Community Foundation for Oak Park

Charity Standards

by David Ross, President

This Web page has not been approved by the Board of Trustees. Opinions expressed here belong solely to Community Foundation President David Ross and do not reflect the positions of the Foundation or its Board of Trustees. Factual statements can be verified by an examination of the Community Foundation's policies and related documents.

Sometimes it seems there are almost as many standards for evaluating charities as there are charities. Yes, that is hyperbole. However, dealing with suggestions from various organizations to complete their questionnaires in order to be rated by them goes beyond annoying to become impossible. Without a paid staff to handle the paperwork, the Community Foundation often ignores such requests.

Further, a number of standards used to evaluate charities rely too much on quantitative approaches that ignore the significant difference in scale between (for example) the California Community Foundation (resources in excess of $1,300,000,000) and the Community Foundation for Oak Park (resources less than $350,000). Instead, any evaluation approach must also include qualitative criteria.

As an example of a one-size-fits-all standard, I looked at the Standards for Charity Accountability of the Better Business Bureaus' Wise Giving Alliance. Below, I present the major headings of the BBB Standards along with my personal comments. Note that the Community Foundation does indeed meet many of of the BBB Standards.

GOVERNANCE AND OVERSIGHT
The governing board has the ultimate oversight authority for any charitable organization. This section of the standards seeks to ensure that the volunteer board is active, independent and free of self-dealing. To meet these standards, the organization shall have:

1. A board of directors that provides adequate oversight of the charity's operations and its staff.

   The Community Foundation has no staff. Individual members of the Board of Trustees attend meetings of our activity committees. The minutes of those meetings are distributed to all trustees. The Foundation's Treasurer reviews the financial statements of the activity committees.

2. A board of directors with a minimum of five voting members.

   Our Board of Trustees has eleven members, all of whom are voting.

3. A minimum of three evenly spaced meetings per year of the full governing body with a majority in attendance, with face-to-face participation.

   In accord with our by-laws, our Board of Trustees meets four times a year, on the second Tuesday of February, May, August, and November.

4. Not more than one or 10% (whichever is greater) directly or indirectly compensated person(s) serving as voting member(s) of the board. Compensated members shall not serve as the board's chair or treasurer.

   No trustee, officer, or any other person serving the Community Foundation receives any compensation. We operate at all levels entirely with unpaid volunteers.

5. No transaction(s) in which any board or staff members have material conflicting interests with the charity resulting from any relationship or business affiliation.

   Again, the Community Foundation has no staff. We have a "Conflict of Interest" policy that prohibits transactions not only with trustees, officers, and activity committee leaders but also with their families.

MEASURING EFFECTIVENESS
An organization should regularly assess its effectiveness in achieving its mission. This section seeks to ensure that an organization has defined, measurable goals and objectives in place and a defined process in place to evaluate the success and impact of its program(s) in fulfilling the goals and objectives of the organization and that also identifies ways to address any deficiencies. To meet these standards, a charitable organization shall:

6. Have a board policy of assessing, no less than every two years, the organization's performance and effectiveness and of determining future actions required to achieve its mission.

   While the Board of Trustees completed a self-evaluation at its 11 August 2004 meeting, that is not a regularly scheduled activity. The Community Foundation has no formal policy on this.

7. Submit to the organization's governing body, for its approval, a written report that outlines the results of the aforementioned performance and effectiveness assessment and recommendations for future actions.

   Lacking a staff, this would be a self-evaluation. The self-evaluation is available for public review.

FINANCES
This section of the standards seeks to ensure that the charity spends its funds honestly, prudently and in accordance with statements made in fund raising appeals. To meet these standards, the charitable organization shall:

8. Spend at least 65% of its total expenses on program activities.
9. Spend no more than 35% of related contributions on fund raising.

   I take strong exception to the two items above. They fail to allow for situations involving unsuccessful fund-raising activities, which do indeed happen; and they ignore the fact that costs consume a greater share of revenues for small charities. More important, the standards omit any measure of how efficiently a charity operates.

   However, in 2006, the Community Foundation met both standards. Our mission of supporting the community of Oak Park took 68% of all our expenditures, combining programs with grants. (Note that the BBB focuses on programs and ignores grants.) Fund-raising consumed 30% of the funds raised. The Community Foundation is a very efficient charity, spending only 4% of its revenues on administration and overhead.

10. Avoid accumulating funds that could be used for current program activities. To meet this standard, the charity's unrestricted net assets available for use should not be more than three times the size of the past year's expenses or three times the size of the current year's budget, whichever is higher.

