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Charitable Contributions for September 11: Protecting against Fraud, Waste, and Abuse.
Subcommittee on Oversight and Investigations
Mr. H. Art Taylor
Good Afternoon: 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. 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 Bureau's 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. 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 it is from the position
of donor "stand in" that I make my remarks today. I can say four things about
donors that are relevant to our discussion today.
First of all, there are a lot of them.
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. Second, as the survey found, Americans have very high expectations for ethics and accountability by charities, but are often frustrated at not being able to find the necessary information to make their decisions about giving. 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. We
were not surprised at these findings. We talk to donors every day who 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. 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. The Alliance reports on individual charities are detailed, often covering several pages, and set out not only to reveal 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. 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. My third point concerns the impact of the Internet as a tool for charity solicitations and donations. Our survey research has shown that the Internet is used by the public more as a tool for gathering information about charities, than as a means to donate. While over half (56%) of regular online users are very likely to go to a charity's web site for financial information if they are considering making a charitable contribution, less than one in 10 (6%) of Americans report having ever made a charitable contribution of $10 or more online. Our survey also shows that the public is concerned about the privacy and security of their Internet charity contribution transactions. However, despite this, many more Americans contributed online for the first time in response to 9-11 relief efforts. If this increased Internet giving is to continue beyond the current crisis charities must address these concerns. My fourth point concerns 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. 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. 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. 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. 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." 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."
I believe this is only the beginning of these complaints. We are at a critical juncture
here. The American public has
stepped up to the plate and given in an unprecedented way.
Donations total over a billion dollars and are growing.
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. There is a
lot riding on this. On our website, we have posted
a number of recommendations to charities that we believe will help achieve this
accountability and can 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. Again, I appreciate the opportunity to be with you today and look forward to answering any questions.
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