Wise Giving Alliance Testimony at W&M Hearing on Charitable Groups' Reaction to Terrorist Attacks

TESTIMONY OF HERMAN ART TAYLOR

[1] I am Art Taylor, president and CEO of the BBB Wise Giving Alliance. I appreciate the opportunity to appear before this subcommittee to report on our donor education programs and also to share with you some of our concerns arising from September 11 solicitations and the use of 9-11 charity donations.

[2] The BBB Wise Giving Alliance is a nationally recognized monitoring organization that sets accountability standards for charities and other soliciting nonprofits. The Alliance is the organization resulting from the recent merger of the Council of Better Business Bureaus' Foundation and its Philanthropic Advisory Service and the National Charities Information Bureau. Between the two organizations, we have over 100 years of experience in reviewing and reporting on charities.

[3] Often referred to as a "charity watchdog," our core mission is to provide information to donors to assist them in making knowledgeable choices about giving. We work with many audiences, including charities, governmental agencies, charity governing boards, the media, corporate contribution departments, Better Business Bureaus, and nonprofit umbrella organizations. However, the donor is our primary constituent and that is the perspective I bring today.

[4] The Alliance recently commissioned Princeton Survey Research Associates to conduct a major study on donor expectations as part of the process to revise our charity accountability standards. Princeton Research interviewed 2000 members of the general public on a range of charity accountability issues and found that 86% of Americans gave to charity last year. Charitable giving is almost a universal experience in this country. And, of particular relevance to your subject today, the survey also found that the public has very high expectations for ethics and accountability by charities. However, they are often frustrated at not being able to find the necessary information to make their decisions about giving.

[5] Most people (70%) said it is difficult to tell whether a charity soliciting their contributions is legitimate, and many (72%) also say it is difficult to choose between organizations that raise money for similar causes. Donors want to know most of all about charity finances, but also important to them are the clarity of a charity's advertising and promotion and the effectiveness of a charity's programs.

[6] In addition, our survey shows that the public expects their contributed money to be used for current programs. Sixty-three percent (63%) of Americans expect that when they donate money to a charitable organization, the bulk of their contribution will go toward current programs, rather than put in reserve.

[7] These findings reflect our own experience. The donors and potential donors who contact the Alliance and local Better Business Bureaus are looking for information to make informed giving decisions. They want to give, but they want to make certain their gifts are well used and for the purposes given. They take charitable giving seriously.

[8] As part of our basic service, the Alliance issues reports on individual national charities that include an evaluation of the charity in relation to the voluntary CBBB Standards for Charitable Solicitations. These standards address public accountability issues, financial activities such as how much the charity spends on its programs, accuracy of fund raising appeals, fund raising practices and also governance issues. We focus our reporting efforts on those charities that donors and potential donors are asking about, some of which are long established, others newly created. On average, about 75% of these national charities meet all of our standards, and about 25% don't meet one or more of our guidelines.

[9] The Alliance reports on individual national charities outline not only whether or not the organization meets our standards, but also information on program service activities, fund raising practices, charity governance, executive compensation, sources of funds, and how the organization spends its money. Our reports are available directly from our office in Arlington, Virginia, through all 129 local Better Business Bureaus in the United States and on our website www.give.org. We also issue a quarterly guide summarizing our evaluation findings and reporting on other topics of interest to donors.

[10] In addition, we issue special alerts and advisories on topics of concern to donors. These range from tips on police and firefighter appeals, to what you should know about car donations to precautionary advice in the face of disaster appeals.

[11] This advice is needed because of the vulnerability of donors, particularly in the wake of disasters. Over the years, we have observed that shortly after every major disaster -- flood, hurricane, or the Oklahoma City bombing a flurry of fund raising appeals to help the victims begins. While most of these appeals are well intentioned and worthy of support, others are not. Americans are very generous and, unfortunately, there are those who are eager to take advantage of this generosity for their own gain.

[12] Very soon after the September 11th events, we received reports of unsolicited emails and phone calls to consumers that requested donations for the victims of the terrorist attack, including asking for the recipient's credit card numbers. We immediately issued a press release cautioning donors against fraudulent appeals that seek to use a national tragedy to take advantage of American generosity. This alert provided a series of tips for donors to help evaluate appeals. A copy is included with my testimony. We were pleased to see that the media made wide use of these tips about 9-11 relief efforts.

