The Better Business Bureau's Wise Giving Alliance (WGA) announced its completed charity standards and officially revealed a charity seal program that it will launch this summer. Though hoping to catch attention generated by the U.S. Supreme Court hearing of the most important fundraising case in 15 years earlier that day, WGA somewhat downplayed the timing.
Art Taylor, president and CEO of WGA, acknowledged the case and the differences of opinion the case brought out within the sector. For example, Taylor's alliance filed an amicus brief in support of the state of Illinois in the Ryan (Madigan) v. Telemarketing Associates. Independent Sector, however, on whose board Taylor serves as vice chair, filed in support of the fundraisers.
"What we are announcing is not in reaction to the Ryan case or to any specific charity accountability scandal," he said. "The steps we are taking to make our sector more accountable have been long in preparation."
The three-year revision process resulted in 20 standards (down from 23) covering governance and oversight, effectiveness, finances, and fundraising and informational material. The standards are more detailed, and in light of the emergence of the Internet and innovative fundraising techniques, more up to date than the previous standards, last revised 21 years ago.
The financial section holds the most standards and held the most change. Organizations must spend at least 65 percent of their total expenses on program activities, and spend no more than 35 percent of related contributions on fundraising. Previously, standards called for at least half of total income be spent on programs and activities. Organizations must also keep unrestricted net assets to no more than three times the past year's expenses or three times the current budget (whichever's larger). They must also make their annual financial statements available on request. The accounting standards to which organizations must prepare audits depend on their size, but any organization with revenues greater than $250,000 should have an audit conducted in accordance with generally accepted auditing standards.
The financial statements should include a breakdown of expenses, showing the portion allocated to program, fundraising and administration. Joint cost allocations must be accurately reported in the financial statements. Boards must also approve the current fiscal year budget, including outlined projected expenses for major program activities, fundraising and administration.
To meet the governance standards, organizations must have a governing board of at least 5 voting members that holds at least three meetings spread throughout the year. Also, the no more than 10 percent or one person (which ever is greater) of the voting board members can be directly or indirectly compensated by the organization. And no transactions can be made in which board or staff members have material conflicts of interest with the charity resulting from relationships or business affiliations.
The effectiveness standards demand that organizations have a board policy of, at least every two years, assessing the organization's performance and determining future actions. Such assessments must be submitted to the board.
In terms of fundraising and informational materials, all must be accurate, truthful and not misleading - whether on electronic or traditional media. Informational materials that must be made available on request include mission statement, past year's program service accomplishments, a roster of officers and board members, and financial data.
The national seal is a newer effort and not quite ready for prime time. It will be rolled out in a pilot program this summer, most likely in New York City and Houston. Julia Erickson, executive director of City Harvest in New York City, and a member of the standards review panel, said local BBBs would be responsible for rolling out the seal program locally, and it will likely be years before that is widespread.
Taylor explained that to help cover the costs of monitoring and administering the seal program, "national charities will be charged a sliding scale fee based on the level of the charity's contributions revenue."
He later explained that the organizations raising $1 million or less would be charged $1,000 for use of the seal. Those raising at least $100 million would be charged at least $15,000. And there would be other break points in between. Organizations would also have to sign a licensing agreement in order to use the seal. Only the specific organizations that were evaluated and met the alliance's standards would be allowed to use the seal, so a local chapter of a national system would not necessarily be allowed to use the seal.
The alliance hopes to eventually generate one-third of its revenues from the seal program, with the other two thirds coming from the Council of Better Business Bureaus and foundations as well as public support, Taylor said.
Taylor said that if an organization that is approved to use the seal acts in a way that jeopardizes its rating, the alliance will not wait for the end of its typical 24-month period to reevaluate.
"This is the first time the alliance or either of its merger partners has ever allowed a charity to state it has met our standards," Taylor said.
Bennett Weiner, chief operating officer of the alliance later added, "The intention is that they meet all the standards in order to have the seal."
Copyright © 2003 The NonProfit Times.