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.