Charity database on Web defended

To the Editor:

GuideStar, a national database of information on charities, exists to promote philanthropy by helping donors, institutional funders, and charities become more informed, effective, and efficient.

In an opinion article, Dan Prives (“Accountability Web Site: More Harm Than Good,” July 27) suggested that philanthropy would be better served if GuideStar were to develop evaluative information on only the 60,000 largest organizations, which take in three-quarters of the donations in this country, and ignore the remaining 580,000 American charities.

His suggestion reflects a basic misunderstanding of GuideStar’s purpose and primary objectives.

GuideStar is not an evaluator. Rather, it is building at one venue an exhaustive base of information that allows users to identify all charities satisfying personal interests; levels the playing field of public exposure for all charities large and small; begins to streamline charities’ reporting obligations; and provides a platform from which other entities offer philanthropy services.

Prives also suggests that GuideStar should not encourage non-profits and the public to rely on Forms 990 — the informational tax returns required by the Internal Revenue Service.

Forms 990, however, are quite simply the only source from which to gather large amounts of comparative information about charities. Furthermore, his assertion that “there is no legal or accounting basis for the particular form of financial reporting used by the I.R.S. Form 990″ would doubtless surprise the I.R.S., state charity officials, and the legal and accounting committees that promote and rely on this document. In addition, the Urban Institute’s National Center for Charitable Statistics, GuideStar’s data development partner, relies extensively on these Form 990 data to inform the work of researchers and policy makers.

The Form 990 is a good reporting document, offering comprehensive, standardized information about a non-profit’s operations, expenses, staff, contractor activities, and board members. Often this information is more extensive than the data one finds in audited financial statements. The document, however, does have limitations. Over half of the nation’s public charities have annual incomes of less than $25,000 and therefore are not required to file the form. Furthermore, many filers have failed to take care in reporting, believing that few people, if any, would ever review this public document. Finally, these forms are necessarily financial in emphasis and typically provide minimal descriptions of program activities and accomplishments.

To counter the first limitation, GuideStar offers organizations that do not file the form the opportunity to complete a simple financial statement. Donors, institutional funders, and researchers have told us that they find this information very useful, even though it is provided, unaudited, by charities themselves.

It’s also fair to expect Form 990 data accuracy to improve rapidly with our efforts to promote transparency. As non-profits realize that their reports are now easily available to the public — and that donors and funders wish to consult these documents — the organizations will prepare their 990’s more carefully and completely.

We agree that donors need much more information than can be gleaned from the Forms 990. In fact, GuideStar’s management is focused primarily upon encouraging charities to supplement data available on the Form 990 with further information about programs, accomplishments, objectives, operating performance, and explanations of financial performance. This richer narrative is vital for donors who are trying to make informed decisions.

Finally, with respect to evaluation, GuideStar believes that there is no single way to assess the worthiness of a charity. In fact, GuideStar expects to work with scores of third-party evaluators who will bring to the table divergent values and knowledge of the workings of specific charitable fields.

Clearly, our work at GuideStar represents only the beginning of the ultimate non-profit information system. But it is a good beginning.

Arthur W. Schmidt Jr.
President, Philanthropic Research/GuideStar
Williamsburg, Va.

To the Editor:

It’s my belief that it is important to credit GuideStar for its pioneering effort to bring non-profit financial reporting online. Mr. Prives is correct that GuideStar’s data, based solely on Form 990’s, is not necessarily the best financial data available about a non-profit, especially a large national organization with affiliates.

Yes, the audited financial statements, including notes, may prove more useful in evaluation, but from my experience you really need to look at both reports to get anywhere near the complete picture about finances, salary structure, and potential conflict of interest. So yes, GuideStar is just a small financial snapshot — but a better one than in the past and one that I am sure will be better in the future.

As a former vice president of the National Charities Information Bureau, I would suggest that relying solely on financial data as a measure of non-profit accountability is not intelligent non-profit evaluation. Contributors need to ask for the right items: annual reports, bylaws, articles of incorporation, audits, 990’s, board lists, budgets, perhaps even board minutes. These are the tools that inform a contributor (or evaluator) about a charity’s management, goals, programs, and performance. If contributors are interested in making an informed difference, this is the type of information they will need to know to make a sound charitable investment decision.

It is in the non-profit sector’s interest to provide this type of accountability to the public. And in my opinion it is not burdensome, can be accomplished both online and off, and makes common sense in a largely self-regulated field.

Bill White
Evecutive Director
Orangutan Foundation International
Los Angeles