by Angela Holzer, Founder of Given Tree
Given Tree certifies smaller, trusted charities and improves accountability so you can trust where your funds are going and see the impact you’re making!
Imagine this: an orphanage in Kenya accepts a donation of clothing, diapers and toys, then promptly locks them in a closet once the donors are gone. These items are sold, used for personal use, or remain locked up in the closet until the donors visit again. How could this be prevented?
What about an orphanage in the Dominican Republic that is transparent with how they use their funds yet they struggle with paying bills? How can donors find out and help this responsible charity?
Most nonprofits are small. There are approximately 1.1 million U.S. registered charities, according to The Nonprofit Almanac 2012. In 2010, 75% of charities had annual expenses of less than $500,000, whereas over 60% of those charities had annual expenses less than $100,000. Only 4% of charitable organizations had annual expenses over $10 million.
Most small charities struggle. Most small charities lack expertise in various aspects of running a business: accounting, management skills, financial reporting, etc. The majority are run by employees and volunteers who have multiple responsibilities in areas they mostly learn on the job. Small charities often have a lack of structure in place to hold them accountable with operations outside of reporting their annual financials to the IRS. Charity Navigator does a great job at providing financial information to the public about large charities and holding them to a high standard. Given Tree aims to provide that service for small charities–not only with financials but also by monitoring project activity.
Combating fraud in nonprofits. An estimated $40 billion is lost annually through charity fraud, according to a report by nonprofit accounting experts. Most likely, the figures are higher. People worry about fraud or wasteful spending in big organizations, but abuse often occurs much closer to home with small to medium charities. Small organizations often lack the financial controls to prevent theft, experts say. The problem is especially acute at small nonprofit groups run by volunteers, according to experts, “where there is very little oversight and everyone is friends.” (Source: NBCNews, Insider theft a big problem for small charities by Elizabeth Schwinn.)
The Solution: Certification for Nonprofits
Given Tree is improving the accountability standard for nonprofit organizations by certifying smaller, trusted charities based on three areas of accountability:
1- Philosophy & Approach (Organizational Health)
2- Financial Health
Given Tree reviews a charity’s financials, mission statement and programs, and requires the charity to show accountability and demonstrate best practices through periodic reporting on our website. This builds confidence in donors and provides a clear way to show transparency with financial reports and project activities.
Given Tree aims to help small charities become accountable, sustainable and collaborative with other charities. (click image below for larger view)
Two major areas of charity accountability:
MISSION STATEMENT: Does your mission statement reflect the activities and programs on the ground? A mission statement can change and it needs to adapt along with your work. Are you being transparent with your changes?
Bad Example: A charity in Africa decides to focus on vision care. Through the years they still get involved with offering surgeries to the poor for vision, but they spend most of their time distributing clothes, food and running other programs from donations given. As mentioned, a mission statement should reflect what a charity is doing. Donors giving to an organization need to feel confident that the charity uses funds in the manner which they have portrayed. In this scenario, clothing and food are still good causes, but it illustrates the lack of accountability and transparency a charity needs to have. A public charity answers to the public both in their activities and their financials (which will be discussed in a separate article).
Good Example: A charity in Mexico deals with many different needs. They run a food kitchen, distribute clothes, teach classes to the community, etc. They chose to have a mission statement that lists all the areas they target so donors and the community would understand what services they offer. Every year they revisit their mission statement and decide if it needs to adapt to what they are currently doing. When they add a service that’s new, they simply add it to the list on their mission statement and values.
COMMUNITY APPROACH: How do you involve the community you are serving in your efforts and critical decision making? A lot of charities decide the needs and wants of a community when they live in a different country, and then wonder why it’s so hard to get the community involved in programs they offer. “What can we do?” asked Ahmed Mohamed in the book, The Idealist. “We cannot enforce. We try to explain. We want to empower. But no one can come and change them if they do not want to change themselves.” Ahmed attempted to introduce a business plan for small-scale milk processing in Dertu, Northeastern Kenya. The people did not understand the principles and preferred their old ways of doing things. Instead they should have consulted the local community in the decision-making prior to introducing the plan to discover exactly what they were interested in changing and learning.
Good Example: A U.S. charity wants to help a small village in Guatemala. They enter this community and meet with the local village leaders. They set up a time to have a community discussion on the needs and things the community wants to accomplish. This charity insists that both men and women from the community attend this meeting to give their voice and be involved. During the meeting, the charity introduces themselves and gives the community members/leaders a basic overview of what they have to offer. Next, they have a discussion on the needs of the community and how the community leaders would most like this charity to help. The charity outlines their requirements which includes the involvement of community members in building and implementing programs. The charity will provide materials and professionals to teach the needed skills to locals. They will work alongside each other. A timeline is established and responsibilities assigned. All of this happens prior to this charity coming in, setting up shop and starting a program.
Bad Example: A U.S. charity decides they want to make a difference. They pick a location they’d like to impact and then start bringing in supplies to distribute without contacting a local leader, government or doing research on what organizations and charities already work in that area on the ground. The volunteers from this charity stay at a local hotel and as they exit the building they start giving handouts. The community starts seeing these individuals as wealthy and starts asking and begging for money instead of getting involved in programs to help themselves. This causes a problem for the next traveler or charity who wants to get the community involved. They are now having to overcome the attitude that’s been created/developed by simply giving handouts opposed to getting them involved in discussions. This charity makes it harder for other organizations to come in and help the community develop a self-reliant attitude when they have been conditioned to asking a charity for handouts or local traveler for money.
In short, we need to always remember the 3 “S”s: TEACH SKILLS, SELF-REIANCE, and SERVICE TO NEIGHBORS.
We’ll delve into these in Part II. Stay tuned!