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Shedding Light on Changes in the Sector


I spent some time with Paul Light, New York University (NYU) Wagner’s Paulette Goddard Professor of Public Service, at the Giving USA board of directors meeting a couple of weekends ago. Paul is a great public speaker, fun to be with, and always has interesting insights about government and the nonprofit sector. It is not surprising that is he frequently quoted by the media.

The subject of one of Paul’s presentations was future prospects for the nonprofit sector, particularly in light of the Great Recession. Last year when the recession first hit, Paul was widely quoted as predicting that “100,000 nonprofit organizations” would go out of business. He told me that he has been “haunted” by that prediction ever since because it is so hard to actually verify.

I thought I’d try.

I asked Chuck McLean, GuideStar’s vice president of research, to help with some rough estimates. Chuck tells me that the IRS formally reports very few de-listings of nonprofit status each year. Anywhere from 30,000 to 60,000 organizations, however, simply disappear from the IRS Business Master File for reasons unknown; the IRS makes no official pronouncement about their status. Presumably, most of these organizations have indeed gone out of business. We mark these organizations as “idle” in the GuideStar database.

A second point of reference is GuideStar’s own research. In last year’s three economic surveys a consistent 8 to 10 percent of organizations reported that they were in “imminent danger of closing” due to financial reasons. Please check back next week when we release our semi-annual economic survey of 2010.

Finally, there is of course the looming revocation of potentially hundreds of thousands of nonprofits for non-filing under the Pension Protection Act of 2006.

So, Paul, predicting that 100,000 nonprofit organizations will go out of business seems not only possible but probable. You can now repeat your estimate with confidence!

Oh, one last thing. Hope springs eternal. Anywhere from 45,000 to 60,000 new nonprofits are approved by the IRS each year. There clearly is hope in the sector!

For more information about your organization or the nonprofit sector as a whole, please visit the rest of our site.

Bob.jpgThe preceding is a guest post Bob Ottenhoff,  Chief Executive of the Center for Disaster Philanthropy. With an entrepreneurial spirit, strong technology focus, and a quest to make an impact in the world, Bob has the ability to take an organization and lead it into strong performance, sustainability, and industry leadership.

Topics: Just Because Paul Light