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At first glance, Charity on Trial: What You Need to Know Before You Give, by Doug White might seem to be a diatribe against charity shenanigans. In fact, White, an experienced fundraiser and consultant, is all for charities, but he wants the few fraudulent ones exposed and for all charities to display the transparency befitting organizations that purport to be above board, ethical, and moral.
White also believes that the only way that charities will voluntarily adopt transparency is if we, the donors, insist that it happen.
Is Charity on Trial aimed at donors? Or charities themselves? Actually both because they are intertwined. Better donor "consumption" will result in better charities. White's primary goal is to help donors understand how the nonprofit world works and why it sometimes goes wrong.
Intrigue lovers will enjoy the stories about The United Way, Adelphi University, The Baptist Foundation of Arizona...the scandals that we probably saw in the newspapers but, until now, did not wholly comprehend. Here there are scoundrels as devious and full of hubris as any in the corporate world although the amounts of money and the damage to organizations are on a smaller scale than say, an Enron or Tyco. However, they are doubly shocking since we least expect such human foibles and greed to exist in the nonprofit world.
Most important is what we learn about how charities work, how they are supposed to work, and how deficient are the mechanisms in place to detect nefarious activities. White, in language anyone can understand, explains how mission and money interact; how charities raise their money; what they have to tell the IRS (if you've never quite understood why you should look at a charity's IRS Form 990, you will go scrambling for it next time you want to give money to a cause) and what they don't have to tell; and how ratings by various watchdog groups are helpful but hardly guarantees against wasting your money.
While White admits there are no hard and fast rules for evaluating a charity, he would like all of us to dig deeper and have the guts to ask questions that can provide clues to the health and intentions of any charity. Most of all he reminds us that charitable giving is first about the cause, not a possible tax deduction nor an estate planning tool. He advises that we first follow our hearts. Do we really care about the homeless or children or AIDs in Africa? What moves us? What needs among the thousands of human needs in the world do we want to try to make a difference in? Then, we can start looking at the organizations we might choose to express our concerns through. With some 1.5 million charities in the U.S. alone, there are bound to be a few that will be worthy of our dedication and generosity.
Once we know our hearts, White suggests we take at least some of the following actions:
- Find out what you can before contacting the charity. Roam around its website and use a search engine to see if the organization has been in the news lately.
- Download a copy of the charity's 990. It should be available on the charity's website, but you can also look on GuideStar, a charity watchdog. If you cannot find the charity's 990, go to the charity itself and get it. Charities have to provide up to three years of 990s when asked. On the 990 you will find expenses, salaries of key people, a list of the board members and fundraising results.
- Ask the organization for an annual report. The report will let you know the accomplishments the organization feels are important and will give a financial snapshot.
- Ask the charity about its programs. What do they do? And how do they do it?
- Ask how long the charity has been in business. A young organization needs to be evaluated differently than a seasoned one.
- Ask about the board. Who are the members? Are they there for show or real work?
- Find out how long key staff have been around. What are the qualifications of the executive director, the chief financial officer and the person responsible for fundraising?
- Find out about transparency and ethics policies. Are the board minutes made public? Are there written policies about conflicts-of-interest? How about whistle-blower policies? How often do they change auditors?
- Ask why you should give to this charity. The group should have a compelling message and story to tell you.
- Ask about the infrastructure. Organizations that pride themselves on running mean and lean may not be able to accomplish their missions. On the other hand, key staff shouldn't be hiring limousines to drive them around.
- Ask about fundraising. How much money is spent on raising funds? Where did those funds go? Is it cash in hand? Or pledges? Find out what foundations support the charity.
- Target your money. Give the most to the charity that can get the job done. Impact is achieved through concentration.
- Ask about gift-acceptance policies. If you make a gift to the endowment or to a scholarship or to the new building, will your gift increase the amount going to that purpose or is money being merely shifted around? The latter is not necessarily bad but you need to know. The charity should have written policies on gift-acceptance procedures.
Mr. White says that most charities are just fine and, when possible, we should give them the benefit of the doubt. But, he is equally convinced that the more transparency a charity has the better off it is. Donors who are nosy and who withhold gifts from charities that seem secretive will ultimately create more openness at all charities.
How can a charity benefit from this book? By getting ready for the newly informed donors. Anticipate the questions and provide the answers up front.
Whether you are a donor, volunteer, or a nonprofit employee, Charity On Trial will illuminate and educate you. If you comparison shop the next refrigerator you buy, shouldn't you learn all you can about the nonprofit organizations you work with and support? Start with this book.
Charity On Trial: What You Need to Know Before You Give, Doug White, 2006, Barricade Books, $24.95 U.S.
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