Sealed for Good

Maryland charities benefit from ‘Standards for Excellence’

The Prince George’s Child Resource Center is finding that it literally pays to be good. Since the Largo, Md.,

charity received a “Seal of Excellence” a year ago from the Maryland Association of Nonprofit Organizations, it has prospered even in the slow economy, says Marti Worshtil, the center’s executive director.

After qualifying for the seal, which the organization is allowed to use on all of its documents, “We realized we were suddenly getting funding from foundations that had never looked at us before,” she says.

The group received its first grants from two Washington funds, the Morris & Gwendolyn Cafritz Foundation and the Eugene and Agnes E. Meyer Foundation, for $18,000 and $10,000, respectively. Says Ms. Worshtil, “One funder saw the seal on our wall and said, ‘You should be congratulated.’ She knew immediately what it symbolizes.”

About 30 Maryland charities have attained the credential, which signifies that the organization has met the Standards for Excellence that the Maryland Association of Nonprofit Organizations, an umbrella group, created in 1998 to boost public trust in charities.

Now many other states are planning similar efforts, and the standards have attracted attention from nonprofit groups in places as far away from the association’s Baltimore headquarters as Turkey and Japan. With the help of grants from the Carnegie Corporation of New York and the Atlantic Philanthropies, the association, which represents 1,300 organizations in its state, is working with five other state nonprofit umbrella groups to adapt the guidelines for their own members.

The 55 Maryland standards go beyond minimum legal requirements and set down ethical rules and performance benchmarks for charities’ conduct in eight areas of nonprofit management: mission and programs, governing boards, conflicts of interest, human resources, financial and legal accountability, openness and disclosure, fund raising, and public policy and public affairs.

For example, the standards require that nonprofit trustees be subject to term limits and that boards put their conflict-of-interest policies in writing; that, over a period of five years, a charity should spend no more than a third of its revenue on fund raising; that organizations honor donors’ intentions for their gifts; and that charity employees not be compensated by a percentage of funds raised or any other commission formula. (The full standards are available at: http://www.standardsforexcellence.org.) To help its member charities meet the standards, Maryland Nonprofits, as the association is known, offers educational programs and management assistance.

A Growing Trend

The Maryland standards are part of a growing effort by watchdog groups and charities to ensure that nonprofit groups are complying with ethical and legal standards. The Better Business Bureau Wise Giving Alliance, the country’s most prominent charity watchdog, announced in March that it had revised its accountability standards and would begin allowing organizations that met its guidelines to earn a Wise Giving Seal of approval, which qualified groups can use in fund-raising appeals and advertising (The Chronicle, March 20).

Watchdog organizations frequently see a rise in interest from charities in the wake of scandals, as reputable nonprofit groups rush to put distance between them and their disreputable peers, says Paul D. Nelson, president of the 25-year-old Evangelical Council for Financial Accountability, in Winchester, Va. His group, which certifies that religious groups comply with ethical standards, received its biggest increase in applications for membership following the televangelist scandals of the 1980s.

“Anytime any charity has a problem, it affects them all,” he says. “The whole community feels the effects of the Catholic Church [and its sex-abuse scandals]. The whole community feels the effects of the Red Cross and its problems after 9/11.” Those recent incidents — coupled with the economic downturn that has depressed giving, he says — have created an environment ripe for reform.

The Standards’ Origins

The goal of the Maryland standards, says Amy Coates Madsen, standards program director for Maryland Nonprofits, is to encourage charities to regulate themselves and thus increase trust in them by the public, and by potential donors and volunteers.

“We wanted to do something really helpful for nonprofits in Maryland in accountability,” says Ms. Madsen. “It wasn’t our goal to create something that would be used outside Maryland’s borders. But as soon as the ink was dry, we started getting calls from groups in other states asking to replicate the program.”

