Top 10 Nonprofit Transparency Dodgers List: Is this Watchdog Chasing Its Own Tail?

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flags of red and white / Robert Couse-Baker

The Better Business Bureau’s Wise Giving Alliance (BBB WGA) has issued its first “Top 10 Transparency Dodgers” list. The list names the largest U.S. charities (based on 2014 revenue as reported on their IRS Form 990) that refused to complete the BBB WGA’s application enrollment process.

A refusal to apply doesn’t necessarily mean a nonprofit is somehow deficient; it simply means they opted out of enrolling at BBB WGA. But on that basis, BBB WGA apparently recommends that donors think twice about giving to them. This is how they put it in the press release:

A charity’s failure to disclose important information relevant to BBB WGA evaluation should be a red flag for donors, and the BBB WGA urges donors to avoid charities that dodge transparency.

The list of charities includes well-known names including Teach for America, the John F. Kennedy Center for the Performing Arts, and the U.S. Holocaust Memorial Museum. The full list, with 2014 revenues:

  1. Dana-Farber Cancer Institute – $403M
  2. Fred Hutchinson Cancer Research Center – $353M
  3. Teach for America – $295M
  4. NeighborWorks America – $254M
  5. John F. Kennedy Center for the Performing Arts – $171M
  6. National Fish and Wildlife Foundation – $127M
  7. City Year – $125M
  8. United States Holocaust Memorial Museum – $111M
  9. PACT – $109M
  10. Local Initiatives Support Corporation – $105M

This is the first time the BBB WGA has published its top 10 list, and according to Art Taylor, BBB WGA President and CEO, it may do so in the future. Taylor expressed hope that publicizing the “transparency dodgers” will prompt more nonprofits to enroll in BBB. That hope is justified in part, he says, by the fact that the top 10 list started out as a top 20 whose nominees were offered a last chance to enroll before the list was made public. Last-minute moral suasion and the threat of public shaming were apparently effective.

The BBB WGA only tracks national charities, but it has reports on about 1,000 nonprofits of all sizes. Most commonly, Taylor says, donor inquiries about a nonprofit prompt a contact from BBB WGA to the charity, encouraging them to enroll. About a third of those contacted refuse to enroll, and about 30 percent of those who choose to enroll fail to meet one or more of the 20 standards. Standards are not weighted; all standards are equally important. Failure to meet one standard results in failure to achieve accreditation. BBB WGA makes no recommendation to avoid any charity that does not meet standards—only to avoid charities that refuse to provide the watchdog with information.

The twenty standards BBB WGA has identified are “proxies of charity trustworthiness,” Taylor says. Unlike the Better Business Bureau’s services involving for-profit businesses, donors to charity aren’t customers with after-purchase complaints about sales and service. Instead, they are concerned about whether their gifts are going to organizations that are well run and where funds will be well used for their intended purposes. The BBB WGA system is designed to provide reassurance that a listed nonprofit is a trustworthy steward of donor funds.

Standards are grouped under four categories: governance and oversight, measuring effectiveness, finances, and fundraising and informational materials. Taylor says that the enrollment process is extensive on purpose because reviewing publicly available information like the Form 990 is not sufficient to indicate trustworthiness. The initial collection and forwarding of enrollment information may take a charity as little as a week, according to Taylor. Completing the process, including follow-up between BBB WGA staff and the charity, usually involves one to two months of intermittent labor.

Taylor believes that a charity’s refusal to enroll is often based on a belief that the organization in question is likely to fail one or more of the 20 standards. He also believes that previously enrolled charities that choose not to renew their status (updates are required every two years) drop off because they believe they no longer meet a standard, or because the organization’s staff simply neglected to provide the update.

Taylor said that the decision to “red flag” the dodgers while not advising donors on charities that report not meeting standards reflects a belief that disclosure (apparently to BBB WGA in particular) is more important than standards compliance in building trustworthiness for donors.

Other charity watchdogs, such as CharityWatch and Charity Navigator, rely on publicly available reports and do not require nonprofits to respond to inquiries or provide information. They assign rankings to charities based on their developed benchmarks.

GuideStar hosts IRS Form 990 information for more than a million organizations and provides opportunities for nonprofits to curate their own pages on the website, adding financial, programmatic, and other information. It also maintains an award hierarchy for nonprofits based on the completeness of the information they provide. There are no punishments for charities that choose not to provide additional information to GuideStar.

NPQ is forced to conclude that with its Top 10 list, BBB WGA is promoting a sensationalized approach to nonprofit accountability based upon an organization’s responsiveness to a single private organization seeking voluntary information. We will leave it at that, but encourage reader discussion on the topic.

Clarification: The website for CharityWatch does say, and a representative from the organization confirmed, that charities “may be required to answer questions related to its financial reporting and/or provide additional documentation if such information is necessary…to complete a meaningful evaluation.”

In order to provide meaningful ratings, CharityWatch frequently must ask charities to answer questions and provide documents beyond what is publicly available. It may be necessary for CharityWatch to ask for this additional disclosure because the information that is publicly disclosed by a charity may be vague, unclear or lacking in other ways. CharityWatch sometimes has to issue “?” or “Insufficient Information” grades to charities that are not forthcoming in response to our inquiries or request for additional documents.

However, the basic point still stands: CharityWatch, unlike the BBB Wise Giving Alliance, will issue an evaluation grade for a charity based solely on publicly available records.

  • Jennifer Chandler

    Thank you for this piece. Could it be that a decision not to be evaluated by BBBWGA is simply an indication that the organization believes that there are other measures of transparency, accountability, and effectiveness, and prefers to spend its time/talent/resources elsewhere? I’m a champion for transparency, but also respect a nonprofit’s decision to prioritize advancing its mission rather than filling out forms and checking boxes.

