What are those Charity “Seals” of Transparency?
It’s quite the statement to say, for more than 200 years, philanthropy has played a major role in American history. Consider just one example, the Smithsonian Institute, the world’s largest research, education, and museum complex named for James Smithson (1764-1829). 192 years ago, his estate plan contained a generous bequest to “…create an establishment in Washington D.C. for the increase and diffusion of knowledge.” Today, 21 museums, a zoo, and all manners of education and research centers have fulfilled his wish.
Americans give generously to organizations that resonant with their personal values, and history offers a wonderful lens as to how philanthropy has changed the way we care for one another, shaping the society we aspire to live within. The IRS has approximately 1.8 million registered nonprofit organizations fulfilling needs as diverse as any American may envision, defining how we want to interact with the world.
With such a profusion of important causes, it’s not surprising that many individuals can feel torn about their giving. They want some measure of reassurance as to how their money will be used to its best advantage. To understand this, one only has to look back to the early 2000’s when PR problems arose with a well-known disaster relief organization accused of using donations for lavish events instead of helping with the intended relief. When the PR issue arose, the backlash caused a major reduction in their fundraising.
Trust. It’s important. So, let’s jump to the spring of 2001, when John P. (Pat) Dugan, a pharmaceutical executive and philanthropist, created Charity Navigator, an internet-based platform designed to help donors make informed giving decisions. The database enables charities to demonstrate their effectiveness, impact, and accountability. From then on, the term charity watchdog organization (CDW) was coined. During the past 22 years, other online CDW platforms have cropped up, but Charity Navigator and GuideStar, now known as CANDID, hold the top two spots.
CWD’s can benefit donors with a broad base of evidentiary information, strengthening trust between donors and receiving organizations by compiling key indicators and statistical information to rate nonprofit organizations with iconography known as “seals” of transparency. In recent years, 52% of donors said the presence of a charity watchdog seal would greatly or moderately increase their likelihood of giving; 84% said the absence of a seal would decrease their giving. These statistics demonstrate knowing how donations are used has become vitally important. There is no cost for a nonprofit organization to register with a CWD, therefore earning seals cannot be influenced by anything other than the reporting of verifiable data.
During a CWD annual review, algorithms assess various information points and program to expense ratios, meaning the greater percentage of annual budgetary costs are expended on delivering programs (a direct line to those helped), and lower percentage on what it took to deliver them (paid staff and turning on the office lights, so to speak). However, I think it’s important to note smaller, grass-roots organizations that do an amazing amount of wonderful work do so on a very small, tight budget and may not be able fulfill all aspects of reportable data to earn a seal. You, as a donor, should feel comfortable asking for information. Honestly, it’s every nonprofit leader’s best day to have the opportunity to talk with donors on their organization’s mission and vision, and the associated budget needed to do what they do.
No membership dues or payment is needed to readily access information through CANDID and Charity Navigator websites. Also, just as free to access but not as easy is the IRS.GOV charitable organization search tool to view 990 tax returns. You will need the exact name the charity uses or their EIN# to search these and let me say, sifting through 990’s can be daunting unless you have an accounting background. When you see a CANDID or Charity Navigator icon/seal appearing on nonprofit materials, social media, and websites, rest assured, a good deal of time and resources have been expended to earn this distinction beyond what is found in a 990 tax return.
Legacy Endowment Community Foundation is proud of its CANDID Gold Seal and 4-Star Charity Navigator rating, and we encourage you to contact our office for any questions or assistance – whether you are a donor or nonprofit – to learn more about obtaining credentials. We are here to help build a sustainable and thriving region through the trust and generosity of donors who want to make a positive and lasting impact in the community they love. Who knows, maybe the next James Smithson is living right here in our town, ready to make his or her estate bequest to shape our region’s future.
This is a reprint of Jean Larsen’s article in the Village News on January 11, 2024.
This is part of a series of articles written to share important information about charitable giving and the various ways you can easily support your favorite charities and community.