Join The NonProfit Times: or Become a member

Subscribe: Print Publication or Newsletter

Stay connected.
Stay informed.

General Ramblings: Letter Of The Law

By Paul Clolery - April 1, 2013

A draft of a letter of protest to be sent to the self-proclaimed watchdog group Charity Navigator is making its way around the sector. It regards Charity Navigator’s method for determining whether a charity is a good steward of donor largess.

Well, that should certainly scare them into changing the position.

As first reported by The NonProfit Times in an October 1, 2012 cover story and parroted recently in other outlets, Charity Navigator changed the way it rates organizations based on joint allocation costs. Charity Navigator decided to exclude joint allocation costs from its rating system, not including them in program expenses.

Joint allocation costs, under certain guidelines and criteria in accounting standards, allow a portion of certain materials to be split between program expenses and fundraising expenses. There is now also having to prove community impact.

The methodology is the polar opposite of how charities account for such things based on Internal Revenue Service (IRS) guidelines and Generally Acceptable Accounting Principles (GAAP).

Charity Navigator President and CEO Ken Berger acknowledged that the change would affect the rating of some charities. The organizations and their for-profit fundraising partners are starting to see those reduced ratings and they are horrified.

Where has the Fundraising Industrial Complex been for five months? Sending a letter to an organization where there has long been a scorched earth policy regarding charities seems a little tame compared to the damage being done to the reputations of charities.

Charities have long had love-hate relationships with watchdog groups. They grovel for a gold star from organizations that don’t even meet their own arbitrary standards. For example, Charity Watch, which until recently was known as the American Institute of Philanthropy, declines to put its own Form 990 on its website but insists on transparency by others.

Along with the IRS, just about every state attorney general and the National Association of State Charity Officials examine the finances of nonprofits. Charities spend tens of thousands of dollars to comply with the law but also contort to receive high ratings from rating services that in some cases are as inane as being one step above Yelp. Many of the so-called watchdogs have made the space between themselves and a television camera a very dangerous place.

Here’s the kicker. The vast majority of donors don’t care. Also in that October 1, 2012 issue were the results of a national study by Opinion Research on behalf of The NonProfit Times. Half of donors who make a gift as a result of a direct mail appeal do not do any Internet research about the organization before writing the check. That’s an increase from 47 percent during 2008. Less than one-quarter (22 percent) of donors who go online check in with a ratings agency, down two points from 2008 but up from 11 percent in 2005.

The U.S. Census Bureau reported there were 311.8 million Americans in 2011. Charity Navigator reported to The NonProfit Times that during 2011 it had 3.4 million unique visitors to its website. That’s barely 1 percent of all Americans.

All of the rating services claim that they have the donor’s best interest at the core of their missions. That’s the problem. They don’t have the best interest of the charitable sector at their core. There is one that does objectively examine records and the sector needs to take more notice.

The BBB Wise Giving Alliance (WGA) has long been tough on charities but has adjusted its position based on economic realities. In December 2009, the WGA began considering the recession’s impact when evaluating charities’ fundraising and program expense ratios.

At the time, WGA President & CEO Art Taylor said spending ratios have limited value in assessing the worth of a charity and too much reliance on them is unwise. “With the economy going sour, donors who fail to look beyond overhead ratios can unduly penalize good charities. We all need to be reasonable, particularly to those charities that otherwise meet rigorous accountability standards,” Taylor said at the time.

Leaders in the charitable sector have long said there needs to be self-regulation. Here’s that opportunity. The signees of the letter to Charity Navigator need to fund the BBB Wise Giving Alliance as a fair broker of nonprofit information. They need to coalesce around the WGA and anoint it as the service the sector trusts to provide fair and accurate assessments.

It is going to cost a few dollars to get the WGA scaled up to handle the increased responsibilities. If each of the signers allotted just $50,000 annually for the next few years, that would start the development of a truly independent industry self-enforcement agency. The foundation world provided millions of dollars over the years to GuideStar, which was the first organization to digitize the federal Form 990 and get it into the hands of the public and researchers. Perhaps some of the same forward thinkers with deep pockets can help to fund this effort.

Independent Sector and the Leadership 18 of United Way Worldwide need to convene a meeting and put forth the wisdom and financial resources to make this happen. For now, the for-profit marketing firms hired by charities need to stay away from what might develop. There needs to be more than a perception that the nonprofits have developed these guidelines without the influence of those who might profit from them. That might be an unfair assessment, given the many agencies that are of the highest integrity. Sometimes you just have to do things yourself for the long-run good.

