BBB Wise Giving Alliance: Helping Grantees Measure Up

(Laura Cronin is a frequent contributor to PhilanTopic. In her previous post, she provided an update on rebuilding efforts in tsunami-ravaged Japan, with a focus on the arts.)

Because so many high-profile charitable gifts in the United States come from institutions that ostensibly know what they're doing, it's easy to lose sight of the fact that individual donors still give far more than foundations, corporations, and estates -- combined.

Of the $290.89 billion donated to nonprofit organizations in 2010, some 73 percent ($211.77 billion) came from individuals. That figure includes more than a few "mega-gifts" from wealthy individuals who employ philanthropic strategies similar to those of professional grantmakers. Still, most charitable giving is done by individuals who don't think a whole lot about theories of change, logic models, and giving strategies.

Through its Wise Giving Alliance and local BBBs, the Better Business Bureau is working to extend its outreach to individuals who come to the charitable marketplace without the benefit of a philanthropic advisor or a well-informed board. Last revised in 2003 by a panel of nonprofit experts (with extensive input from the charitable sector), the BBB Wise Giving Alliance Standards for Charitable Accountability suggest guidelines and minimum requirements in four key aspects of nonprofit management: governance, effectiveness, finance, and fundraising/communications.

According to Claire Rosenzweig, president and CEO of the BBB of Metropolitan New York, "[T]he Charity Accountability Standards are intended to help create a more informed charitable marketplace and to give prospective donors a framework they can use to make their own decisions about where to give." Rosenzweig believes nonprofits should use the standards as a sort of checklist to remind staff of the things they need to do to keep an organization operating ethically and in compliance with regulations. More broadly, says Rosenzweig, they can be used to improve an organization's accountability and transparency.

Because the BBB has given so much thought to what makes an effective nonprofit tick, nonprofit groups that solicit and depend on the public for the bulk of their revenues might want to take the additional step of having their organization formally reviewed. In the Empire State, the New York Philanthropic Advisory Service of the BBB evaluates charities in the metropolitan New York area against the standards and publishes a review of its findings that is available to the public online. A positive review is one way of highlighting the soundness of your organization while also reminding your managers about the fundamentals of good management practice. Seminars on how to apply the principles embodied in the standards are offered year-round.

Professional grantmakers might be surprised to learn which standards are the most difficult for nonprofits to follow. In New York, the five "most-failed" standards all have to do with effectiveness and communication. They are:

14. Board-Approved Budget. Have a board-approved annual budget for your current fiscal year, outlining projected expenses for major program activities, fundraising, and administration.

16. Annual Report. Have an annual report available to all, on request, that includes:

• your mission statement;
• a summary of your program service accomplishments over the past year;
• a roster of the officers and members of your board of directors; and
• financial information that includes (i) total income in the most recent completed fiscal year, (ii) expenses in the program, fundraising, and administrative categories, and (iii) ending net assets.

6. Effectiveness Assessment Policy. Have a policy of assessing, no less than every two years, your organization's performance and effectiveness, and determining future actions required to achieve your mission.

17. Website Disclosures. Include on any site that solicits contributions the same information that's in your annual report, as well as the mailing address of your organization and electronic access to your most recent IRS Form 990.

7. Effectiveness Reporting to Governance. Submit to your organization's governing body, for its approval, a written report that outlines the results of the aforementioned performance and effectiveness assessment and recommendations for future actions.

Data from charities that solicit nationally shows similar patterns, with most charities around the country failing to meet the same standards as the ones that trip up New York-based charities. Charities in other regions were also found to have trouble with addressing donors' privacy concerns (#18) and convening the board on a regular basis (#3).

The standards also help guide nonprofit leaders through the delicate dance of negotiating partnerships with often-demanding corporate donors.

19. Clearly disclose how the charity benefits from the sale of products or services (i.e., cause-related marketing) that state or imply that a charity will benefit from a consumer sale or transaction. Such promotions should disclose, at the point of solicitation:

• the actual or anticipated portion of the purchase price that will benefit the charity (e.g., 5 cents will be contributed to abc charity for every xyz company product sold);
• the duration of the campaign (e.g., the month of October); and
• any maximum or guaranteed minimum contribution amount (e.g., up to a maximum of $200,000).

When it comes to these types of partnerships, the public wants to know about the charitable bottom line. Corporate donors would be wise to pay attention as well and to take into account how their nonprofits partners are perceived by individual donors when they sit down to design a cause-related program.

In an effort to supplement its work on charity accountability, the BBB Wise Giving Alliance along with the BBB Foundation of Metro New York helped organize an initiative to address the effectiveness and transparency issues head on. Developed in partnership with GuideStar and Independent Sector, Charting Impact is designed to help nonprofits sharpen their thinking about their work, create a standardized report about their plans and progress, and share that report with people looking to invest their money, time, and attention. To start, nonprofits are asked to answer five "deceptively simple" questions:

1. What is your organization aiming to accomplish?
2. What are your strategies for making this happen?
3. What are your organization’s capabilities for doing this?
4. How will your organization know if you are making progress?
5. What have and haven’t you accomplished so far?

Armed with the answers to those questions, nonprofits are invited to complete an organizational profile with a unique URL that is shared on the Charting Impact site, the GuideStar site, and -- in the future -- with other Web sites and information providers.

"Developing a self-reporting framework that enables nonprofits to gauge their mission-driven impact is a ground-breaking endeavor that the BBB was pleased to embark upon with Guidestar and Independent Sector," says Rosenzweig. And the information the BBB is capturing on behalf of individual donors can be useful for institutional funders, as well.

For nonprofits seeking to distinguish themselves in a vast sea of worthy causes and deserving organizations, a Charting Impact profile is a new and exciting platform for getting the word out to prospective donors, volunteers, and other stakeholders. The format of the profile is thoughtful and well designed, and it forces nonprofit development and communications professionals to be both clear and concise about their organization's goals and results. If you haven't checked out the site, take a few minutes to do so. It will be time well spent.

-- Laura Cronin