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Fundraising Competition Increases as U.S. Charities Number 800,000

(Jan. 24, 2005) Charities can look forward to additional fundraising competition as the Internal Revenue Service reports that there are now nearly 800,000 charitable organizations in the United States, double the number that existed in 1990.

Nearly 40 percent of all charities were created in the past decade, according to research conducted by the Urban Institute in Washington, D.C. on IRS nonprofit data, and analyzed by and published in The Chronicle of Philanthropy. Most of that growth (53 percent) has come from small organizations with revenue of $25,000 or less.

The total number of charities rose by 5.6 percent in 2003, while approximately 4.5 percent of all charities shut down the same year.

In contrast, the Small Business Administration estimates that the business sector did not grow appreciably in 2004, according to the Chronicle. While ten percent of the United States' businesses were new in 2004, an equal number of businesses failed the same year.

Survival of the Fittest?

The growing number of charities has long been a concern for AFP. 'My chief concern is the overlap in the delivery of services' said AFP President and CEO Paulette Maehara, CFRE, CAE. 'The mergers that were once talked about in the nonprofit world have not come about in great numbers. When there have been mergers, it's often been the result of financial problems instead of a systematic, frank look at how best to serve the community.'

Maehara does not believe that the government will step in and try to limit the number of charities through legislation or regulation. There are inherent problems in evaluating whether or not a charity is effective or well-meaning, as well as strong Constitutional concerns. In addition, she believes that most American strongly support the idea of creating community organizations when needs arise. 'It's part of American history and tradition, and it's what makes our society so strong.'

Nor does she predict that the number of charities will disappear, even with more competition and an uneven economy. 'While smaller charities are competing for an even smaller part of the philanthropic pie, many of them don't need that much money to operate successfully,' said Maehara. 'So if they're good fundraisers, they know how to cultivate donors, and they may have the number of dedicated supporters they need to stay afloat. We may be victims of our own success.'

Because of these concerns, AFP has been looking to address this issue through another way: marketing and branding. 'Creating a unique niche for our organizations has quickly become one of the profession's biggest challenges and responsibilities,' said Maehara. 'AFP is working to develop tools that will help members successfully market and brand their organizations.'

Subsector, Geographic Increases

According to the IRS data, religious groups grew the most, with nearly 35,000 such organizations created since 1999. More than 30,000 education groups were created in the same time, while social services groups numbered 24,000 and arts and culture organizations increased by nearly 20,000.

Most states saw at least 10 percent growth in the number of charities. Several experienced more than 20 percent growth in the number of religious organizations, including Arkansas, Florida, Georgia, Louisiana, Maryland, Mississippi, New Hampshire, New York, North Carolina, Oklahoma, South Carolina, Tennessee and Texas.

The Chronicle also analyzed metropolitan areas by the number of nonprofits, the number of new nonprofit groups and the sector's percentage growth over the past five years. Atlanta, Ga., saw the most growth since 1999 with 23 percent. The other metropolitan areas that experienced more than 20 percent growth during that same period were Albany, N.Y., Las Vegas, Nev. and Orlando, Fla.

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