Two Big Charity Watchdog Groups to Merge

Two of the biggest organizations that monitor charities — the National Charities Information Bureau and the Philanthropic Advisory Service of the Council of Better Business Bureaus — plan to merge by year’s end.

The move is being welcomed by many non-profit officials who note that the two watchdog groups have long performed similar roles and have evaluated many of the same charities.

But the alliance is also raising concerns among government officials and others who worry that the move reduces the diversity of views available to donors who want to decide where their gifts will do the most good.

“The more organizations you have taking a hard look at the non-profit sector the better,” says Karl Emerson, a charity regulator in Pennsylvania and head of the National Association of State Charity Officials. But, he adds, the merger must ultimately be judged according to what the new organization is able to accomplish.

“We’ll have to wait and see whether the new, proposed group will be better than the two independent ones,” says Mr. Emerson.

Among the harshest critics of the merger is a senior executive of the National Charities Information Bureau.

Daniel Langan, director of public information for the bureau since 1990, says the merger is tantamount to a takeover of the bureau by the Council of Better Business Bureaus’ Foundation, the Philanthropic Advisory Service’s parent organization.

In a statement, Mr. Langan said that the service would hold a monopoly and would eliminate “an independent source of information.”

He added, “The elimination of N.C.I.B. would mean a free ride for some charities that meet B.B.B. standards but refuse to be evaluated by N.C.I.B. because they cannot meet the tougher measurements.”

As an example, he points to the differences between the organizations’ positions on surplus funds. Charities that hold assets worth more than two years’ expenses or twice the next year’s budget flunk the bureau’s evaluations because the watchdog believes that such surplus money should be used for charitable programs. The Philanthropic Advisory Service has no such restriction.

George Penick, chair of the National Charities Information Bureau’s board, says Mr. Langan and other critics are way off the mark. He says that both organizations’ standards are sufficiently stringent, and that the merged group will reflect the standards, perspective, and history of both organizations. He notes that he is slated to be chair of the new organization’s board, which will also include other bureau directors.

Seeking to Rate More Groups

Mr. Penick, president of the Foundation for the Mid South, in Jackson, Miss., and other officials from both watchdog groups say that by combining their efforts and eliminating some duplication, the new organization will work more efficiently. And, they say, it will be able to evaluate more charities and reach more donors. In the past, each group has examined and published reports on about 200 national non-profit organizations annually. More than half of those organizations, the officials say, were rated by both watchdogs.

The new group will be located in Arlington, Va., where the Council of Better Business Bureaus and its foundation reside. Candace McIlhenny, executive director of the foundation, will head the new organization, which has not yet been named. Bennett M. Weiner, who heads the service, will direct charity evaluations.

The new organization’s budget has also not yet been determined. The Philanthropic Advisory Service has operated in recent years with roughly a $600,000 budget. It has also used the services and staff of the council.

The National Charities Information Bureau, an 82-year-old New York-based group, has spent about $1-million a year. Only one staff member from the bureau is expected to stay on after the merger. Officials of both groups say that talks about merging began last spring, following the resignation of the bureau’s president, William P. Massey. He said he left to tend to family matters.

One of the considerations for the bureau, officials there say, was the group’s growing difficulty raising money. While the organization always received gifts from a large number of individuals, it began to rely on their contributions more and more as grant money from foundations and corporations became tighter.

According to Ms. McIlhenny, the merger makes sense in part because the two groups were seeking financial support from many of the same grant makers.

The move makes sense to many charity officials for other reasons, too.

Peter Berns, head of the Maryland Association of Nonprofit Organizations, says that consolidating the two groups, with one set of evaluation standards, will eliminate confusion among charities and donors.

“The word will get out to more donors, there’ll be more strength in terms of public education if we have one concerted effort to put out a sensible set of standards that set a high bar for how charities ought to act,” Mr. Berns says.

Different Approaches

One difference between the groups evaluation standards — in the way they measure whether organizations are spending enough on charitable programs — is often cited as a point of confusion for charities and donors alike. The Philanthropic Advisory Service bases its measurement on a group’s total annual income, and says that charities should spend at least half of that money on charitable programs. The bureau compares such spending to total annual expenditures and says that at least 60 percent of charities’ expenses should be for charitable programs.

The new organization plans to announce its own standards by the end of next year. In the meantime, new charity evaluations will be based on the Philanthropic Advisory Service’s guidelines.

That worries Daniel Borochoff, president of the American Institute of Philanthropy, in Bethesda, Md., another watchdog group that monitors national charities.

He says: “In this merger, we are losing an aggressive, critical voice in terms of charity oversight if we lose N.C.I.B. and its standards.”