By Amy Hines, Senior Vice President, The Alford Group
With the start of an unprecedented intergenerational wealth transfer, not-for-profits have a lot to gain by avoiding any inadvertent pitfalls that deter potential donors from contributing to their efforts. With access to the internet, donors do not have to rely on government scrutiny to avoid unscrupulous charities (Besides, government entities have limited authority as watchdogs). Donors can look for evidence themselves, vetting charities with a tap or a click.
Maintaining integrity is key—but ensuring that an organization’s optics convey that integrity is also essential.
A potential donor’s due diligence before opening her wallet, is likely to take place by heeding to the credo–“follow the money.” While that may in fact be just a line in a movie, it resonates in the philanthropic ether as a sound way to approach investigating an organization’s worthiness.
How do potential donors assess the money trail? There are several logical ways:
- Look at the organization’s website to see if financial information is being reported in a transparent way.
- Go online to GuideStar, the primary resource for accessing an organization’s IRS 990 and comparing similar organizations.
- Go online to Charity Navigator to see how the organization is rated.
- Go online to BBB Wise Giving, to check out whether they have been accredited as a trustworthy national organization.
It’s important for not-for-profits to manage the optics of their organizations in these four locations. Here’s how.
Optics on your own website:
I took a look at some of my own client’s websites to assess this approach and made this observation: Organizations that have been around a couple of decades or more, that depend primarily on philanthropy for their revenue, and that have refined the image they project online, were likely to have a very transparent financial profile on their website. This assures donors and builds confidence that they need look no further to understand the organization’s financial health.
Younger organizations that may have had fewer years to shape their image and grow in confidence were less likely to have transparent financial information on their website. Or, it was harder to navigate to revenue and expense information, financial information of any kind, or to click on a link to financial statements or the IRS 990. This difficulty makes it more likely that a donor will look elsewhere to find out about the organization’s financial track record.
Tips for strengthening your website optics:
- Include quotes endorsing your organization –from external sources if you have them– such as from a magazine, foundation, donors or other credible sources.
- Make your financial graphics easy-to-understand and provide a clear narrative about how funds are spent to advance your mission, including to raise more money on behalf of your cause.
- Provide a link to your listing on GuideStar, Charity Navigator or BBB Wise Giving.
GuideStar is an easy-to-find source for online access to your IRS 990, but also a one-stop shop for savvy donors to see information you provide yourself about your organization’s financial health, your board and governance, and your own assessment of program impact. GuideStar ratings inform donors how you compare to others. Your organization can fill in some basic information that can be viewed as soon as the donor searches for the organization’s name. Too often, organizations don’t bother opting to fill out their GuideStar profile. GuideStar also asks for answers to some straightforward questions. If you fail to answer, GuideStar simply reports “No Response.” People see your GuideStar profile when they use AmazonSmile, JustGive, Network for Good, and other online giving portals. Review all the fields you can use to build your organization’s GuideStar profile here.
Tips for managing optics on GuideStar
- Get your IRS 990 filed as soon as possible so that GuideStar publishes recent information. Organizations without a recent IRS 990 available on GuideStar are sending a signal that they don’t have their financial act together.
- Create a GuideStar account and update your organization’s profile, minimally to the Silver seal level of transparency, but why not go all the way to Platinum? Fill in your GuideStar profile, answer questions, and describe your impact.
- Activate the Donate button on your profile.
Charity Navigator examines financial health, accountability and transparency by assessing the degree to which an organization follows best practices in governance, donor relations, fund allocations, fundraising efficiency, and other areas. It awards up to four stars as its highest rating, and provides detail analysis of its performance review. It rates organizations with at least $500,000 in public, non-support that represents at least 40% of total revenue for at least two years. Rating is based on information in the IRS 990 and on the organization’s website. Charity Navigator is an influential charity evaluator, claiming over 9 million visits to its web site in 2015 alone.
Tips for managing optics with Charity Navigator
- Aim to achieve the maximum of four stars from Charity Navigator.
- If you already have a four-star rating, post it on your website and proudly display it and mention it in appeal letters, annual reports, newsletters, etc. Consider providing a link to your organization’s site on Charity Navigator’s site.
- If you are not yet rated by Charity Navigator, yet meet its criteria for its rating service, request that they rate you.
BBB Wise Giving Alliance accredits national charities and produces the National Charity Report of accredited organizations that meet its 20 standards in four areas of assessment: governance, finance, fundraising practices, and effectiveness. It’s akin to the old-fashioned Good Housekeeping Seal of Approval, carrying good will and signaling high integrity. A natural brand extension of the Better Business Bureau’s evaluation of companies, including upholding acceptable standards for “truth in advertising,” BBB Wise Giving commitment is to foster truthful solicitations for philanthropic support. Its scoring is simple: Meets standards; Standards not met; Did Not Disclose; or Unable to Verify. There are also several local BBB Wise Giving Chapters willing to accredit local and regional organizations in their catchment areas.
Tips for managing optics with BBB Wise Giving Alliance
- If BBB Wise Giving Alliance has already accredited your organization, publicize that fact and even sign up to use their seal.
- If qualified as a national charity, apply for BBB Wise Giving Alliance accreditation.
- If you are not a national organization, apply if you are located in one of the regions served by a local BBB Wise Giving Alliance affiliate. See listing here.
Unintentional Messages: Don’t throw up red flags for potential donors!
As consultants working with many not-for-profit organizations, The Alford Group wants our clients to put their best foot forward. Donors can easily see much more about an organization today than in the past.
Avoid this pitfall:
If you depend at all on voluntary contributions for your essential operating income, don’t describe your organization as an “agency.” The word “agency” suggests that you are an actual arm of government, receiving the preponderance of revenues from tax payer funded sources. Many donors may assume that any gifts they make to you could supplant government funding that they already pay for. Advice: just call yourself an “organization,” which is true regardless of your income mix.
Avoid this pitfall:
At some point, your financial statement may need to report on an unusual financial event. If this happens, request your auditor to provide an explanatory footnote. Don’t leave unsaid what could easily be explained in a document that will become public information. And be sure to notate this as well in the appropriate area of your IRS 990. Use your GuideStar profile to provide the explanation in a positive light.
Fire on all cylinders in conveying your integrity
As long as any charitable organizations exist to scam or otherwise deceive potential donors, there will be skepticism in the philanthropic marketplace about all charitable enterprises. As long as competition continues to increase for philanthropic dollars, people will be looking for ways to evaluate which organizations will achieve greater impact with their contributions. In other words, people are alert for red flags, even those that signal nothing but an oversight.
Our advice: remain alert for ways you can continually assure your supporters of your willingness to explain your actions. Demonstrate transparency by publishing and making available information to inform potential stakeholders about best practices followed by your organization. As you develop fundraising ideas and put together your annual fundraising plan, consider a “red flag audit” as one of the activities in your plan.
The Alford Group team is confident you can easily take advantage of these key online channels to communicate your organization’s impact and integrity.