The Maryland Standards for Excellence had their origin in the mid-1990s, when, prodded by national headlines about scandals involving misuse of funds at United Way of America and the Foundation for New Era Philanthropy, Maryland Nonprofits’ executive director, Peter V. Berns, its board of directors, and Margaret Williams, head of a Baltimore children’s charity called Friends of the Family, began an effort to boost public trust in charities.

Spurred in 1995 by a $100,000 grant from the Charles Stewart Mott Foundation, the group held a two-day “leadership summit” on accountability with nonprofit executives, government regulators, and ethics experts. A committee led by Ms. Williams followed up by scouring business and professional ethics codes for ideas. The research eventually led to the creation of the Standards for Excellence certification program.

To become certified, says Ms. Madsen, organizations must pass a voluntary review of all aspects of their operations by their local nonprofit peers. If a charity that has been certified is subsequently suspected of not meeting the standards, Maryland Nonprofits can investigate and, if necessary, deny use of the seal. Program participants must also be recertified every three years. Some applicants for the seal, Ms. Madsen notes, have not earned it, though she would not say how many have failed to make the cut.

Since 1996, says Ms. Madsen, Maryland Nonprofits has spent $595,000 of its own funds on the project, along with $143,000 in local foundation and corporate contributions. Maryland charities that participate in the program pay the group a $250 fee to enter the certification process, which can take from as little as a few weeks to more than a year to complete, says Ms. Madsen.

Getting Certified

Maryland charity leaders whose groups have attained certification say that the process is rigorous. Going through it is like “hitting your head with a hammer — it feels good when you stop,” says Bill Ewing, executive director of the Maryland Food Bank, in Baltimore. His organization completed certification in three months, he says, though he feels that most charities would need a year to finish.

Mr. Ewing says the standards program has energized his group’s trustees and helped speed his organization’s maturation process. “The staff has a wonderful frame of reference for understanding what our core values are,” he says. “I can give the Standards for Excellence book to anyone and say, ‘Here, this is what we’re about.’ It’s the most eloquent statement I can make.”

The seal impresses donors, according to some charities that have received certification. Some grant makers have begun asking on their grant applications whether charities have attained the seal, says Mary Ellen Vanni, executive director of Fuel Fund for Maryland, in Baltimore.

“We even received a donation that included a list of everyone this particular donor gave to,” she says, “and the list was all the groups that had received certification.”

The program’s example may be influencing many of the state’s charities, according to a study Maryland Nonprofits completed last year. For example, the study found that 93 percent of Maryland charities (and 99 percent of Maryland Nonprofits members) have written mission statements, up from 85 percent in 1996, before the standards were introduced. The study also found that boards are more involved in oversight activities now than before the standards were introduced, with 85 percent of members and 76 percent of nonmembers reporting that their trustees are highly or substantially involved in reviewing their group’s financial performance, up from 65 percent in 1996. In addition, 49 percent of members and 46 percent of nonmembers report having conflict-of-interest policies, up from 21 percent in 1996.

Mr. Nelson, of the Evangelical Council, praises the care that went into the creation of the Standards for Excellence. A program like the Maryland standards, he says, can help create a critical mass of ethical organizations that pushes out badly run charities. “You do start to build a culture of peer pressure,” he says. He points out, however, that participation in the program is strictly voluntary for the state’s charities, and thus the code cannot necessarily get rid of disreputable organizations on its own: “Any voluntary organization is going to attract only those who have nothing to hide.”

Copying the Standards

Since September 2001, Maryland Nonprofits has been working with five other state nonprofit umbrella groups to help them spread the standards program to their members. The standards help satisfy a need charities have to establish credibility, especially after years of scandals in the nonprofit world, says Joseph M. Geiger, executive director of the Pennsylvania Association of Nonprofit Organizations, in Harrisburg. “The time is right,” he says, “and there’s a readiness for it.”