    This standard ignores the basic concept of a community foundation, which is to accumulate and invest resources so that the earnings on its funds are sufficient to make grants and pay operating expenses. This requires resources 20 times current outgo, well in excess of the limit indicated by this standard. In 2006:

    • Total year-end resources were only 94% of out outgo for the year.
    • The unrestricted balance in the General Fund was 12.5 times the year's outgo from the General Fund.
11. Make available to all, on request, complete annual financial statements prepared in accordance with generally accepted accounting principles.
12. Include in the financial statements a breakdown of expenses (e.g., salaries, travel, postage, etc.) that shows what portion of these expenses was allocated to program, fund raising, and administrative activities.
13. Accurately report the charity's expenses, including any joint cost allocations, in its financial statements.

    Our annual financial statements and our IRS Form 990 are availble on this Web site. The financial statements are compiled "in accordance with standards established by the American Institute of Certified Public Accountants." They include sufficient details to distinguish program, fund-raising, and overhead costs and the sources of revenues.

14. Have a board-approved annual budget for its current fiscal year, outlining projected expenses for major program activities, fund raising, and administration.

    Starting in 2006, the Foundation's Board of Trustees decided to adopt annual budgets. The Foundation's larger activity committees ("larger" in terms of cash flow) also develop and follow annual budgets.

FUND RAISING AND INFORMATIONAL MATERIALS
A fund raising appeal is often the only contact a donor has with a charity and may be the sole impetus for giving. This section of the standards seeks to ensure that a charity's representations to the public are accurate, complete and respectful. To meet these standards, the charitable organization shall:

15. Have solicitations and informational materials, distributed by any means, that are accurate, truthful and not misleading, both in whole and in part.

    The proliferation of standards and proposals to mandate some standards by law results in part from a number of instances in which charitable solicitations bordered on fraud or actually crossed that border. The Community Foundation places a high priority on doing what is ethical and right, not merely on meeting the requirements of existing laws. This is part of the Foundation's culture, seen in the actions of both our Board of Trustees and the leadership of our activity committees. All communications — public and internal — are accurate and honest.

16. Have an annual report available to all, on request, that includes:
    • the organization's mission statement,
    • a summary of the past year's program service accomplishments,
    • a roster of the officers and members of the board of directors,
    • financial information that includes (i) total income in the past fiscal year, (ii) expenses in the same program, fund raising and administrative categories as in the financial statements, and (iii) ending net assets.

    All of these may be found on this Web site.

17. Include on any charity websites that solicit contributions, the same information that is recommended for annual reports, as well as the mailing address of the charity and electronic access to its most recent IRS Form 990.

    This Web site is actually the primary means of communicating this information.

18. Address privacy concerns of donors by
    • providing in written appeals, at least annually, a means (e.g., such as a check off box) for both new and continuing donors to inform the charity if they do not want their name and address shared outside the organization, and
    • providing a clear, prominent and easily accessible privacy policy on any of its websites that tells visitors (i) what information, if any, is being collected about them by the charity and how this information will be used, (ii) how to contact the charity to review personal information collected and request corrections, (iii) how to inform the charity (e.g., a check off box) that the visitor does not wish his/her personal information to be shared outside the organization, and (iv) what security measures the charity has in place to protect personal information.

    The privacy policy of the Community Foundation generally prohibits any dissemination of personal information about anyone — donors and others — outside of the Foundation. This policy applies equally to operations directly under our Board of Trustees and under our activity committees. We do not disclose information when the law permits disclosure; we only disclose information when the law mandates disclosure.

19. Clearly disclose how the charity benefits from the sale of products or services (i.e., cause-related marketing) that state or imply that a charity will benefit from a consumer sale or transaction. Such promotions should disclose, at the point of solicitation:
    • the actual or anticipated portion of the purchase price that will benefit the charity (e.g., 5 cents will be contributed to abc charity for every xyz company product sold),
    • the duration of the campaign (e.g., the month of October),
    • any maximum or guaranteed minimum contribution amount (e.g., up to a maximum of $200,000).

    The Community Foundation does not currently engage in cause-related marketing.

20. Respond promptly to and act on complaints brought to its attention by the BBB Wise Giving Alliance and/or local Better Business Bureaus about fund raising practices, privacy policy violations and/or other issues.

    The Community Foundation has never received a complaint of any type from any agency — private (e.g., BBB) or government.

The conclusion is that the Community Foundation does indeed meet most the the BBB Standards for Charity Accountability, some by default (because they address situations not applicable to the Foundation) and some by the inherent culture of the Foundation. However, no explicit attempt was made by the Foundation or its activity committees to use the Standards as a guide for our operations. Thus, where the Foundation does not meet a standard, future action to change the way we operate is unlikely.

Last updated 10 November 2007