Donorsinthe

When Charities Don’t DiscloseDark

WISEGIVING GU

IDE

A P U B L I C A T I O N O F T H E B B B W I S E G I V I N G A L L I A N C E : H O L I D A Y 2 0 0 7

TM

A Publication of TheBBB Wise Giving Alliance

The BBB Wise Giving Guide is

published quarterly to help

donors make more informed

giving decisions. This guide

includes a compilation of the

latest evaluation conclusions

completed by the BBB Wise

Giving Alliance.

If you would like to see a

particular topic discussed

in this guide, please email

suggestions to

give@council.bbb.orgor write to us at the

address below.

Holiday Issue 2007

BBB Wise Giving Alliance

4200 Wilson Blvd.

Suite 800

Arlington, VA 22203

(703) 276-0100

www.bbb.org/charity

BBB Wise Giving Guide Layout

and Production — art270, inc.

Staff members from the

affiliated Council of Better

Business Bureaus, Inc., provide

administrative, personnel,

media, accounting, information

technology, legal and office

services to the BBB Wise

Giving Alliance.

H. Art TaylorPresident and CEO

Bennett M. WeinerChief Operating Officer

Tierra C. BuggsBBB Charity Coordinator / Administrative Assistant

Kelley BevisResearch Analyst

Margery K. HeitbrinkEditor, Wise Giving Guide

Gayle S. LorenzResearch Analyst

Julie A. RizzoDirector of Development

Rebecca UwaifoResearch Analyst

Shawn Van GorderAssociate Director, Charity Evaluation

Copyright 2007BBB Wise Giving AllianceThe name Better Business Bureau is a registeredservice mark of the Council of Better Business Bureaus, Inc.

BBB Wise Giving AllianceStaff

BBB Wise Giving AllianceBoard of Directors

INSIDE2

9Donors in the Dark

10List of Nationally Soliciting Charities

46Q&A About the Alliance

How to Read the List ofNational Charities

45National Charity Seal Program

48Standards for Charity Accountability

Douglas Bauer – ChairRockefeller Philanthropy Advisors • New York, NY

Ernest B. Gutierrez, Jr. – Vice ChairThe Kresge Foundation • Troy, MI

Marcus Owens – TreasurerCaplin & Drysdale • Washington, DC

Virginia M. Esposito – SecretaryNational Center for Family Philanthropy • Washington, DC

Thomas M. BartholomyBetter Business Bureau / Charlotte • Charlotte, NC

Evelyn BrodyChicago-Kent College of Law • Chicago, IL

Margery S. BronsterBronster, Crabtree & Hoshibata • Honolulu, HI

Michelle L. CoreyBetter Business Bureau / St. Louis • St. Louis, MO

John EdiePriceWaterhouseCoopers • Washington, DC

John H. Graham IVAmerican Society of Association Executives • Washington, DC

Cheryl Lamm GunnMcMaster-Carr Supply Company • Elmhurst, IL

Irv KatzNational Human Services Assembly • Washington, DC

James E. McHaleW. K. Kellogg Foundation • Battle Creek, MI

David E. OrmstedtWiggin & Dana • Hartford, CT

Joseph R. ReynoldsWilliams Group • Grand Rapids, MI

H. Art Taylor - Ex-Officio

BBB Wise Giving Alliance • Arlington, VA

47Holiday Giving Tips

If you wondered, for even a split second,

whether this was indeed the BBB Wise

Giving Guide you know from the past,

I wouldn’t be surprised. Yes, this is it,

with a brand new look. And if the

changes have brought about the effect

we sought, you’re already finding the

pages livelier and easier to read.

What drove our search for change was the jump in

our report production. As the number of charities we

review has grown—more than doubling in the past two

years—the list has become more cumbersome. Given

the scope of our evaluations, it will never be simple,

but we were sure it could be more user-friendly. That’s

what we hope the re-design and added colors have

achieved. But you are the judges here, and we’d be

delighted to have your comments on the changes

and your suggestions for future ones. Write us at

give@council.bbb.org or 4200 Wilson Boulevard,

Suite 800, Arlington, VA 22203.

Perhaps you’ve noted something else new—the

BBB torch symbol has taken on a contemporary look.