Aided by $1.8-million from national grant makers — including, in 2000, two two-year grants totaling more than $1.3-million from the Carnegie Corporation of New York and the Atlantic Philanthropies — Maryland Nonprofits selected the Pennsylvania umbrella group, as well as the Georgia Center for Nonprofits, in Atlanta, the Ohio Association of Nonprofit Organizations, in Columbus, the Louisiana Association of Nonprofit Organizations, in Baton Rouge, and the North Carolina Center for Nonprofits, in Raleigh, to copy its standards program. The umbrella groups pay a licensing fee for materials and assistance from Maryland Nonprofits, with costs ranging from $20,000 to $30,000 in the first year, and lesser amounts in subsequent years, says Ms. Madsen.

None of the umbrella groups have yet begun certifying their member charities, say those groups’ leaders, though most expect to do so this year or next. Many charities are small, with few employees, notes Karen Beavor, executive director of the Georgia Center for Nonprofits. “When you have few employees, it’s not always easy to carve out that time to complete the process,” says Ms. Beavor. “That’s part of the challenge: to make it accessible to those groups to achieve the standards.” States with charities scattered across rural areas may also need more time to put the standards program into effect, she says.

Tailoring the Code

A key challenge for all state associations that hope to bring Maryland’s standards to their members is customizing the program to fit local laws and needs, and making sure they aren’t viewed by their members as merely a hand-me-down.

The Ohio Association of Nonprofit Organizations’ executive director, Richard L. Moyers, says his group is already tweaking the standards — and, he says, such changes will help it sell the program to its members as a grass-roots effort. “We did focus groups, and the biggest change we made was in the term limit of board members — whether they are required for certification or not. We emphasize term limits for certification,” he says. “We also added a standard related to strategic planning and investment in organization infrastructure.”

Mr. Moyers also points out that a two-page standards checklist posted on his group’s Web site, which enables charities to easily keep track of their compliance, has been adapted by the North Carolina and Pennsylvania state associations. “It’s something we’ve created and not part of Maryland’s package,” he says.

Getting Charities on Board

Leaders of nonprofit organizations in states that are adapting the Maryland standards say they see value in participating in the program. “We really saw this as an opportunity first to check ourselves and assure ourselves that we are managing the agency well and effectively,” says Dianne Radigan, chief operating officer of Children’s Hunger Alliance, in Columbus, Ohio. “There aren’t many venues in the world to prove we are doing a good job.”

Julio R. Galan, executive director of the Family and Youth Counseling Agency, in Lake Charles, La., also says he is looking forward to the certification process. “Meeting a set of standards set by an independent group like the Louisiana Association of Nonprofit Organizations, is one of the best things that can happen,” he says. “We are responsible to our donors and to people that we serve, and the Standards for Excellence provide the framework for accountability for the nonprofit sector.”

Mr. Galan’s group oversees programs providing different services, such as family counseling and child advocacy. “Even though all of those programs have state standards, and some have local and national standards, each one of the Standards for Excellence really applies to those groups,” he says. “So what the standards program means is a level of local accountability that covers all these programs.”

As the initial group of five state associations create their own standards programs, 27 other organizations — state, regional, national, and overseas groups — stand in the wings, having expressed interest in adapting Maryland’s program, says Ms. Madsen. Those groups are planning to finance their own efforts to adopt the standards, she says, although Maryland Nonprofits is also trying to raise money to allow it to help the organizations.

The spread of the Standards for Excellence, she says, can help the nonprofit world rid itself of its bad apples through attrition.

“They’re not minimum standards — they’re above-average standards,” she says. “They will help raise the bar for organizations, so that those who deliberately operate in an inappropriate or unethical manner may find that they can’t operate in an environment like that.”

Mr. Berns has faith that the public will learn to recognize what the Seal of Excellence means. “Will the standards eliminate all wrongdoing charities? I don’t think we can claim that — there are going to be bad guys in any industry,” he says. “But having a set of standards will help organizations understand how to operate. Folks who have the wrong motivations will be a lot easier and faster to identify.”