Chris Roush presents "Investigating Nonprofits" in Minneapolis on Oct. 4, 2011 at the Star Tribune during the Reynolds Center's free workshop, "Business Journalism Boot Camp." For more information about training for business journalists, please visit businessjournalism.org.
1. Investigating Nonprofits Oct. 4, 2011 Minneapolis Chris Roush [email_address] 2. Choosing the nonprofit to investigate Developing a story froma news tip, often from someone who has been close to the nonprofit and who may or may not have something to gain. Developing a story from another news item or a press release. Developing a story bychecking Watchdog reports or 990s. 3. The test In about an hour, you can usually get a pretty good idea of whether the nonprofit is worth investigating, based largely on information gleaned from a variety of sources. Isthe charitya member of a strong local United Way campaign? (Often, anindication of a good charity) How isthe charityviewed by national and local charity watchdog groups? How much does it reveal on its website? How transparent is it? 4. The United Way Many charities, particularly local charities, have to opentheir records and themselvesto get access to United Way dollars. Ifthelocal United Way is strong with a strong program review committee, its charities often are legitimate and above-board. 5. The watchdog groups Each of these has specific strengths and weaknesses. Charity Navigator at www.charitynavigator.org (largely deals with a nonprofit s financials) The American Institute of Philanthropy s www.charitywatch.org site (again, largely deals with financial information) The national Better Business Bureau s Wise Giving Alliance at www.give.org (monitors a variety of areas include transparency, board involvement, administrative and other areas) Local Better Business Bureau 6. Charity Navigator Strengths: Has many of the larger nonprofits and an easy to read guide of its financials. Offers a comparison to other, similar, nonprofits. Weaknesses: Does not have the ability to look at programs. No way of checking the accuracy of the information It simply accepts what is given to the IRS in its 990. 7. National Marrow Donor Program Here is what Charity Navigator said about this Minneapolis organization: Overall Rating (43.33) Organizational Efficiency Program Expenses 58.3% Administrative Expenses 31.2% Fundraising Expenses 10.4% Fundraising Efficiency $0.04 Efficiency Rating (23.33) Organizational Capacity Primary Revenue Growth 34.8% Program Expenses Growth -10.5% Working Capital Ratio (years) 2.90 8. National Marrow Donor Program How does it compare to similar organizations? Be The Match Foundation - MN 43.33 Michael J. Fox Foundation for Parkinson's Research - NY 66.32 American College of Rheumatology Research and Education Foundation - GA 69.16 Citizens United for Research in Epilepsy - IL 69.24 Food Allergy Initiative - NY 63.40 9. National Marrow Donor Program Accountability and Transparency? Charity Navigator notes that it does not have an independent board, and does not provide copy of Form 990 to organization's governing body. Also notes that its website does not include audited financials or the Form 990. 10. American Institute of Philanthropy Strengths: Information both online and in printed booklet format Easy to read and understand Perhaps the toughest of all watchdog groups, particularly on groups with high fundraising costs or large amount of noncash, gifts in kind, program expenditures. Weaknesses: Limited number of charities, so the one you are looking for may not be there. It s toughness on groups that deal with large amounts of gifts in kind make some argue that it is not a fair assessment of a charitys work. 11. AIP rankings Health organizations Alzheimer's Foundation of America A American Brain Tumor Association A American Kidney Fund A+ American Liver Foundation A American Lung Association/Christmas Seals N.O. B+ American Parkinson Disease Association B+ City of Hope/Beckman Research Institute A Crohn's & Colitis Foundation of America A Cystic Fibrosis Foundation A Diabetes Action Research and Education Foundation A 12. National Better Business Bureau Strengths: Large number of national charities listed The one watchdog groups that goes beyond financials and specifically asks charities to supply them with additional information regarding their operations The 20 Standards of Accountability cover more area than either the AIP or Charity Navigator. Weakness: Many charities find it either too time consuming or expensive to provide information and thus the Better Business Bureau cannot grade them. Again, the BBB largely accepts information from charities as true. BBB accepts payment from member charities for the charities to be able to use a BBB Seal. 13. Scholarship America This Minneapolis-based foundation is reviewed by the Wise Giving Alliance. Says Scholarship America meets the 20 Standards for Charity Accountability. 14. Scholarship America Gives nice breakdown of finances: Uses of Funds as a % of Total Expenses Programs: 94% Fund Raising: 2% Administrative: 4% Total income $96,122,776 Program expenses $109,893,054 Fund raising expenses 1,921,630 Administrative expenses 4,318,178 15. National Marrow Donor Program So, what does Wise Giving Alliance say about the National Marrow Donor Program, which we looked at earlier? ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ Despite written BBB Wise Giving Alliance requests in the past year, this organization either has not responded to Alliance requests for information or has declined to be evaluated in relation to the Alliances Standards for Charity Accountability. While participation in the Alliances charity review efforts is voluntary, the Alliance believes that failure to participate may demonstrate a lack of commitment to transparency (continued) 16. National Marrow Donor Program Without the requested information, the Alliance cannot determine if this charity adheres to the Standards for Charity Accountability. A charity's willing disclosure of information beyond that typically included in its financial statements and government filings is, in the Alliance's view, an expression of openness that strengthens public trust in the charitable sector. 17. Local Better Business Bureaus Strengths: Only public monitoring of non-national charities, other than some attorney general s offices that show fundraising costs. Weaknesses: Limited staffs locally mean limited amount of information usually available Many charities not included 18. So, what does this mean? Simply because a nonprofit rates good or bad with one or another of these groups usually doesn t mean a lot. Several charities get high marks from one watchdog group and low marks from another. But if a charity gets all good or all bad marks, often it is an indicationthat it could have problems. 19. A nonprofit s website A good nonprofit has web links to its 990s, its audit reports and its annual reports. It WANTS you to know about it and feels the more you know, the more likely it is you will contribute. Also has contact information and urges you to contact someone with the charity for answers to additional questions. 20. A nonprofit s website A bad nonprofit often has very little information on its website other than a couple of photos, a self-serving statement of what it does and a way to contribute money. Seldom has links to additional financial information such as audit reports, annual reports or 990s. 21. The transparency question How transparent is the nonprofit? The good nonprofits often have a lot of publicity, send out a lot of press releases. When you approach them with a question, they do all they can to come up with an answer as quickly as possible. They readily offer their latest 990 and audit reports. 22. The board of directors Too few or too many can signal a potential problem. Look for relationships among board members. 23. Related party or conflict of interest transactions Often nonprofits mark there is no related party transaction when there is. If there is a related party transaction, it should be detailed. 24. Going to the source Test of transparency is asking a nonprofit for specific information. Ask them to w