Friday, January 29, 2010

New Accountability Standards Webinars

Join us and learn more about the new Accountability Standards and how nonprofit organizations can prepare for its Accountability Wizard review by attending one of the three upcoming webinars.

The free webinar will cover the following topics:

  • Overview of changes and additions to the new Accountability Wizard
  • Highlight changes to the Accountability Wizard
  • Key upcoming dates to keep in mind

Click on any of the dates below to sign up now for one of the upcoming webinars.

Tuesday, January 5, 2010

Measuring impact and effectiveness

by Rich Cowles, Executive Director

The joint news release last month by Charity Navigator, Guidestar and others discouraging donors from using financial ratios to evaluate charities was welcome news. As an organization that has long tried to move donors away from preoccupation with the Program Expense ratio, the Charities Review Council applauds the release. We also fully agree with the assertion that nonprofits’ impact should be the primary criterion for giving decisions. Our newly updated standards that will be implemented 2nd quarter 2010 include a Community Impact standard and Monitoring Mission and Strategy standards.

The news release has triggered a flurry of posts in the nonprofit blogosphere affirming the importance of Impact, with some disparaging ratios as utterly useless. These comments have included the assertion that donors shouldn’t be concerned with how much it costs nonprofits to achieve their impact. If there were a limitless supply of donations, I would agree. But given donors’ legitimate desire to get the most bang for their contributed buck, they have a right to know about an organization’s efficiency in achieving its impact.

Highly flawed as it is, the Program expense ratio has been a widespread attempt to measure such efficiency. At best, it’s a surrogate until a better efficiency measure can be determined. Ultimately, “Impact per Dollar” is what we want to get to.

The sector is a long way from determining how to measure Impact per Dollar. But there’s an urgency to finding it; it should be an integral part of determining an accepted means of measuring impact. Donors do and should care about nonprofit efficiency. And nonprofits should too. We’re long past the day when nonprofits can expect donors to go for “just trust us.” And that’s a good thing.

Wednesday, November 4, 2009

Unveiling the New Accountability Standards!

Here they are!

Today, officially, the Charities Review Council unveils its new standards. These represent over a year's worth of work to find a balance of contemporary regulatory requirements and sound practices for nonprofits. In so doing, these standards also serve to modernize donors’ reasonable expectations of nonprofits.

I want to highlight a few of the changes, but, as the adage goes, sometimes a picture is worth a thousand words. So, here's a picture of words.


The above "wordle" helps highlight the changes by emphasizing words that occur more frequently in the new Accountability Standards. Some things aren't surprising. Since these standards focus on nonprofits, obviously the word "nonprofit" stands out. But what I find interesting is the fact that "board" is the next most frequent word, reflecting an emphasis on nonprofit governance.

Now, we're all familiar with the increased interest in how a nonprofit is governed. But what I think is notable is that the Accountability Standards not only try to shed some light on how a board goes about its business, but gets at the need for an engaged Board of Directors.

Among these standards related to governance is the brand new Diversity and Inclusivity standard. A whole post could be devoted to this standard, but briefly it asks two things:

  1. That a nonprofit identifies the community it serves, and;

  2. Using this information, it evaluates whether the composition of the organization reflects its community.
There are a number of reasons this standard was added. First, clearly there have been demographic changes in the sector and the country that make the case for having a diversity standard. Second, research, such as Francie Ostrower's 2007 study, finds a connection between board diversity and issues of accountability. Third, we wanted to be responsive to what we were hearing in our focus groups and town halls. Time and time again, we heard individuals tell us that it is time to include diversity and inclusivity in our Accountability Standards.

Another notable change related to governance is the addition of board term limits. When this came up at our first town hall in Mankato, I had no idea that it would become the most consistent piece of feedback we received. Overwhelmingly, people told us we needed to add board term limits to the Accountability Standards. The new standard isn't prescriptive in terms of how many terms or how many consecutive years a board member can serve, but rather simply asks that the nonprofit establish some limit. Again, I can see this being a future blog post, so keep an eye out for further conversation around this one.

The last change I wanted to mention connects to the third most frequent word in the Accountability Standards - "financial." After the Governance section, the Financial Activity section received the most revisions. Perhaps the change that got the most attention was shifting the Use of Funds standard from at least 70% of expenses going to programming to 65%. Although this change was welcomed by most nonprofits and donors we talked to, there were a number of people that worried we were getting too lax.

As Charities Review Council Executive Director Rich Cowles wrote back in July, there are a lot of reasons why this change occurred. But to sum it up in a sentence, this standard was changed in recognition that a nonprofit needs to invest in its infrastructure (i.e. administration and fundraising) in order to achieve its mission. There's been an ongoing debate about the validity of overhead ratios, so again I expect future blogs around this topic.