You may also have seen the BBB tagline “Start with

trust” on the Contents page. That tagline is just as

applicable to donors as to consumers, a reminder that

there are standards for trust in charities as well as

business, and that the Alliance’s application of its

Standards for Charity Accountability helps donors

give with trust. As our cover article points out,

charities that disclose the information needed for

Alliance review are expressing the openness that

strengthens public trust in the charitable sector.

I hope that you will give generously, and with

trust, this holiday season. We at the Alliance thank

you for all you have given us in the past year, and

wish you peace and fulfillment in 2008.

H. Art Taylor, President

president’sMESSAGE

1Wise Giving : Holiday 2007

TWhen the shades are down, you can

only guess what’s on the other side.

That pretty well describes what happens when you

ask us about a charity and learn only that it hasn’t pro-

vided the information we’ve requested for a BBB Wise

Giving Alliance review.

Though inquirers don’t often tell us exactly what

they’ve made of that reply, we suspect that their respons-

es run the gamut from suspicion that the non-disclosing

charity must be hiding something to conviction that there

must be a good explanation for its silence. Or the inquirer

may simply be stumped.

There’s no single “right” way to interpret charities’

appearance on the “Declined to be evaluated or did not

respond” list in this magazine. There’s no single reason

why charities don’t take part in the Alliance’s charity

review program.

But we can provide some light. There’s much that

you may find helpful in understanding the category we

call “nondisclosure” for short—how organizations move

into it, their explanations for being in it and even for

staying out of it. Ultimately, though, our true subjects are

transparency and accountability, abstract words with

down-to-earth meaning for charities and the public that

supports them. They’re what’s missing when the shades

are down.

Accounting? Accountability?Without getting lost in elaborate definitions of

“transparency” and “accountability,” let’s just say that

they’re nearly inseparable—that willingness to be open, to

disclose, indicates readiness to stand behind the informa-

tion offered or the policies followed, to take responsibility

for what’s done.

In charity, transparency has long been nearly syn-

onymous with financial disclosure. The Internal Revenue

Service, which began requiring charities to file financial

data in the 1940s, has naturally spotlighted finances. The

IRS Form 990, which hundreds of thousands of charities

file annually, consists primarily of detailed financial

Donors in the DarkWhen Charities Don’t Disclose

2

information. Publicly accessible at www.guidestar.org,

the 990 is sometimes considered the resource for people

looking to “know” about a charity. To aid donors who

have asked about the charities soliciting them, state char-

ity officials have also focused on finances, often providing

summary financial information on their web sites.

The spotlight on charity finances, though common,

has not been universal. Even in the first decades of the

twentieth century, the National Charities Information

Bureau, one of the merger partners that formed the BBB

Wise Giving Alliance, was assessing multiple aspects of

charities, such as whether their governance was active

and responsible, their promotion and publicity ethical

and their fund raising free from pressure—as well as how

they spent their funds.

In 2004 the GAO announced that after 83 years as

the General Accounting Office, it had become the

Government Accountability Office. Though the GAO says

that the middle-name change had less to do with new

functions than with better describing functions long-held,

it’s a telling acknowledgment that “accountability” goes

beyond financial accounting, to programs, policies, truth

and transparency.

That’s our stand, too. As we detail below, we deal

with accountability and transparency as they’re

expressed in publications, solicitations, audits, board

actions and policies.

The first move is yoursIt’s sometimes alleged that the Alliance goes looking

for charities to evaluate. That’s not the case. We ask for

information because you do. When you say, “What can

you tell me about Charity ABC?” we can’t answer if we’ve

not approached ABC due to lack of previous inquiries.

Following your question, though, we check whether ABC

is soliciting nationally and thus falls within our range of

review. That established, we send what may be a series

of letters.

The first letter introduces the Alliance and the

Standards for Charity Accountability and asks Charity

ABC to complete an online questionnaire and provide

copies of certain basic documents within the next three

n the Darks Don’t Disclose

3Wise Giving : Holiday 2007

weeks, for an evaluation in relation to those standards. If

there’s no response by then, we ask again for the infor-

mation, again within three weeks. If necessary, there’s a

third letter enclosing a draft report that states that the

charity has not provided current information. This letter

says that the draft report will be distributed in two weeks

from the letter’s date and again invites the charity to

provide information.

The first and third letters are sent by certified mail.

