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From the President's Office, June 2007

Dear Friend:

This Saturday, June 9, I will have the honor of participating in a panel at the 2007 Investigative Editors and Reporters Conference in Phoenix, Arizona. Two other panelists and I will help journalists learn more about reporting on and investigating nonprofits.

The fact that these reporters would schedule a whole session on nonprofits underscores the fact that as the sector gets bigger and more important, we will continue to attract more media attention. As a longtime journalist myself, I understand that one of the roles of the media is to try to condense complicated situations into a story that people can understand. On one level, the world of the nonprofit should be pretty simple: we ask for voluntary donations and tax benefits in order to provide badly needed public services. But often I find myself having to tell a reporter that making a judgment about a nonprofit depends on a few qualifiers. Consider these recent questions I've received:

Q. This charity is paying its executive director a quarter of a million dollars. Isn't that excessive?
A. It depends. How large is the organization? What is its mission? How large is the compensation that leaders of nonprofits of a similar size and mission receive? What steps did the board take to establish this compensation?
Q. This charity is doing business with a company owned by one of its board members. Isn't that a conflict of interest?
A. It depends. Is the nonprofit paying the company market rate or less? Did the organization get bids from other companies to ensure that the price was fair? If the board approved the contract, did the member who owns the company recuse him- or herself from the discussion and vote?
Q. A charity in my town holds a big gala every year. It brings in thousands of dollars, but a large portion of that money has to be used to offset the cost of the event. Isn't putting on this gala a misuse of the charity's time? Wouldn't it be better for the organization to do a direct-mail campaign instead? Isn't it misleading to tell donors that the proceeds will go to programs?
A. It depends. What is the primary purpose of the event? Is it to raise money? To publicize the nonprofit's cause? To identify people in the community who are interested in that cause and might therefore be interested in serving on the board or making a sizable donation? Or is it a combination of these goals?

As for misleading donors, it depends. As long as the organization makes clear that the donor cannot deduct the entire amount of his or her ticket price, auction purchase, etc., then no. If the organization fails to make this clear, or if it implies (or states) that every cent of these costs will be used for programs when that is not true, then yes, it's misleading.
You get the idea.

Reporters hate hearing, "It depends." To be honest, I sometimes get tired of saying it. There are days when I wish I could give journalists the simple sound bites they want. But the fact is, the sector is complex, and I would be remiss if I oversimplified.

So what can you do to show reporters and the public that, truly, "It depends"? I can recommend three things:

  1. Look at your organization through an outsider's eyes and be prepared to explain.
    What makes sense to you, or something you know is appropriate, may appear suspicious to someone unfamiliar with nonprofits.

    In the end, the most important question for you to answer is whether you are making an impact. Are you indeed accomplishing what your mission says you are trying to do? How do you know? How do we measure? If, indeed, people can measure your impact and outcomes, many of the little details we often focus on won't be nearly as critical.

  2. Document, document, document.
    When your board establishes compensation rates, keep the research the board based its decisions on. When you award contracts for services, get bids and document your bidding process.

  3. Update your information on GuideStar.
    Use GuideStar as one more tool to be transparent. Describe your mission and programs, tell people about your goals and accomplishments, and let them know about your needs. Provide a context for your Form 990, if your organization files one. If you do not file a 990, flesh out the IRS data we already have for you and create a complete picture of your organization.
You're not going to convince everyone, any more than I'm going to convince everyone this Saturday. Still, I'm looking forward to the challenge.

Wish me luck!

Sincerely,

Bob Ottenhoff
President and CEO