Thank you again to everyone who helped craft the new Accountability Standards. It was a tremendous effort by a great number of folks, and it speaks to the vitality of the philanthropic and nonprofit sectors here in the upper-Midwest. Although the standards are now finalized, we still invite comments, questions and concerns as we begin implementing them in the spring of 2010.

Monday, September 28, 2009

1,308 miles in a Toyota

We're nearing the end of the public input phase of the 2009 Accountability Standards Project. Since the preliminary standards were unveiled in June, we’ve heard from nonprofit leaders, individual donors and grantmakers. The quality, thoughtfulness and diversity of feedback has been incredibly helpful in making sure the final set of Accountability Standards the Board of Directors will vote on at the October meeting are truly the reasonable expectations for accountable nonprofits.

I wanted to briefly look back on these past few months and summarize some of what happened. All told, here are the numbers:
  • 7 town halls and 4 large group meetings across Minnesota and North Dakota
  • More than 350 people attended a town hall and gave us feedback
  • 1,308 miles logged in Rich Cowles' Toyota Corolla traveling to all the town halls.
Add this to the 12 focus groups we did this past spring, the comments on this blog, and individual feedback from people via email or phone calls and you get a healthy sized amount of data to sort through and digest. Of course, this is a fantastic challenge to address. The strong interest and general support for these standards and the work of the Charities Review Council speaks highly to the fact that here in the upper-Midwest we have a vibrant nonprofit and philanthropic sector that understands the importance of accountability and transparency.

Although there are a number of possible changes to the preliminary standards that the Program Committee and then the Board of Directors will have to look at, I wanted to highlight a few of the stronger bits of feedback that we heard. Top on this list, surprisingly to me, is the potential for adding board term limits to the Board Length of Service standard. As one town hall attendee said:
I frequently experience that nonprofits who are having board problems, regularly have no term limits and board members who have been on the board for 10+ years."
This sentiment was echoed many times over, from Fargo to Mankato to Minneapolis, and is something that will be considered as a possible addition to the Accountability Standards.

The other strong piece of feedback received was around the Financial Health standard and, in particular, the requirement of cumulative growth over the past 3 years in unrestricted net assets. Now obviously, we’re in historic economic times where many nonprofits are simply trying to stay afloat, much less grow unrestricted assets. But we also heard a number of people tell us that because of the recession, nonprofits are spending down unrestricted reserves because this is the proverbial rainy day everyone had been saving for. Done in a prudent and strategic way, this makes a lot of sense, but means that the nonprofit likely would not meet this standard. We received a lot of good suggestions on how to find a compromise on this one and will be considering them all.

To see further feedback on these issues, and many more, please check out the summaries of the town hall forums that are posted on our website. Also, please keep an eye out for the final revised Accountability Standards later this fall. In an effort to make sure nonprofits and donors have time to adjust to these new standards, they won’t be implemented until 2010, but we encourage everyone to keep letting us know what they think and asking us questions.

Again, thank you to everyone who weighed in during these past few months. We look forward to staying connected with you and working together on this important task of improving the climate for charitable giving.

Friday, September 11, 2009

Fundraising Section Overview

The following post was written by Kelly Rowan, Outreach & Resource Manager for the Charities Review Council.

Fundraising is an essential part of ensuring that nonprofits can continue to provide their critical services to improve our communities. While nonprofits strive to proactively seek funds, they must be conscientious in following ethical practices that will ensure the upkeep of trust for the organization, and respect for the sector as a whole among donors.

Throughout this public input phase of our Standards Revision Project, we’ve been holding focus groups, town hall style meetings, and inviting input and comments here in this blog forum. The suggestions we’ve heard regarding this Fundraising section of the new draft Standards have led us to consider combining and re-drafting this section of the originally proposed Standards as follows.

Fundraising Disclosures
The responsible actions of both donors and nonprofits promote and sustain a climate
of giving. Fundraising methods should therefore be ethical and honest and
encourage the donor to give voluntarily, based on their interest and knowledge
of the purpose, programs, and achievements of the nonprofit. All information
provided in connection with solicitations is accurate and not misleading.

Print, email, and electronic solicitations clearly describe the purpose or
programs for which the contributed funds will be used and identify the nonprofit
that will receive the contribution. The donor is provided with the address or
phone number of the nonprofit.

Soliciting Practices
Donors are entitled to know
who is soliciting their gift and what portion of their gift will be received by
the nonprofit.

