The Benchmark for Giving

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With so much need in this world, it’s no wonder that many good-hearted people want to do what they can to help. Some folks volunteer their time and talent, but not everyone can do that. Others donate clothing, food, and supplies, but there’s always the problem of getting the goods to the people who need them most.

Giving money, then, becomes one of the most effective ways of helping our fellow humans. Money can be allocated for specific purposes and used to quickly respond to emergencies. Financial donations build and operate shelters, buy and serve food, provide essential transportation, and purchase and distribute medicine. There are thousands of charities that act as conduits for our generosity. And most of them do an honest, efficient job.

But after the tragedy of Hurricane Katrina, there were multiple accounts of fraud and mismanagement of charitable contributions. Individual and institutional donors became more cautious about which charities to support. The Federal Trade Commission (FTC) and the IRS warned potential donors about attempts at charitable fraud in the wake of Hurricane Harvey. There were more such warnings after Hurricane Maria.

It’s a sad fact of life that at times when we’re most eager to lend a helping hand, there are con artists who will try to take advantage of our generosity. Deception and fraud are commonplace after major natural disasters, particularly because swindlers look to profit from other people’s compassion and their unfamiliarity with how charities operate. Fortunately, there’s an organization that helps ensure that kindhearted people can donate money to the many honest charities that do good work and are scrupulous about their finances. This is where Give.org comes in.

It’s essential when our donors are looking to support organizations like MDA and others. They want to know that we’re meeting the standards out there and we’re thrilled to have the rating we have with the alliance.

-Lynn O’Connor, President and CEO of the Muscular Dystrophy Association (pictured above) speaking on accreditation.

HELPING THOSE WHO WANT TO HELP

Give.org is the website for the BBB Wise Giving Alliance (WGA), an organization dedicated to evaluating national charities and reporting on their practices. Just as the Better Business Bureau focuses on consumer protection and industry self-regulation, the Wise Giving Alliance performs the same function for charitable organizations. They do the research and compile the data so donors can make informed decisions when selecting a charity to support. And they promote high standards of conduct for charitable organizations. Local Better Business Bureaus similarly report on regional charities.

According to Giving USA, Americans contributed over $400 billion to charities in 2017, the first time ever the $400 billion threshold was crossed and an increase of 5.2 percent over 2016 donations. These donations cover the whole spectrum of causes, from religious (by far the highest amount of charity received, with an estimated $127.37 billion) to environmental and animal organizations (the lowest at $11.83 billion).

When such sums of money are involved, it’s imperative to consider where the cash is going and how it’s used. But most people don’t really want to deep dive into research on charities. It’s the detachment inherent in simply writing a check that leads to misgivings and contributions to less-than-reputable organizations.

Image: March of Dimes Foundation (source)

ACCREDITATION IS A BIG DEAL FOR CHARITIES AND DONORS

To encourage sound charity practices, the Wise Giving Alliance established 20 Standards for Charity Accountability that became the foundation of a comprehensive accreditation process. The WGA codified the principles of charity administration and called for charities to voluntarily adhere to them. This voluntary accreditation process soon became the model for effective charitable monitoring and review.

Complying with these standards gives charities a twofold benefit. First, it confers distinction and includes them in a community of responsible, self-regulating charitable organizations. It provides charities with a roadmap to ethical and efficient operation. This helps charities achieve their primary goal: to help people effectively and efficiently. Second, complying with the WGA standards confers legitimacy on a charity in the eyes of potential donors. Accredited charities have the option of displaying the national charity seal by signing a licensing agreement and paying an annual fee. Bennett Weiner, Chief Operating Officer of the Wise Giving Alliance, asserts that “the seal provides a symbol of trust assurance in a visual format that can be quickly identified.” This encourages philanthropists to donate with confidence.

Obtaining accreditation by the BBB gives our organization instant recognition and a badge of trust for our business as it gives potential donors and partners a guarantee that our operations are ethical, professional, credible, and trustworthy. The International Eye Foundation has openly identified the nature, location, and ownership of our business, and clearly disclosed all policies, procedures, and guarantees that bear on a potential donor’s decision to contribute.

Robert Middlebrooks, CFO, International Eye Foundation

It can be difficult to determine which charities are worthwhile and reliable. Donors want to trust that their hard-earned money is going to be spent wisely and in a manner that benefits their chosen cause. By establishing a set of transparent guidelines for good practices and encouraging charities to willingly participate in enforcing them, Give.org provides donors with a sense of how organizations are administered and how their funds are utilized. Guesswork is taken out of the equation. The burdensome research process that can consume so much time and energy is taken over by the WGA and is summarized on Give.org. Donors can focus more on their philanthropic goals than on the risk that their donations may be mismanaged.