  • Beth Gazley

    I’m still a little confused, Michael. Can you elaborate? Is the BBB WGA charging charities to “enroll”? And does Taylor have any hard evidence to support his belief that non-enrollees make the decision for the reason he offers? I ask because I sat on the Governance Committee of an NPO where we ran through several sets of standards (IS’s 33 Good Governance principles, United Way member agency standards, etc.) and we found we met all of them. Then we asked ourselves whether we should bother with the BBB WGA “seal of approval’ and decided we didn’t need the BBB–it would be a waste of donor money. So in our case, Taylor is wrong.

    • Cloggie

      I was also wondering about how much charities are being charged to “enroll”. Granted, we don’t have the clout of the BBB, but my organization would never name and shame companies that didn’t utilize our product (even if the work world would be so much better if they did!).

  • Pull any one of these “offenders” off the list. I pulled Teach for America. GuideStar Rating Gold. Includes annual reports, salary disclosures and financial audit. Charity Navigator 4 stars. Highest rating for both financial data and accountability and transparency. If Teach for America were to participate in BBB WGA’s program, they would have to pay a $27,500 annual licensing fee for the use of the BBB seal. BBB WGA’s accusation that the “top 10” listed organizations are not accountable and transparent is not only self serving but potentially libelous.

  • Rita Ulrich

    Some organizations may simply not want any association with BBB. The BBB’s own practices in rating its members are shaky, at best. A company can have a lot of legitimate complaints against it, but still get an A+ rating. As far as I can tell, all that the business has to do is respond to the complaint, not necessarily resolve it. I have learned to not take any BBB rating very seriously.

  • Gayle

    Besides the cost, perhaps the charity does not agree with the standard. For example, BBB WGA requires an audit for organizations with revenues of $500,000 or more. California only requires an audit if your revenues are $2 million or more. Years ago when I worked at a child sponsorship organization, they disagreed that our donor education program was program and classified it under fundraising.

  • Ann Gerckens

    We found the process quite time consuming and the expectation that we would do it every two years unreasonable. We have a mission and it is not to raise money to pay staff to keep the BBB happy.

  • Wade

    The BBB is clearly running a shakedown racket, and this is nothing new. The organization’s southern California chapter was the subject of an ABC News ’20/20′ investigation in 2010. The program reported that the BBB was being accused by business owners of running a “pay for play” scheme in which A ratings are awarded to those who pay membership fees, and F ratings used to punish those who don’t. 20/20 interviewed then Connecticut attorney general Richard Blumenthal, who said, “Right now, this rating system is really unworthy of consumer trust or confidence.”

    A few years later, 20/20 interviewed a national BBB representative who said their southern California branch had been expelled and a replacement group was being put together. But it seems that the real problem lies at the national level, and the BBB simply had to gnaw off a limb in order to escape the crushingly bad PR. And of course the shakedown had to be altered a little.

    ABC’s 20/20 investigation of the BBB (the original 2010 report and the follow-up in 2013).
    Google search:

    Better Business Bureau Probe – YouTube

    Better Business Bureau President Talks End of BBB “Pay to Play” – ABC News

  • As I have to say to my children sometimes, “The more you talk the worse it sounds.” The BBB Wise Giving vetting is Free but for a nonprofit to use the “seal,” they need to pay you up to $30,000 per year? Somehow, if at the end of the transaction, I write you a check for $30,000 then It is not free no matter how you parse the process of vetting and the actual use of the seal.

    Second, what you do not address is the fact that by flagging these 10 charities you are casting doubt on their credibility, accountability and transparency wholly without merit. If these charities did not utilize other means of providing accountability and transparency you might have some “moral ground” upon which you can cast such dispersions.

    In my previous example, I picked Teach for America, who has virtually the highest ratings from two “competitor” rating systems, including audited financial data. Now I may not even agree with the Teach for America program delivery model but there is no evidence that they are not accountable and transparent. For you to assert that because Teach for America is not willing to use your service, it is indeed disingenuous (at best) to say that such nonprofits should “Raise a Red Flag for Donors.”

  • Russell Dennis

    The licensing fee and the complete “up or down” certification have clearly created problems and strong reactions. The standards are quite high, but meeting 17 to 19 of them should inspire some confidence in an organization’s credibility. They are not weighted, but a system could be established to rank them in some order of importance.

    I work with newer organizations and after looking at the overview of the standards felt it would be helpful to include favorable reports from the BBB WGA, Guidestar, Charity Watch and other organizations would help these organizations. They do not have funds to use the BBB Seal. I did not know about the cost or the semi-annual recertification.

    Providing a “rating” score based on the level of compliance is helpful to the public and gives the nonprofit an idea of where improvement is necessary.

  • SophieB

    Maybe BBB should change its name to be the Bullying Business Bureau. One would expect their practices to be beyond reproach. Instead this looks like a marketing ploy–scare people into doing what we want so then we can hit them up for the licensing fee. Talk about violating trust.

    Where’s the data to back up their assertion that nonprofits don’t respond because they are afraid they can’t pass all the standards? I never completed the forms despite repeated coercive calls because I had too many more important things to do and had already been poked, prodded, and audited enough.
    Do they think that making public statements about nonprofits without
    facts to support their claims is an appropriate way to do business?

    Posting a list of top “dodgers” crosses the line and is inexcusable.

    Just to make sure they too are transparent–their last 990 (2014) shows the CEO making $275,000 along with 3 other employees making over $200,000 and another 6 or so making more than $150,000, with a budget of just over $18 million and a $1.5 million operating surplus for the year. Of course they only provided total expenses per line item, so we can’t determine what their administrative rate is, but 23% of their revenue comes from “seals and self regulation”–sounds like licensing fees to me.