Solicitors who are not employees or volunteers of the
  • Identify themselves in each solicitation as professional fundraisers,
  • Upon request, provide the name and address of their employer or contracting

If the nonprofit is engaged in cause-related marketing or its name is used in
connection with an event, or the sale or marketing of goods or services, upon
request, the nonprofit or persons authorized by the nonprofit to utilize the
nonprofit’s name provides accurate information about the percentage of gross
revenue that is paid to the nonprofit.

Donor Financial Information Security
A nonprofit should protect all private financial information provided by donors.

The nonprofit provides a secure environment for collecting online and
offline donations, and maintains internal controls governing the safekeeping of
all confidential donor financial and personal information.

Donor Privacy
A nonprofit should protect the privacy of donors and disclose when information is
collected about them and how this information is used. Donor information should
not be shared outside of the nonprofit without donor consent. A nonprofit should
also offer a way for donors to have their name removed from solicitation or
other mailing lists.

A nonprofit does not share donor
information without consent and provides a privacy policy on its website or by
request that describes how donor information is collected and used and provides
for donors to "opt-out" to make their private information available. A nonprofit
has a board-approved discontinue contact policy guaranteeing that donors can be
removed from solicitation and other mailing lists.

Adhering to these basic expectations regarding fundraising lays an important foundation for establishing a meaningful, trusting relationship between donors and nonprofits. A report by Independent Sector shows the negative impact of distrust—as well as the potential for increased giving in a more trusting environment: donors who have high confidence in charities give approximately 50 percent more annually than do donors who express low confidence. In the Council’s own Public Trust survey, most Minnesotans (83 percent) said that their general trust in charities influences their charitable giving.

We hope you’ll weigh-in regarding these most recent changes to the draft Standards. Are there important fundraising expectations that are not covered here? Also, you can always view the entire list of new proposed Standards here.

Monday, August 31, 2009

Managing the Basics - Fundraising Disclosure standard

The following post was written by Kelly Rowan, the Outreach & Resource Manager at the Charities Review Council.

According to Giving USA, Americans gave an estimated $307.65 billion to charities in 2008. Although a two percent drop in current dollars over 2007, this is a staggering number, especially considering the tightening in our budgets due to the challenging economic recession. As nonprofits strive to meet growing needs in our communities, donors want to feel confident that their hard-earned contributions will do the most good. What can and should charities be doing to protect and nurture this community-minded generosity?

As stated in the Fundraising section of MCN’s Principles and Practices, “(n)onprofit organizations are responsible for conducting their fundraising activities in a manner that upholds the public’s trust in stewardship of contributed funds”.

There are many ways of honoring this responsibility, and organizations should have thoughtful and proactive conversations about which ones to implement. One of the most commonly cited lists of expectations is the Donor Bill of Rights, developed by the Association of Fundraising Professionals and others.

In the coming weeks, we will be highlighting the most essential practices that have been recommended and reinforced by the members of our board Program Committee, experts in the areas addressed, as well as focus groups.

We begin with the Fundraising Disclosure Standard, which maintains that we should certainly expect that charities will clearly identify themselves in their solicitations by providing their address or phone number. Solicitations should also describe how donations will be used. While these seem to be such simple, common-sense expectations, I am reminded of how important stating this information clearly can be for donors, as illustrated in my co-worker, Amy Sinykin’s, previous What’s in a Name? post. We must be wary of organizations taking advantage of well-respected and established charities’ names to mislead donors into supporting them. This can damage the public’s trust and be detrimental to the charitable sector as a whole.

Are there other basic expectations we should address here for what a charity discloses to donors through their solicitations? Please weigh-in, and check back here to discuss the Voluntary and Charitable Giving Standard later this week.

Friday, August 28, 2009

Travel and Entertainment Reimbursement Policy standard

Over the last couple years there has been no shortage of egregious examples of lavish travel by board members or executives on the organization’s dime. Now, let’s be honest, most nonprofit organizations aren’t going to be sending its board members or staff on wildly expensive junkets. But nonetheless, reimbursement for travel or entertainment is one of the areas where waste, or worse, fraud can occur.

For that reason, we decided to add a new standard speaking to this issue. Like many of the other standards related to policies, we intend to provide a sample policy for organizations to download and pass at the board level. One example that we’re considering is the sample policy found on the Minnesota Attorney General’s Office.

For the last couple weeks we’ve been holding town hall forums and yesterday we were in Fargo. One piece of feedback we’re hearing is that some standards feel like busy-work and, especially for smaller organization, to pass multiple policies can take a lot of time away from the work of the nonprofit. What is your opinion? Is requiring a travel and reimbursement policy helpful in upholding accountable practices? Or is it just another policy that takes time away from getting the work of the organization done?

The Travel and Entertainment Reimbursement Policy standard is the last standard in the Financial Activity section. Starting next week we begin blogging about the last section, Fundraising.

Next post: Fundraising Disclosure