posted on: Wednesday, December 26, 2007
Watching the Watchdogs
Gary R. Snyder
I was struck by the 50% plummeting in confidence in the financial rating service agencies. I then thought about the confidence in the charity rating services of the nonprofit sector.
It is a generally accepted belief that the nonprofit rating services, such as Charity Navigator, BBB Wise Giving Alliance and American Institute of Philanthropy, are monitoring most nonprofits. Unfortunately, there is no third party source watching the activities of the multi-billion dollar philanthropic community.
To put donor’s confidence in perspective we need only to look at the Brookings Institution study where only 11% of the public thinks charities do a very good job of spending money wisely and only 19% feels that charities do a very good job of running their programs and services.
The criterion that is used by watchdog groups is wanting. Two of the aforementioned focus only on financial standards and the third sells its seal of approval on a sliding scale. Because of different criteria, the rating agencies recommendations often conflict. Moreover, all fail to address in any substantive manner many of the issues that have gotten the nonprofit sector in trouble—scandals and inadequate governance. Furthermore, the charity evaluators, by their own admission, believe that the reporting from the nonprofits is often inconsistent, unclear and incorrect.
Because the watchdogs have no teeth in their recommendations, the Senate Finance Committee and other regulatory bodies have been working on legislation that guides philanthropy in making their decisions. The Senate Finance Committee and the Internal Revenue Service have become surrogate boards for the sector. They have given guidance to the American Red Cross, Smithsonian Institution, Natures Conservancy, universities, as well as hospitals.
Even in the face of billions of dollars of nonprofit malfeasance in just the last year, the watchdog agencies as well as the sector leadership does not see the need for more transparency. It has only been the efforts of Congress and the IRS that have made some incremental changes.
Despite the government’s efforts there has more of the same. Misconduct is still rampant with little response from those that lead the sector. In spite of protestations of wanting self-regulation, all indications from the sector’s leadership are that it wants to relinquish its authority to regulators and establish a partnership with government.
With watchdogs being only marginally effective and the leadership in total denial, who has the credibility to lead and enforce? Without transparency, accountability, credibility and confidence, how much farther can the contributor’s confidence sink?
FORTUNE, December 24, 2007.
Gary Snyder is the author of Nonprofits: On the Brink (iUniverse, February, 2006) and articles in numerous publications. He can be reached at gary.r.snyder@gmail.com or 248.324.3700Labels: accountability
Gary R. Snyder
I was struck by the 50% plummeting in confidence in the financial rating service agencies. I then thought about the confidence in the charity rating services of the nonprofit sector.
It is a generally accepted belief that the nonprofit rating services, such as Charity Navigator, BBB Wise Giving Alliance and American Institute of Philanthropy, are monitoring most nonprofits. Unfortunately, there is no third party source watching the activities of the multi-billion dollar philanthropic community.
To put donor’s confidence in perspective we need only to look at the Brookings Institution study where only 11% of the public thinks charities do a very good job of spending money wisely and only 19% feels that charities do a very good job of running their programs and services.
The criterion that is used by watchdog groups is wanting. Two of the aforementioned focus only on financial standards and the third sells its seal of approval on a sliding scale. Because of different criteria, the rating agencies recommendations often conflict. Moreover, all fail to address in any substantive manner many of the issues that have gotten the nonprofit sector in trouble—scandals and inadequate governance. Furthermore, the charity evaluators, by their own admission, believe that the reporting from the nonprofits is often inconsistent, unclear and incorrect.
Because the watchdogs have no teeth in their recommendations, the Senate Finance Committee and other regulatory bodies have been working on legislation that guides philanthropy in making their decisions. The Senate Finance Committee and the Internal Revenue Service have become surrogate boards for the sector. They have given guidance to the American Red Cross, Smithsonian Institution, Natures Conservancy, universities, as well as hospitals.
Even in the face of billions of dollars of nonprofit malfeasance in just the last year, the watchdog agencies as well as the sector leadership does not see the need for more transparency. It has only been the efforts of Congress and the IRS that have made some incremental changes.
Despite the government’s efforts there has more of the same. Misconduct is still rampant with little response from those that lead the sector. In spite of protestations of wanting self-regulation, all indications from the sector’s leadership are that it wants to relinquish its authority to regulators and establish a partnership with government.
With watchdogs being only marginally effective and the leadership in total denial, who has the credibility to lead and enforce? Without transparency, accountability, credibility and confidence, how much farther can the contributor’s confidence sink?
FORTUNE, December 24, 2007.
Gary Snyder is the author of Nonprofits: On the Brink (iUniverse, February, 2006) and articles in numerous publications. He can be reached at gary.r.snyder@gmail.com or 248.324.3700
Labels: accountability
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