By Jerri Stroud, BBB Editor
When a charity or nonprofit applies to become a BBB Accredited Charity, BBB Charity Review Director Carole Bellman may be presented with a stack of paperwork several inches thick.
In addition to a detailed questionnaire, charities must submit documents including their annual report, audited financial statements, complete IRS form 990, budget, fund-raising contracts, board roster, fundraising materials and cause-related marketing promotions, a conflict-of-interest policy, informational brochures, the IRS letter showing they are tax-exempt, bylaws, articles of incorporation and, if applicable, affiliate agreements, such as those with a national office.
That’s a lot of information, but it’s an important component in meeting BBB’s mission to advance marketplace trust in charities, as well as businesses.
“The whole purpose of BBB Charity Review is to assure the public that charities are using their donations effectively,” Bellman said. Only by showing it has met BBB’s 20 Standards for Charity Accountability can a charity become accredited.
Donors want to know whether a charity is accredited just as consumers want to know that a business is accredited, said Adrian Bracy, chief executive of the YWCA of Metro St. Louis. Donors who see the BBB logo on a charity’s website believe the nonprofit “has integrity, is responsible, strives to work at high standards and is trustworthy.”
“It’s kind of a gold seal – that stamp of approval,” said Opal Jones, president and CEO of Doorways. For that reason, Doorways puts the seal on the front of its website, just as many other Accredited Charities do.
Charities value the seal because it conveys the transparency that donors want, said Jan Albus, CEO of Variety, the Children’s Charity. For example, she said, “People automatically think the money they give you is being spent on the children.” Accreditation shows that a company is spending the majority of its funds on programs, not on fundraising.
Businesses who want to work with charities need to look beyond whether a charity’s mission fits with their goals, said Karen Nolte, executive director of the Children’s Home Society of Missouri. If they don’t check a charity out, they could be embarrassed if the public finds out that the charity wasn’t above board about its operations or fundraising.
If that happens, “it really hurts [a company’s] brand, too,” Nolte said. “It hurts the whole giving community” because it casts doubt on whether charities in general are using donors’ money wisely. It could make donors less willing to give, even to well-run nonprofits.
BBB’s Charity Review process “provides businesses with an opportunity to make sure that they’ve done their due diligence” before they sponsor a charity event or make a donation, said Nolte, a member of BBB’s Charity Information Service Committee. “You’ve got someone who’s knowledgeable about charities evaluating charities” and, in BBB, Nolte said, the evaluator is “someone with a good name.”
In evaluating a charity, Bellman goes over the documents submitted and the charity’s questionnaire responses carefully to determine whether a charity meets BBB’s 20 Standards for Charity Accountability. The standards were developed by BBB’s Wise Giving Alliance after consultation with major charitable organizations and significant research on donor expectations.
The standards, which are on BBB’s website at http://go.bbb.org/charity-standards, address the charity’s governance, oversight, effectiveness, finances and fundraising.
BBB’s governance and oversight standards are designed to determine that a nonprofit has an independent board that is active, independent and free of self-dealing. For example, a board must have at least five members, and no more than 10 percent of the board can be paid, either directly or indirectly, nor should there be other conflicts of interest, such as board members who are related or who have business relationships with the nonprofit.
Standards on effectiveness require charities to have policies on evaluating their programs and must do so at least every two years, in consultation with their boards.
Financial standards look at how a charity uses its money, including a requirement that at least 65 percent of its funds be spent on program activities and no more than 35 percent on fundraising. Seven of the 20 standards are directed at a charity’s financial stewardship.
The final group of standards cover fundraising, privacy policies, informational activities and aim to determine whether a charity is being accurate, truthful and not misleading in the information they provide to donors and the public. Charities that solicit online must have a secure website that protects donors’ sensitive information.
A well governed charity should be able to meet the standards, Nolte said. “It’s not difficult to pass, but it’s very thorough.”
“Any charity worth its salt is going to be in a good position to be accredited,” said Kevin Drollinger, chief executive of Epworth Children & Family Services and chair of BBB’s charity committee. Many charities already have been through similar evaluations to attain other accreditation, state licensing or other requirements. “BBB bring together a lot of the different requirements for charities in one place.”
Bellman reviews Accredited Charities every year, but the process is not as difficult the second time around, she assures charities. Accredited Charities are eligible to use BBB’s Accredited Charity seal if they sign an agreement covering the use of the seal and pay an administrative fee based on the charity’s size.
“There is a standard of credibility that goes with the BBB seal that is a great benefit to a charity,” Epworth’s Drollinger said. “And in my estimation, that far exceeds the amount of effort that it takes to attain it.”
BBB encourages BBB Accredited Businesses to seek out Accredited Charities when they decide to give back through its Gain by Giving program. The program helps companies find a quick, efficient path to volunteer, get involved on a board or donate.
To find more about BBB Accredited Charities in Eastern Missouri and Southern Illinois, visit BBB’s Accredited Charity Guide: http://go.bbb.org/charity-guide
This article first appeared in the Summer 2015 issue of BBB’s Torchlight magazine, which is produced exclusively for Accredited Businesses and Accredited Charities.