Competition From Government

March 1, 2011       Don McNamara      

As American donors seek more and more information about charities and Web sites compete for visitors to view financial data, questions arise about the need for and longevity of the organizations providing that information.

Well-publicized reports of nonprofit wrongdoing and perceptions of secrecy or inefficiency have turned many U.S. donors into demanding consumers. Giving in the United Kingdom, on the other hand, does not seem to carry the same "Customer is always right" baggage or demands for scrutiny that characterize the conversation in the U.S.

Further, while foundations in the United States seem willing to fund certain watchdog sites while their sustainability is uncertain, U.K. funders aren’t as forgiving.

GuideStar, in Williamsburg, Va., one of the first organizations to provide a wide range of information about nonprofits in the United States, is doing well, providing both free and value-added material.

By contrast, GuideStar U.K., headquartered in London, has filed for bankruptcy and is being liquidated. The Directory of Social Change (DSC), a London-based nonprofit specializing in information and training within the sector, ceased operating the GuideStar U.K. program this past October. The move also means DSC is no longer operating the efforts of GuideStar Data Services, CIC to support operations via sales of value-added data services to U.K. institutions.London-based GuideStar International (GSI) will now operate the free GuideStar U.K. Web site. The decision by DSC raises questions concerning the funding of organizations providing information about the nonprofit world as well as about the need for the wide range of such organizations.

Arthur "Buzz" Schmidt, who had founded GuideStar in the United States in 1994, started GuideStar U.K. in 2003. U.K. offered information on 163,000 charities in England and Wales.GuideStar International was formed in 2004 after the work of GuideStar U.K. prompted inquiries from other countries. GuideStar International partners are operating in Israel, Belgium and India. Tinsley C. Goad, CEO of GuideStar International, said that several other countries are in various stages of developing a GuideStar system.

In 2007, the existing GuideStar International and GuideStar U.K. merged, keeping the name GuideStar International. Following the combination, GuideStar International established GuideStar Data Services CIC to provide data, information and data analysis services to third parties like government, commercial institutions and academic institutes.

Ownership of GuideStar U.K. and GuideStar Data Services was transferred from GuideStar International to the DSC in March 2010.

Goad said that in November 2009 GuideStar had two distinct but related discussions regarding the organization. GSI began negotiations with TechSoup Global, a U.S.-based 501(c)(3) working to provide nonprofit and social benefit organizations with the technology resources and knowledge to operate to their full potential. Simultaneously, GSI was in discussions with the DSC about transferring GuideStar U.K.

Goad said the programs of the DSC and GuideStar U.K. were similar and compatible and that transferring operation of GuideStar U.K. to the DSC would then free GSI to focus more fully on its global mission. The transfer was completed in March 2010, with the DSC taking on full ownership and control of GuideStar U.K. and GuideStar Data Services operations, while licensing the name and trademark from GSI.

All that changed just a few months later.

"In September (of 2010) we were notified by the DSC that they intended to cease operations of GuideStar U.K.," Goad said.

That caused two things to happen. First, the GuideStar name and trademark in the U.K. reverted to GSI. The license automatically terminated and GSI recovered the rights to the GuideStar U.K. name and trademark. Second, in October, the board of GuideStar Data Services placed the company into administration, which Goad said in the U.K. is essentially like a Chapter 7 liquidation of the CIC to satisfy creditors as much as possible. Among the assets liquidated were the historical data that had been captured by GuideStar U.K. during the previous five years, Goad said.

Goad said it is not accurate to say that GuideStar U.K. is no longer functioning.

"In December (2010), GuideStar International re-launched an updated GuideStar U.K. Web site at www.guidestar.org.uk that continues to offer search and display of information on charities in England and Wales," said Goad. "We are working to ensure that the site becomes fully integrated with the entire range of TechSoup Global programs as well as with complementary offerings in the U.K."

Schmidt, who is chairman of the board of GuideStar International, declined to comment on DSC’s motivation for its decision. "I will say that we continue to believe that DSC operates a set of programs that are complementary to the GuideStar model, and that managing an online data-publication operation is not an easy thing," Schmidt said.

Schmidt, who started GuideStar with a staff of four, said that he found the United States to be somewhat more supportive of efforts like GuideStar than is the case in England, but there were other factors hurting GuideStar U.K. One of those factors was the decision by The Charity Commission, a government agency that registers and regulates charities in England and Wales, to offer the same information as GuideStar U.K.

"Once GuideStar U.K. was launched, (The Charity Commission) realized it should be doing some of the same things, so there emerged a competitive factor from the government," Schmidt said. "I guess you’d have to say that one of the successes of the GuideStar program was it set the stage for that."

Schmidt added that The Charity Commission is also encountering financial problems and is reviewing its programs.

The DSC did not return messages from The NonProfit Times asking about its relationship with GuideStar U.K. According to the report issued by administrator Anthony Kent, the cost of maintaining and improving the website was too high for the DSC to fund and a decision was made to cease trading.

The news met with mixed reactions across the sector.

Elizabeth Boris, director of the Urban Institute’s Center on Nonprofits and Philanthropy (CNP), said the issue was not even mentioned at an international conference she attended recently."I think we can infer that the economy has hindered their ability to make this site take off," Boris said.

Adrian Sargeant, who was born and educated in the U.K. and who holds the Hartsook Chair in Fundraising at The Center on Philanthropy at Indiana University, was not so forgiving. Among Sargeant’s criticisms were the fact that the organization received a no-bid contract from the British government to duplicate the work already being done by others and his contention that the money could have been put to better use than for what he called "a database with a web front end."

Sargeant said that the British treasury donated £2.885 million sterling ($4.464 million U.S.) to get things started. "What amazed me was the fact that the government decided to pump money into an initiative to build public trust and confidence, but that exists already," Sargeant said in a telephone interview, adding that the U.K. already has organizations doing what GuideStar U.K. set out to do.

"They (the government) arbitrarily decided to make a grant," Sargeant added.He also said that the GuideStar U.K. model was not self-sustaining. There was a question of members of the public being willing to pay to use it, Sargeant said, but the general public doesn’t constitute the bulk of users.