The majority of national charities that receive those

letters provide the requested information. That’s impor-

tant to keep in mind. A few others respond, but only to

say they’re declining to be evaluated in relation to the

Alliance’s standards. From some there is silence.

There’s a little more silence than there used to be. As

the Alliance extends its reporting, following up more and

more of the inquiries it gets from donors, the number of

charities that do not disclose has grown, from about 22%

to 30% of all we cover.

Are we looking for the moon? While “disclosure” may conjure up images of outing

a mole in a spy network or a skeleton in the closet, that’s

not the sense it has here. We’re not looking for revela-

tions. What we request is detailed but quite mundane:

information about governance, finances, organizational

self-assessment, solicitations and other materials directed

to the public.

Gathering this diverse data and answering well over a

hundred questions online is no one’s favorite job. Even the

many charities that complete our questionnaire, appreciate

the range of areas we include and consider the purpose

well worthwhile don’t hesitate to tell us that the job is oner-

ous, though they’re asked to do it only every two years.

Obviously, though, the requests we make to charities

describe a purpose beyond disclosure. Information they

file isn’t just ticked off and stored away or passed on to

anyone who asks. It’s evaluated in relation to Standards

for Charity Accountability. The result of the evaluation is

published. And if charities don’t file, that’s reported, too.

Though some charities think we should keep mum in

those cases, we think donors deserve to know the out-

come, whatever it is, of our inquiries on their behalf.

Donors’ desire for help is documented. A key finding

of a BBB Wise Giving Alliance survey commissioned sev-

eral years ago was that 70% of Americans said it is diffi-

cult to tell whether a charity soliciting their contribution

is legitimate—that is, actually does the kind of charity

work it says it does and operates ethically.

Charities talk back It should be no surprise that charities that don’t

answer requests to file information rarely write or phone

to say why.

Still, it’s useful to know the reasons they give. Several

dozen BBBs around the country evaluate charities as the

Alliance does. Eight of them recently sent out a short

survey to almost 900 charities asking why they had

not responded to the request to complete the BBB

questionnaire. About 10% answered. Here’s what a

few of them said:

• It is our current opinion that it is not worthwhile to

devote the extraordinary amount of time necessary

to complete your form.

• Your standards for evaluation do not take into

account charities such as ours.

• We don’t agree with some of the standards.

• We are [already] audited by state and federal

agencies regarding program and fiscal compliance.

• Being seen as not meeting standards makes the

charity look worse than not participating.

• We do not make our financial records public.

...the number of charitiesthat do not disclose hasgrown, from about 22% to30% of all we cover.

4

“

”

In the view of some charities, then, the charity review

program takes too much time, is inappropriate for the

organization addressed, or will be of no use to anyone.

Or the information is already publicly available, or what’s

requested is no one else’s business. Or the standards

themselves are faulty. Or if there’s a standard not met,

obscurity beats exposure. Similar responses, outlined

below, come to the Alliance from national charities.

We don’t assume that nondisclosure is proof of

bad faith or worse. We know that it can be attributed to

letters that got buried on someone’s desk or came in the

midst of a crisis that required all staff energies. We agree

that our questionnaire is long and that a “file by” date can

be annoying (though we’re as familiar with term-paper

syndrome as any student). And unless you’re an

American Idol contestant eager for public appraisal,

the prospect of evaluation can be daunting.

Decades of experience tell us, though, that

nondisclosure results at least as often from charities’

assumptions about themselves, their donors and their

role on the public scene as from overly full agendas,

philosophical disagreement or organizational stage

fright. These are reasons we sometimes hear:

Nondisclosure reason #1— “Transparency is

all about money”

“Transparency” is a celebrated value these days, a

quality that every sort of institution is expected to

demonstrate. It sounds simple: being open rather than

closed to public view and scrutiny, welcoming rather than

rejecting, inhabiting a glass house rather than a bunker.

But too many charities think that transparency is

only about finances. Tell donors how their dollars were

spent and you’ve proven your commitment to openness.

It’s an easy way out, because financial reporting is, for

most well-known charities, routine and often required by

law. The annual form they file each year with the Internal

Revenue Service (Form 990) is available to all. Many

states also require financial reporting and make filings

publicly available.

Finances do matter. The Alliance’s Standards for

Charity Accountability include numerous finance-related

requirements. With good reason, donors are interested in

how their money is spent. But charities are about more

We don’t assume that nondisclosure is proof of bad faithor worse.

