NYPAS
New York Philanthropic Advisory Service
History of NYPAS Standards for Charity Accountability
NYPAS, one of the nation's largest charity watchdogs, released its new BBB Standards for Charity Accountability, effective March 3, 2003. These standards replaced the old standards previously used to evaluate area charities, and they deal with a variety of emerging issues that are important to prospective donors. With the new standards, NYPAS continues to provide information on the importance of governance, public disclosure of financial reporting, public accountability, and other issues that affect New York state charities.
In January 2002, the Better Business Bureau Wise Giving Alliance released an exposure draft of its Standards for Charitable Accountability. These standards were developed to replace the separate standards of the National Charities Information Bureau and the Council of Better Business Bureaus‚ Foundation and Philanthropic Advisory Service that were in place at the time those organizations merged. The new standards enable NYPAS to continue its mission of assisting donors in making sound giving decisions and fostering public confidence in charitable organizations. In addition, NYPAS continues to provide information to charities that enables them to fulfill their missions effectively. The Wise Giving Alliance has produced an Implementation Guide for the Standards for Charity Accountability, which provides details of the evaluation process, including how to apply each standard and the effective date of each provision.
The standards and the implementation guide apply to both NYPAS's reports on charities and the Wise Giving Alliance's reports. NYPAS's reports created before March 3, 2003 were all based on the old standards. All NYPAS's reports now use the new standards.
The standards were developed by the Better Business Bureau Standards Review Panel, with professional and technical assistance from representatives of small and large charitable organizations, accounting professionals, grant making foundations, corporate contributors, regulatory agencies, research organizations and the Better Business Bureau system. The new standards are based on the principle of full disclosure and are designed to apply to organizations soliciting from the public.
The new standards cope for the first time with issues like donor privacy, measuring effectiveness, and internet solicitations. The standards also reaffirm longstanding principles of NYPAS. The aim was to develop standards that both respond to donor concerns and recognize the diversity and range of charitable operations.
Highlighted Changes in the New Standards
- Standards pertaining to the role of governance (Standards 1-5)
- Regular appraisal of theCEO (Standard 1)
- Minimum of five voting board members (Standard 2)
- Compensated board members shall not exceed one person or 10% of the voting board (Standard 4)
- The organization must spend at least 65% of its total expenses on programs (Standard 8)
- Avoid accumulating unrestricted funds in excess of 3 times previous year's expenses or current budget (Standard 10)
- Provide financial statements in accordance with GAAP (Standard 11)
- Audited statements if income is over $250,000
- Review if income is over $100,000
- Internally prepared in GAAP format if income is less than $100,000
New Issues: Monitoring Effectiveness and Addressing Privacy Concerns
- Effectiveness monitoring that includes having a policy of assessing, no less than every two years, the organization's performance and effectiveness (Standards 6-7)
- Include on any website that solicits donations the same information as in the organization's annual report, as well as the mailing address of the organization, and electronic access to its most recent IRS Form 990 (Standard 17)
- Address privacy concerns of donors by providing them an opportunity to inform the organization that they do not want their names shared, and show information about the organization's privacy policy prominently on its website, including instructions for donors who wish to indicate that they do not want their names shared (Standard 18)
Standards Prior to March, 2003
A. PUBLIC ACCOUNTABILITY
A-1. Provide, on request, an annual report that includes information about the organization's purposes, current activities, finances, governance and tax exempt status.
A-2. Provide, on request, complete annual financial statements.
A-3. Provide adequate information in financial statements to serve as a basis for informed giving decisions.
A-4. Provide, on request, all income and fundraising costs of controlled or affiliated entities, such as chapters, branches or committees.
B. USE OF FUNDS
B-1. Spend a reasonable percentage (at least 50%) of total available support and revenue on programs and activities directly related to the organization's cause and purpose.
B-2. Spend a reasonable percentage (at least 50%) of available public contributions in accordance with programs described in solicitations.
B-3. Spend a reasonable percentage (no more than 35%) of public support and/or related contributions on fundraising.
B-4. Spend a reasonable percentage (no more than 50%) of total available support and revenue on fundraising and administrative costs combined.
B-5. Substantiate, on request, that funds are applied to programs described in solicitations.
B-6. Establish and exercise adequate controls over disbursements.
C. SOLICITATIONS AND INFORMATIONAL MATERIALS
C-1. Solicitations and informational materials shall be accurate, truthful, and not misleading.
C-2. Substantiate, on request, that solicitations and informational materials are truthful, accurate, and not misleading.
C-3. Solicitations shall include a clear description of the programs and activities for which funds are requested.
C-4. Identify the solicitor and his/her relationship to the benefiting organization and the programs for which funds are requested, in direct contact solicitations (e.g. personal and telephone appeals).
C-5. Solicitations shall identify the benefiting organization, a source from which written information is available, and the percentage of the sales or admission price which will benefit the charitable organization or cause in all materials offered in conjunction with the sale of goods or services (e.g. special events).
D. FUNDRAISING PRACTICES
D-1. Establish and exercise controls over fundraising activities conducted on the organization's behalf by staff, volunteers, consultants, contractors and controlled or affiliated entities.
D-2. Establish and exercise adequate controls over contributions received.
D-3. Honor donor requests for confidentiality and not publicize the identity of donors without prior written permission.
D-4. Refrain from the use of excessive pressure in fundraising.
E. GOVERNANCE
E-1. Establish and maintain an adequate governing structure.
E-2. Maintain an active governing body that meets at least three times a year with a majority of members present.
E-3. Allow no more than 20% of the governing body to be compensated.
E-4. Ensure that all members of the governing body do not engage in business transactions with the organization in which they have material conflicting interests.
F. COMPLIANCE WITH APPLICABLE LAWS
F. Comply with all applicable laws and regulations for New York State.