Image: Pacific Crest Trail Association (source)

Surinder Moore, the Executive Director of Alternative Gifts International, notes that “more than ever donors are keeping a close eye on the charities they gift to. They want to be assured that their hard-earned money is going to a reputable non-profit.” Because of this, she says “accreditation is an important piece of assuring donors that they are doing business with a vetted charity. We have high standards for how we conduct business and being validated by the BBB affirms that we take accountability seriously.”

THE HISTORY OF CHARITY STANDARDS

The origins of the WGA hearken back to 1918, when the National Information Bureau (later National Charities Information Bureau, or NCIB) began monitoring the numerous relief agencies  that were set up after World War I. Years later, the NCIB became “the first organization in the U.S. to establish accountability standards to evaluate charities,” thereby setting a precedent that continues to direct community practices to this day. “By the mid to late 1920s, BBBs were producing reports about charities in response to inquiries. In addition, BBBs issued ‘alerts’ on questionable solicitation practices that came to their attention,” says Weiner.

Meanwhile, the national office of the Better Business Bureau established a Solicitations Control Division that monitored charitable organizations and offered guidance to donors. In 1971, the Solicitations Control Division was renamed as the Philanthropic Advisory Service (PAS). The NCIB and PAS worked in parallel to develop guidelines, standards, and principles to evaluate charities and provide donors with detailed information. The overarching goal of these efforts was to support and foster the growth and development of charitable organizations.

Finally, on March 23, 2001, the NCIB and PAS merged to form the BBB Wise Giving Alliance, combining decades of industry-leading experience into a single body equipped to steer the charitable community towards stronger, well-informed practices and self-regulation.

Charitable accountability is essential in a world where donors usually aren’t personally familiar with the organizations they support. Organizational impropriety is not only reflected in fraud cases but also, and probably more pervasively, in charitable inefficiency. Sure, the charity may be legitimate, but if more than half of the donations they receive are used to pay the CEO or for fund-raising, it somewhat defeats the purpose of having a charity in the first place. We all expect the majority of the money received by a charity to go toward the cause it champions, though that is not always the case.

People need to research before they donate to a charity. And there are many wonderful resources out there they can tap, their state regulators have enormous information on charities doing business in the state. Wise Giving Alliance provides a wealth of information.

-Lois Greisman, Associate Director, FTC Division of Marketing Practices

DETERMINING THE STANDARDS

Art Taylor, President and CEO of the BBB Wise Giving Alliance, believes that “one unique aspect of our work is that we require much more than a charity’s IRS Form 990 to complete our accountability assessments. While this reflects our commitment to complete thorough evaluations it also is a result of the comprehensive scope of the BBB Charity Standards which address far more than just finances.” A graduate of Franklin and Marshall College and Temple University law school, Mr. Taylor has been the head of the WGA since its inception in 2001 and knows full well the benefits the standards provide. “We have significant correspondence with a charity before we post our finalized report. This communication usually involves recommended actions that a charity can take to address our initial concerns,” he says.

Image: American Bird Conservatory (source)

Focusing on four general areas of accountability, and further subdivided into 20 specific standards, the WGA assesses each charity point-by-point and determines whether a standard is metnot met, or can’t be verified/ is not disclosed. To complete the process and become a WGA-accredited charity, institutions must meet all 20 standards. This process differentiates Give.org from metrics-based charity watchdogs that evaluate charities based principally on the numbers on the charity’s tax form (the IRS form 990). The four areas of accountability are:

  • Governance and oversight, which includes five standards and refers to the supervision provided by the organizational structure. These standards emphasize the importance of having an independent and active board of directors. Among the standards evaluated, the board must have at least five voting members, carry out a minimum of three meetings per year, periodically appraise the CEO’s performance, have budget approval, and not incur conflicts of interests due to compensation or business affiliations.
  • Measuring effectiveness, which contains two standards to regularly assess whether the charity is achieving its proposed mission. These standards call for a charity to evaluate its effectiveness and submit an analytical report with recommendations for improving its efficacy.
  • Finances, which is composed of seven standard points that seek to ensure the correct and judicious use of charitable funds. This does not mean that financial ratios (the percentage of funds raised that’s spent directly on the charitable mission) are the sole indicators of a charity’s performance. Nonetheless, program expenses, or the amount of funds destined for program activities, must be at least 65% of total expenses, while fundraising should account for no more than 35% of total contributions. Other considerations include avoiding the accumulation of funds, making annual financial statements available on request, detailing expenses, and maintaining a budget plan that outlines projected expenses.
  • Fundraising and informational materials, which refers to the charity’s truthfulness in representations to prospective donors. Charities must present accurate materials for solicitations, have an annual report (including mission statement and summary of past accomplishments) available upon request, provide complete information about the charity on any website from which donations are solicited, maintain donor privacy, explain how the charity benefits from the sale of products or services, and respond to complaints in a timely manner.

Accreditation is very meaningful, especially to smaller nonprofits like ours. It assures donors and supporters that you are compliant, transparent and fulfilling your mission honorably.

