Self-Reporting Tool for Nonprofits Draws Howls From Watchdogs

At issue is whether donors can trust what charities say about themselves

Charity watchdogs argue the new reporting tool leaves out critical information. Charity watchdogs argue the new reporting tool leaves out critical information.

Who’s better at telling donors about a nonprofit’s fundraising performance, the charity itself or a “watchdog” group?

The launch this summer of a new tool that would allow nonprofits to self-report their performance has brought the issue to the fore, resulting in an exchange of charges and countercharges.

The Direct Marketing Association Nonprofit Federation, an association of nonprofits and firms that solicit funds through direct marketing, rolled out the Nonprofit Accountability Dashboard “to demonstrate to the public that participating nonprofit organizations are transparent on fundraising.”

Anticipating possible criticism, the association in its announcement took a swipe at “a patchwork of charity watchdogs” who for years have given “inconsistent measurements and theories on fundraising from an outsider’s perspective.

“We believe those concepts are not helpful to those who support the thousands of reputable charities loved by the public who do amazing things to help our society advance,” the group's chairman, Angel Aloma, said in the announcement.

The watchdogs didn’t take long to weigh in. “There’s no independent scrutiny or analysis which would provide a benefit to a donor,” Sandra Miniutti, vice president of marketing at Charity Navigator, told The Chronicle of Philanthropy.

“It appears to be no different than when charities publish their own pie charts and annual reports showing donors their best attributes.”

The Chronicle noted that charity regulators and the media often spotlight nonprofit fundraising campaigns that channel most of the donations to commercial solicitors.

But the DMA maintains that some campaigns that appear expensive will pay off in the long run by attracting new donors.

The DMA’s new tool asks nonprofits to provide three years worth of data about how many people were served, total revenue and expenses, how much was spent on programs, the amount spent to acquire and retain donors and the number of current donors.

“Not meaningful,” Daniel Borochoff, president of CharityWatch, which also monitors charities’ fundraising costs, told The Chronicle. Listing the number of donors says nothing about their quality, whether they made big or small contributions or would continue to give, he said.

“It almost shows you that it’s written for the groups that oversolicit.”

The DMA’s general counsel, Senny Boone, in a letter, skewered The Chronicle for failing to provide “an unbiased view of the recent transparency efforts nonprofits are undertaking after many years of watchdog scolding.”

He responded to Charity Navigator’s charge of no independent scrutiny by noting that the information provided on the DMA dashboard comes predominantly from the legally required IRS Form 990.

He also pointed out that charities’ financial statements must be audited through an independent review process.

As for the dashboard being for groups that oversolicit, he said that CharityWatch did not understand the fundamentals of legitimate fundraising methods — “in this instance, the responsible practice of identifying potential donors using data-driven marketing and fundraising to avoid ‘oversoliciting.’”

Shannon McCracken, a senior fundraiser at Special Olympics and chair of the DMA’s ethics committee, told The Chronicle that the federation wanted to remind people that finding and keeping donors that support nonprofit work costs money.

McCracken said nonprofits should enter financial data that matched their audited financial statements, but that the dashboard would “streamline” the information to make it easier for donors to find.

The DMA would not police the dashboards, she said, but its ethics committee could investigate any member accused of misrepresenting financial information.

The Chronicle reported that the DMA in 2013 issued its first set of fundraising guidelines. These said a majority of nonprofits’ annual revenue should be spent on programs.

The guidelines also made recommendations for agreements between charities and commercial partners.

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Check out 10 Worst Charities in America on ThinkAdvisor.

 

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