I recently read an article in the Wall Street Journal by Emily Glazer that provided guidelines for major investors in charities. The article was primarily for those donors who wish to support community-based charities, and who may think their donations go right to an important cause for which they have a passion or personal interest. Since there has been some major fraud in charity giving recently, it is important for charities to know how they are being questioned and checked for honesty and integrity.
It is also important to know that any donor can go to at least two sources to verify authenticity of a charity. Charity Navigator has a rating system for the 5,500 charities it tracks. Guidestar.org tracks all the financials of organizations granted tax-exempt status by the IRS.
The guidelines in the article offered good recommendations for making sure that donor investments are sound. They included the following important criteria.
- Mission Statement: A clearly crafted statement that tells who the target audience is and the purpose of the mission. It should be displayed on all correspondence, letterheads, newsletters and any web site.
Board members: A charity should have at last 3 to 4 Board members to start that ensure a diversity of thinking. They should not just be friends of the founder, but represent a range of ideas for the organization. This number should expand in 4 to 6 years as the need arises for input on legal, financial, etc. concerns.
- Financials: In order ro provide oversight and accountability, more than 1 person should handle the financials. If an organization is raising more than $500,000 a year it should be independently audited.
Tax exempt status: The IRS Form 900 should be easily available – posted on the website, or accessible upon request. It is also advisable to have available the ‘Letter of Determination’ from the IRS that is proof of tax-exempt status.
Conflict of Interest policy: An agency needs guidelines or by-laws to ensure independent voting on issues and the means for assuring that employee compensation is fair.
Transparency: Openness to the public in all business matters is essential to the non-profit agency to reassure donors and especially major donors.
It might be a good idea to check Guidestar.org to verify that the information on your agency is correct and up to date.
Author: Adrianne DuMond, Executive Coaches of Orange County, www.ECofOC.org