the organizations are fully functioning and funded? No, it doesn’t because if you skim the Assets column you will see that some of these organizations have $0 assets.

However, this doesn’t mean they aren’t taking up valuable space in the marketplace of ideas; this many of anything muddies the water and creates distractions. I often ask myself, “how do some of these organizations accomplish anything? Where do they get funding or volunteers?”

The answer is they probably don’t.

This brings me to the question at hand: Are there too many nonprofits? I raise this question because, within the general public, there is very little understanding or awareness of what nonprofit actually means and what they do. What most people do seem to know is that the phrase “tax deductible” applies, and this opens a door to the nonprofit status being abused.

I encourage you to ponder this question for yourself and to discuss it with others. If you hear someone say “I’m going to start a nonprofit” my suggestion is to steer their energy towards one that already exists serving their passion or their profession.

If we don’t remain vigilant, we may find ourselves in a world without nonprofits because an exponentially increasing number of “nonprofits” cannot be held accountable by any organization or government agency. Abuses and illegal activities by those untrained, unaware, or just oblivious will lead to some people in this country getting what they want: the elimination of the nonprofit status.