[13] The very first tip was to be wary of appeals that are long on emotion, but short on describing what the charity will do to address the needs of victims and their families. We also noted that charities should be willing to provide basic information that describes the charity's programs and finances. Even newly created organizations should have some basic information available.

[14] In cooperation with the Better Business Bureau of Metropolitan New York, we will soon make available a special section on our websites that will provide information on organizations that have been soliciting for September 11 relief programs. We have requested information from approximately 170 such organizations for this listing. Our objective here is to provide a central information resource to donors who are responding to appeals or who are looking to direct their support to specific types of assistance.

[15] We are still receiving inquires from potential donors asking about specific charities. But, we are also beginning to hear concerns from those who have already given and who feel their contributions may not be used as expected. For example a consumer recently wrote: "We have donated $130 to the wtc disaster fund and my employer has graciously matched that amount. We have now found out that our money may be used for other things. We insist that our monies be used for what they were intended. We would like our funds to be placed in an account specifically used for the wtc disaster or be promptly returned so that we may give it to a charity that will adhere to our wishes."

[16] Or another who said "if people knew that this money was not really going to help victims' families with the things they really need, like with bills because of the loss of an income, they would in many cases never have given the money they did. People would be outraged to hear this." Another stated "I am appalled." The messages are consistent -- "I gave to help the victims and now I am hearing that my donation will not be used as I intended."

[17] There are a number of our current charity standards that relate to some of the concerns being raised by the public. In addition to ensuring that a majority of public contributions are spent on the programs mentioned in appeals, our 23 charity standards also call for charities: to include, in solicitations, a clear description of the programs and activities for which funds are requested; to substantiate on request their application of funds, in accordance with donor expectations, to the programs and activities described in solicitations; and to ensure that solicitations and informational materials are accurate, truthful and not misleading, both in whole and in part.

[18] We are at a critical juncture here. The American public has stepped up to the plate and given in an unprecedented way. Now the challenge rests with the charitable sector to be equally forthcoming to the public regarding the use of these donations. Broad accountability is called for. How the recipient organizations handle the enormous resources they have been given and how well they communicate with the public about what they have done and plan to do in the future will have an impact on future charitable giving at all levels.

[19] I believe that charities will rise to the occasion and serve us all well. However, I think that it is in the best interest of donors, victims and the charities themselves to take a more collaborative' approach in all of their efforts. Coordination is certainly essential to ensure that there is a fair distribution of the 9-11 relief assistance and we encourage charities to cooperate in the sharing of information about available services and victims served. We believe this can be accomplished without unduly violating the privacy of the victims. At the same time, there also needs to be a commitment to openness and transparency far beyond what we are currently seeing. Most importantly, there needs to be a seamless and non burdensome way for victims and potential beneficiaries to seek help.

[20] I firmly believe in the vast power of the nonprofit sector and its capacity to serve and serve well and do not believe that the answer to the current situation lies in more government regulation. However, given the enormous need and the great amount of funds at stake, a clearly defined coordination mechanism is warranted. Whether through the good offices of the New York State Attorney General's office, through an independent control board, or via a consortium of institutional grant makers, it is essential to identify, document and monitor the activities carried out in this unparalleled relief effort. There needs to be an overall accounting beyond that of each individual organization.

[21] On our website, we have posted a number of recommendations to charities that we believe will help them achieve a level of accountability and can also help assure donors that their confidence in giving is well placed. Our recommendations, among other things, include the need for all organizations to: plan for a full accounting of all funds raised and all expenditures by year's end, regardless of the size of the organization; provide for clear descriptions of the programs or services in all future fund raising appeals so that donors and potential donors will know the specific ways that their donations will provide assistance; and maintain strong internal controls on income and expenses. Finally, we recommend that charities establish a board-approved plan for how contributions will be spent and a projected time line for these expenditures and revisit this plan as needs evolve.

[22] Again, I appreciate the opportunity to be with you today and look forward to answering any questions.