This week, it was announced that four cancer charities are being charged in a $187 million fraud case. Wow. The four charities, run by various members of the same family, are being charged with some outrageous practices. According to the article in The Chronicle of Philanthropy, “Children’s Cancer Fund (of America) in 2012 spent less than 1 percent, or $45,000, of donations to give some families facing a cancer diagnosis a small amount of money, while paying Ms. Perkins [head of one of the accused charities] more than $231,000.”
No wonder donors are worried about administrative costs!
The truth is, this type of fraud will make it harder for every nonprofit organization. What can you do to prove you are a reliable charity? How can you answer the question, is your nonprofit a wise investment?
To the web! Donors can research nonprofits through the free 990s found on different sites, but there are also charity watchdog groups. For instance, the BBB site, Give.org states that Children’s Cancer Fund of America “Did not disclose” information with a big red exclamation mark. But is that exclamation mark a warning sign or a scare tactic for organizations who do not want to take the chance that they will not receive top marks?
The bar is set high and the reviews can be a bit harsh. For instance, Doctors Without Borders received a “Standards Not Met” with a large yellow “X” next to the rating. Their infractions included:
“The board of directors does not have a written policy stating that, at least every two years, an appraisal be done assessing the organization’s performance and effectiveness and determining future actions required to achieve its mission.”
“Although it produced a written effectiveness assessment report in April of 2013, it was not submitted for approval to the board of directors.”
If I am translating that correctly, they are creating the correct reports but do not have a written policy to do so and the report was not submitted for review by the board. Is that the same as paying 85+% of funds raised to professional fundraisers?
A quick glance at the yellow X would imply Doctors without Borders does not deserve your funds. However, by all accounts, they provided services to eliminate Ebola in Liberia that the World Health Organization was unable to manage. So is it or is it not a good charity to support?
And what should a nonprofit do to prove its worthiness?
Be transparent about overhead but allocate it across the board to every program and department and not just as a single line item. Fundraising expenses should include the cost of facilities, as should programs and events. There may not be a direct fee to use the nonprofit’s building for a gala, but that doesn’t mean there aren’t additional electric, custodial, and wear and tear costs on the building.
Consider Testimonials. If you have a chance, introduce recipients of funds to funders. That is easier to do at a hospital fundraiser, perhaps, than at a synagogue event, but you can still ask someone who has received a scholarship for summer camp to consider writing a note to thank the people who helped her experience such a transformative, identity-strengthening summer.
Be open to conversations with donors about the governance, finances and fundraising. Even if you choose not to publicly disclose every document, it does not mean you should not offer them to a donor upon request.
And most of all, be ethical and function with impeccable integrity. If you are, there will be fewer questions. And that will help secure donations for years to come.