Such a beefing up of the BBB will save money in the long run and prevent further contortion of nonprofit financial statements. The sector leadership needs to stand up and take control of how the sector is regulated and perceived.  NPT


Sponsored Podcasts

Welcome to the Raise & Engage podcast, a filters-off series for nonprofit professionals hosted by Blackbaud's straight-shooting expert Danielle Johnson Vermenton. During this open-mic session, you’ll hear honest advice to help YOU do more for your cause.

Episode 6: The Power of ‘No’ at Work|| daniellejohnson-76

You have a job description, but on any given day, you're probably doing dozens of things outside the scope of that description. Combine that with the challenge of a fast-paced environment and the shifting priorities of funders, colleagues, and board members and it’s easy to fall short of doing your best. By being mindful of your limitations and capacity—and saying “no” when your plate is full—you can actually do more for your cause. In the sixth installment of the Raise and Engage podcast Danielle Johnson and Robin Anderson discuss the power of saying “no” at work.

Episode 5: Professional Development: Getting Un-Stuck|| daniellejohnson-76

In the most recent episode of Raise + Engage, Danielle is back with Brian Reich from little m media to discuss how nonprofit professionals can stay motivated and energized in their day-to-day roles. Brian shares his experience working with nonprofits and the lessons and tips he's learn from and shared with them over the years, including tips for avoiding a professional rut, creating forward momentum in your career and pushing yourself outside of your comfort zone. If you're considering making a career move or want to ensure you're on the right path, you won't want to miss this inspo-packed episode!

Episode 4: Apps and Hacks to Stay (Mostly) Sane || daniellejohnson-76

Episode 4: Apps and Hacks to Stay (Mostly) Sane, is all about tips, tricks and tools for sanity. Blackbaud’s own interactive product marketer, Julia Lenz, joins host Danielle Johnson to share some high tech. (and no tech.) productivity tips to help nonprofit professionals stay sane in the crazy world of philanthropy.

Tune in to hear:

  • Tips for how to spend the first 30 minutes of your day
  • The benefits of 15 minute meetings
  • Why notebooks are still relevant to a successful organization
  • Ideas for better managing your inbox
  • Why you should take lunch outside the box
  • ...and much more!
Don’t forget to visit the #NoFilterNonprofit Hub afterwards to download our newest tip sheet10 Productivity Hacks for Nonprofits.

Episode 3: Tech. Connection: Solutions, Strategy, and Staff || daniellejohnson-76

Episode 3: Tech. Connection: Solutions, Strategy, and Staff In episode 3 of the Raise + Engage podcast, Danielle Johnson is joined by Chris Geady and William DaSilva, two IT experts in the nonprofit space, to talk technology integration for NPOs: when you need it, when you don’t, and how to do it successfully.

Tune in to hear:

  • When to say NO to integration
  • How to set your strategic plan before even looking at technologies
  • Ways to get your entire team on board
  • The importance of identifying a project lead
  • The RFP process - how it should and should not go
And William shares a story about a nonprofit that may or may not have still been using a typewriter. You don't want to miss this one!

Episode 2: From Socially Awkward to Socially Awesome! || daniellejohnson-76

According to Danielle Johnson, straight-shooting host of the Raise + Engage podcast series, if your staff members aren’t the number one advocates for your cause on social media, you’re failing. In the most recent episode, Danielle is joined by Blackbaud’s own social media guru Madeline Turner to discuss overcoming social struggles and creating a social ambassador program at your organization. This entertaining and insightful duo dishes on the importance of making your social media presence human, making the case for a formal social program to leadership, how University of Michigan turned a one time social media campaign into a long term social program, and how Madeline's mom unknowingly became a social ambassador on #GivingTuesday.

Episode 1: Corporate Culture & Development: Shake It Up! || daniellejohnson-76

In the premiere episode of Raise & Engage, Danielle is joined by three straight-shooting nonprofit rock-stars: Jodi Smith of Sanford Health Systems, Veronica Brown of Chicago Public Library Foundation and Ali Burke of Southlake Regional Health Centre Foundation. The group talks organizational culture, problem employees, why its important to celebrate and how to shake things up this year and build a better more authentic team that gets stuff done!


Stay informed, catch latest trends in the nonprofit space.

Subscribe to Our Free Newsletter

No obligation, unsubscribe at anytime.

Success! Check your email inbox.

Follow Us On Twitter

NPT 2016 Buyers' Guide

Newsletter Sign-up

click here to return to the previous page