5Wise Giving : Holiday 2007

6

than income and expenses. Numbers and percentages

might look great while solicitations aren’t forthright

about how donated funds will be used, there’s no concern

for donor privacy, or the board isn’t actively or responsi-

bly governing.

Nondisclosure reason #2— “Obeying the law is

transparency enough”

“Look, we give the IRS what it asks for and our IRS

report is public information. We give reports to the foun-

dations that fund us. We meet filing requirements of

state regulators. Enough, already. We’ve amply shown

we’re transparent.”

True, charities must do a great deal of reporting to

one body or another if they are to safeguard their legal or

financial positions. Again, required reporting is usually

mostly about money. But charities that are ready to go

beyond what’s required of them by government or grant-

makers demonstrate that for them transparency is a com-

mitment to openness, to respect for inquiry. Whether an

Alliance evaluation concludes that a charity meets all

standards or not, the fact that the information on which it

was based was supplied voluntarily lends a luster that

enforced disclosures lack.

Nondisclosure reason #3— “See how

much information we publicly display”

Some charities think that transparency is about

quantity of information. Indeed, it can be helpful for

charities to put financial information and annual reports

on their web sites or make it readily available by other

means. The Alliance standards call for such measures

and donors can learn from them.

But donors are often without the tools to determine

whether the reported expenses are accurately represented

or where they stand against defined criteria. They don’t

know what to look for in an annual report. They’re

unlikely to find on a charity web site information about

the oversight activities of the board—which is after all

ultimately responsible for the use of contributions—or

how some fund raising expenses are being reported

(or not).

Nondisclosure reason #4— “Our donors know

we’re beyond reproach”

True, giving is often a matter of good intent and

blind trust. But increasingly, people want information

before they give. Many charities seem unaware that

potential givers are more likely to be put off by a nondis-

closure listing than by a conclusion that a charity did not

meet certain Alliance standards—specific points that they

can then weigh for themselves. They want an outside

view, from a disinterested party, which they can take

or leave.

Nondisclosure reason #5— “How can you ques-

tion us when our cause is so compelling and our dedica-

tion so profound?”

To some charities, being asked about how they oper-

ate—about the activity of their board or their commit-

ment to evaluating their work, for example—appears

meaningless if not insulting. These organizations have

trouble acknowledging that focus on “doing good” doesn’t

rule out giving time to building an effective board, devel-

oping sound budgets or assuring donor privacy—activi-

ties that strengthen rather than detract from the mission

that drives them.

Nondisclosure reason #6— “Sorry, but we’re

totally unique”

Some charities, understandably absorbed in their

own work, don’t see themselves as part of a group

with shared interests. Particularly if they are small or

inexperienced, they may have no idea that standards

of accountability exist or that they can profit from

considering principles and practices developed by

other charities over the years.

But if there’s any proofneeded that charity, despiteits rich diversity, is publiclyperceived as a community,it’s that a single charitablescandal will impact givingon charity generally.

7Wise Giving : Holiday 2007

More broadly, they don’t see that their actions

can affect “charity” as a whole.

But if there’s any proof needed that charity, despite

its rich diversity, is publicly perceived as a community,

it’s that a single charitable scandal will impact

giving on charity generally. Likewise, a few

well-publicized instances of charitable miscon-

duct are likely to set the government thinking

about regulating all charities.

From that perspective, every charity that

commits itself to transparency and accountability helps

strengthen the respect (and justify the privileges) that

America gives to charity and charitable giving. And it

differentiates itself from those unwilling to do the same.

Nondisclosure reason #7— “As a religious

group, we believe that only a review by the proper

religious organization is appropriate”

When a church or other religious group solicits only

its members or congregants, the Alliance does not review

it. When such a group solicits the public beyond its

congregation and potential donors ask the Alliance for

information, however, the Alliance considers it appropri-

ate to ask it, like other publicly soliciting national

organizations, to file information for evaluation.

Nondisclosure reason #8— “We don’t feel we

should divert funds from our mission to pay for an

Alliance review”

Whoa! Don’t believe it. This excuse, which donors tell

us they’ve heard, is simply untrue. There’s no charge to a

charity for an Alliance evaluation.

