Watchdog Organization Recommends 15 Standards for Local Charities

The Council of Better Business Bureaus’ Philanthropic Advisory Service is recommending that its local affiliates use the following 15 standards to evaluate local non-profit organizations. The standards, from a list of 23 that the advisory service uses for its evaluations of national charities, are the ones considered to be most applicable to local non-profit groups. However, bureaus can use all 23 standards if they wish.

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Public Accountability

* “Soliciting organizations shall provide on request an annual report. (An annual report in this context means a single document, brief or lengthy, that contains information about the organization’s purposes, current activities, governance, finances, and tax-exempt status.)”

* “Soliciting organizations shall provide on request complete annual financial statements.”

* “Soliciting organizations’ financial statements shall present adequate information to serve as a basis for informed decisions.”

Use of Funds

* “A reasonable percentage of total income from all sources (at least 50 per cent) shall be applied to the programs and activities directly related to the purposes for which the organization exists.”

* “Fund-raising costs shall be reasonable. (Not exceeding 35 per cent of related contributions.)”

* “Soliciting organizations shall substantiate on request their application of funds, in accordance with donor expectations, to the programs and activities described in solicitations. (Generally, to meet this standard, a charity provides on request a projected board-approved budget for the current fiscal year that shows it plans to spend funds on the programs mentioned in appeals.)”

Solicitations

* “Solicitations and informational materials, distributed by any means, shall be accurate, truthful, and not misleading, both in whole and in part.”

* “Solicitations shall include a clear description of the programs and activities for which funds are requested.”

* “Direct-contact solicitations, including personal and telephone appeals, shall identify: a) the solicitor and his/her relationship to the benefiting organization; b) the benefiting organization or cause; and c) the programs and activities for which funds are requested.”

* “Solicitations in conjunction with the sale of goods, services, or admissions shall identify at the point of solicitation: a) the benefiting organization; b) a source from which written information is available; and c) the actual or anticipated portion of the sales or admission price to benefit the charitable organization or cause.”

Fund-Raising Practices

* “Soliciting organizations shall establish and exercise control over fund-raising activities conducted for their benefit by staff, volunteers, consultants, contractors, and controlled or affiliated entities, including commitment to writing of all fund-raising contracts and agreements.”

* “Fund raising shall be conducted without excessive pressure.”

Governance

* “Soliciting organizations shall have an active governing body that meets at least three times a year, with a majority of the members present on average.”

* “Soliciting organizations shall have an independent governing body whose compensated board members constitute no more than one-fifth (20 per cent) of the total voting membership.”

* “Soliciting organizations shall have an independent governing body that is not engaged in transactions in which board members have material conflicting interests resulting from any relationship or business affiliation.”