-Linda Webb, Executive Director of Ally’s House.

After each analysis, the BBB WGA publishes their findings in single reports for the individual charities. These reports can be accessed through the Give.org website.

It should be noted that the fact that a charity has not been evaluated by Give.org does not mean that the charity is inefficient or fraudulent. The BBB WGA only evaluates charities who voluntarily agree to the process and there may be a variety of legitimate reasons why an organization would not want to participate.

“Of the 1,437 nationally soliciting charities approached by BBB’s Give.org, about two-thirds provide requested information and one third do not provide any information despite repeated written requests. Of the 922 charities that provide information, 70% meet all BBB Charity Standards (accredited) and 30% do not meet one or more of these standards,” says Weiner. He also noted that local BBBs report on an additional 10,000 regionally-soliciting charities.

Bennett Weiner, COO of Give.org

CRITIQUES & COUNTERS

Even with these significant benefits, the accreditation process has not been immune to criticism, particularly in regard to the way charities acquire the accreditation seal. Detractors object to the mechanism which allows charitable organizations to pay the BBB WGA an annual fee for the rights to display their accreditation seal in promotional material and websites. In a 2012 USA Today article, critics leveled accusations that requiring charities to pay to use the BBB WGA seal unduly influences the accreditation decision. These allegations, however, were strongly refuted by CEO Art Taylor:

“There is a strict separation between the people who do the accreditations and the ones who work on the seal programs,” Taylor told USA Today. “The only way they can (license)  a seal is if they get a notification that we have a new charity that meets our standards.”

In fact, there is no charge for the accreditation evaluation. Licensing the right to use accreditation seals after the evaluation process is completed is not an unconventional practice, as some charity monitors engage in the same procedure as the BBB WGA.

In addition, BBB WGA indicates that about 10% of charity seal holders lose the seal each year due to no longer meeting standards or not providing requested information to complete an updated report.

We are very proud to meet the WGA criteria that tells donors the Lupus Research Alliance is a non-profit they can trust to invest in the highest quality science with the greatest potential to help people with lupus.

-Debra Rose, Chief Financial Officer, Lupus Research Alliance.

Charities who participate in the Give.org seal program vouch for its integrity. Mark Bergel is the founder and president of A Wider Circle, a charitable non-profit organization based in Maryland. After graduating and teaching at American University, Mr. Bergel established A Wider Circle with its ultimate mission of eradicating poverty one individual at a time. He states that “being part of BBB WGA has made us a much better organization – on many levels. The initial process allowed us to establish strong organizational and fiduciary practices, habits that we have maintained and that have come to help define A Wider Circle. I honestly believe that every organization should have to follow BBB WGA guidelines, and every Board should require this of their organization,” Bergel says. “The team at BBB WGA is extremely helpful, and one of the things I like most is that they are interested in building relationships above and beyond the seal.”

Image: A Wider Circle (source)

THE OVERHEAD MYTH

Another common misunderstanding of the WGA’s process concerns financial ratios and what they say about a charity’s performance. We all want the highest possible percentage of funds to directly benefit the causes we donate to. However, this percentage will vary depending on the type, function, and size of the charity. Some organizations need to invest funds into administrative or fundraising activities to sustain and improve their operations. These expenditures are part of an organization’s overhead—the money a charity collects that doesn’t go directly to program costs. Overhead should always be analyzed jointly with other factors.

To dispel the common notion that the percentage of donations spent directly on program activities is the be all and end all of charity assessment, the BBB Wise Giving Alliance, along with GuideStar and Charity Navigator (two reputable charity assessment organizations), crafted a letter to the “Donors of America”. It states, in part:

“In fact, many charities should spend more on overhead. Overhead costs include important investments charities make to improve their work: investments in training, planning, evaluation, and internal systems— as well as their efforts to raise money so they can operate their programs. These expenses allow a charity to sustain itself (the way a family has to pay the electric bill) or to improve itself (the way a family might invest in college tuition). When we focus solely or predominantly on overhead, we can create what the Stanford Social Innovation Review has called ‘the Nonprofit Starvation Cycle.’ We starve charities of the freedom they need to best serve the people and communities they are trying to serve.”

The Overhead Myth website was set up to ensure additional charity accountability, by focusing on other, more fundamental factors like transparency, governance, leadership, and results.

Image: Women For Women International (source)

KEEPING THE SPARK OF COMPASSION ALIGHT

A spark is struck in all of us when we confront someone’s hardship or need. That spark makes us automatically react in compassionate ways that stem not only from our sense of morality or our pre-conditioned responses, but as a genuine feeling, an empathetic response. There’s no need to let that spark die out because of confusion, doubt, or reluctance. The focus of the donor should be on picking a cause and donating. By doing all the grunt work, Give.org facilitates the process of philanthropy, giving donors the peace of mind they’re looking for.

Cover Image: (source)

Co-Author: Scott Smith, Community Editor

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