Nondisclosure reason #9— “We simply don’t

agree with all your so-called ‘Standards for Charity

Accountability’”

Even among charities that meet all Alliance stan-

dards, there’s bound to be disagreement about the rela-

tive value of individual ones, and donors who use

Alliance reports are likely to weigh some standards

more heavily than others.

But the Alliance’s standards have broad respect

and acceptance, due in large part to the way they were

developed. They weren’t cooked up in a back room by

self-appointed accountability pros. Instead, there was

an open process that drew on independent research on

donor expectations, professional and technical assistance

from a variety of philanthropic experts, and numerous

comments from donors and charities, over a three-year

period.

It’s sometimes charged that the standards, though all

right as far as they go, lack an important point: they don’t

say how effectively an organization is carrying out its

mission. The standards do recognize the importance of

this subject, requiring that organizations assess their own

performance and effectiveness at least every two years.

But judging effectiveness is so subjective and charity so

diverse that it’s unlikely that a single measure could be

devised for the job. Even if it could, there’d still be a need

for truthful solicitation and good governance practices.

Charities are free to take exception to the standards

and how they’re applied. Filing information gives them

the chance to make their case to donors. We invite and

...every charity that commits itself totransparency and accountability helpsstrengthen the respect (and justify theprivileges) that America gives to charityand charitable giving.

welcome a charity’s comments on not meeting a particu-

lar standard so that we can include them in our report.

And as recounted at length in the last issue of the Guide,

many a charity that fails to meet standards on the first

round of review finds it can to do so by the time its report

is made public.

In the light of experienceYou’ve read all these hypothetical viewpoints, and

where do they leave you? Aware of attitudes that float

about, maybe, but still in the dark about which to attach

to the one non-disclosing charity you’re interested in.

And unless you ask that charity and get an answer that

makes sense to you, you’re left to guess.

But there are yet other views on this whole nondis-

closure issue that are perhaps the most illuminating of

all. They’ve been expressed by charities that do file with

the Alliance, the ones that predominate on the multi-

page listing at the center of this magazine. These are the

charities that enter the evaluation process and persist to

the published report, even at times to a conclusion other

than “meets all standards.” Their experience with disclo-

sure throws light on the lack of it. Here’s what some have

told us in recent months:

• If you value accountability, you make time available for

the filing process.

• We’re a small charity, but when we can show through

an Alliance evaluation that we meet the same standards

as the giants who are working on the same health prob-

lem we are, we’re proud of it and think our donors will

be, too.

• We strongly disagree with one of the standards and

don’t meet it, but we have little respect for some of the

groups on the nondisclosure list and don’t want to be

seen in their company.

• We see the standards as baselines, and any charity that

doesn’t meet one or two should know why and be able

to explain it to donors.

• We want to differentiate ourselves from charities that

don’t disclose.

• We didn’t meet all the standards at first, but when we

realized that the practices called for would clearly bene-

fit our organization, we adopted them.

• We see accountability as a growing issue for donors,

who find it hard to assess charities without evaluation

from an independent source.

• People are looking for information. Transparency

matters, whatever the outcome of the Alliance report.

All these statements, from the practical to the

abstract, tell much about how the charities behind them

reacted when the Alliance’s requests for information

began arriving. While they didn’t all rejoice at the

prospect of responding, they didn’t immediately reject

the requests as annoying impositions, harmful diversions

or invitations to public disapproval. They weighed the

effort, the risks and the benefits and chose to invest in

accountability.

Donor powerCharities want the public trust. We think they need

to trust the public, too. We don’t know if all the charities

reluctant to file information don’t think donors can weigh

the Alliance’s conclusions for themselves or whether

they’re not sure if they can convincingly state their case.

Or, as we’ve said above, what their reasons are.

Whatever the answer, your power can be enormous.

Filing with us is voluntary, and we wouldn’t have it any

other way. Nor would you, we believe. But that doesn’t

mean there’s no role for encouragement. One charity’s fil-

ing often leads others to do so. We at the Alliance work to

acquaint more charities with the standards and the value

of transparency and accountability.

Your voice, though, is ultimately what counts. If a

charity on the nondisclosure list is of interest to you, let it

know you’d like it to file. The list is never static, and you

may well help shorten it.

Charities want the publictrust. We think they needto trust the public, too.

8