Friday, November 06, 2009

Nonprofit Standards

Charities Review Council’s New Accountability Standards (7:45 AM)

First, a conference session starting at 7:45 AM? I think this only happens at nonprofit conferences.

Minnesota has this unique organization--the Charities Review Council that sets standards for nonprofit organizations. The organization has been around since the 1940s. They have a new set of accountability standards that was presented at this session. Overall headings include: Public Disclosure, Governance, Financial Activity, and Fundraising (a total of 27 separate standards. The most interesting part of the session was the question/discussion section. Being a shameless agitator, I raised my hand first:

The public disclosure section is all about transparency. My major problem with this section (overall it is a great section) is that it doesn’t require nonprofits to be proactive about communication. It is all passive (“Make the information available to the public’). There is no discussion about working to engage the community.

The data privacy standard only addresses donor privacy. It should also address client data privacy.

My major complaints are about the "Use of Funds" section in the standards on Financial Activity. (Really, about the percent of administrative cost that is allowed.):

  • First, it is better than it was. The text addresses the reality that administrative costs are important and valuable and that not all nonprofits will be the same.
  • It requires an explanation if the organization claims administrative costs of under 10%. This at least re-inforces the fact that not all administrative cost is bad.
  • It also allows a three year average of administrative costs. While this helps for major infrastructure projects like implementing a new database, it may not be enough. A three year average doesn't allow much for ongoing investment in non-capital infrastructure. However, it still sets percentage standards.
  • My major complaint is that the percentages don't work for a lot of organizations. For example, small nonprofits that rely on volunteers to provide services and have limited staff who manage the organization and coordinate the volunteers will have a high percentage of administrative costs--simply because its program costs are low (I actually kind of did a rant on this topic) (go here for a longer rant and a link to a great article from Fast Company about this)

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