Encouraging Charitable Efficiencies More Charitable Than Discouraging Nonprofits – Take One

In a recent article entitled Charities Rise, Costing U.S. Billions in Tax Breaks, Stephanie Strom of the New York Times raises concerns about an out of control nonprofit sector that is flooding the IRS with frivolous new applications to establish new public charities that will deprive the federal budget of billions of dollars.

She demonstrates her point by citing new groups such as Save Your Ass Long Ear Rescue, working to save donkeys from cruelty; new chapters of the Sisters of Perpetual Indulgence, a group of cross-dressing nuns raising money for AIDS treatment; and the Red Nose Institute, a group of trained clowns trying to bring relief to US troops abroad by distributing clown noses.

While I can’t speak to donkey cruelty or clown humor, one of Strom’s examples – Sisters of Perpetual Indulgence – is a misguided target. Back in the 80s when the federal government was notoriously silent on AIDS, the Sisters of Perpetual Indulgence, through humor and street theater, were at the cutting edge of AIDS prevention efforts and literally saved lives. As such, it’s a wholly positive move that their efforts are spreading to the heartland and their progress should be applauded, even if their methods seem less conventional to the average New York Times reporter.

Is Strom suggesting that playful and entertaining nonprofits ought not receive 501(c)(3) status, even though they are providing a well-demonstrated public service? Just like for-profits, (think: Apple), the Sisters of Perpetual Indulgence are successful because they are great marketers, and it’s puzzling to suggest that nonprofits can’t be both effective and light-hearted at the same time.

To Strom’s point, there is surely potential waste in creating thousands of new nonprofits every year. But the problem is not people’s motivations – it’s that not nearly enough people know about the alternatives to establishing nonprofit organizations. Alternatives like fiscal sponsorship and donor advised funds are two highly effective ways to make your charitable activities more cost-efficient and less time-consuming.

If you’re raising funds for your favorite cause, for example, you don’t have to go through the hassle of establishing and managing a brand-new nonprofit. Instead, talk to your local community foundation or a grant making intermediary to create a donor advised fund or a collective giving fund.

And if you’re looking to fill a need in your community, look to fiscal sponsorship as a solution instead of creating a brand-new nonprofit. Fiscal sponsors provide their projects with all of the financial, human resources and governance infrastructure of a well-managed nonprofit, allowing activists and social entrepreneurs to focus their attention on the content and mission of their work, not the administrative and regulatory details.

The nonprofit sector is a sector of innovation, creativity, and people for the common good. If we want to create greater capacity for the IRS to monitor nonprofit activity, improve efficiency in the charitable sector, and continue to support the social innovation and dedication of the American people, raising the visibility – and availability – of alternative structures like fiscal sponsorship and donor advised funds will go a long way towards helping those with passion, ideas, creativity and access to resources achieve their charitable goals most effectively.

Tod Hill is Vice President, Marketing & Business Development for Tides. This post originally appeared on The Bilerico Project, “the web’s largest LGBTQ group blog.”