Thursday, August 21, 2014

ALS Ice Bucket Challenge, Movember and Kickstarter: a look at the future of philanthropy

Originally published on AirTalk on August 14, 2014.

Please click here to access the radio piece.



Kris Dorward, a 22 year-old chef, poses for pictures with his 'Movember moustache' in London, on Nov. 28, 2011.
You’ve likely seen the videos on the news and in your newsfeed of friends, family, and celebrities dumping a bucket of ice water over their heads. The “ice bucket challenge” is intended to raise money to fight Lou Gehrig’s Disease (ALS), and so far the campaign has been incredibly successful, using the viral, friends-tagging method to increase awareness and bring in over $1 million since the end of July.
Viral philanthropy is nothing new — lots of men (and some women) participate in Movember, growing moustaches to raise funds and awareness to support men’s health, including prostate cancer. Kickstarter and other crowd-funding methods have also added to the virility of philanthropy, generating huge amounts of money for charities.
How do nonprofits and aid groups set themselves apart in a time when fundraising is ubiquitous and unique? Is it enough to host a more traditional event like the walks, runs, or bike rides that support HIV/AIDS and breast cancer? Does direct access to friends and family via social media change the personal landscape of philanthropy? Is the U.S. philanthropically fatigued, or becoming increasingly generous?
Justin Timberlake does the #ALSIceBucketChallenge:


Bill Parent, Associate Dean for Strategic Initiatives at UCLA Luskin School
Ken Berger, President and Chief Executive Officer of Charity Navigator

Wednesday, August 13, 2014

How Much Should We Pay Charity CEOs?

Originally published on Linkedin on June 3, 2014. 

Last week it was reported by the
 Associated Press that median CEO pay among the Standard & Poor's 500 companies had crossed the $10 million mark. The justification given by many board members and large investors for this uptick (in addition to a surging stock market which is a big part of most of their pay packages) was that big pay packages are need to “attract talented men and women who can run multi-billion dollar businesses”.
How does this translate into the nonprofit sector? Some have argued that we need to offer salaries that are competitive with our for profit counterparts to recruit the best talent too. In addition, others have been worried for some time now that we are going to experience a “leadership gap” as nonprofit CEOs retire and there are not enough people with comparable skills to fill the void.
I say poppycock! As my colleagues and I have noted for some time now, there are other motivators that draw talent into the nonprofit sector. In other words, money isn’t everything and most who do the work of helping others do not expect to become millionaires along the way. This reality is bolstered by the ongoing migration of many for-profit workers and CEOs into the nonprofit sector. Surely most of them are not doing it for higher pay!
I believe that much of the focus in the world of social entrepreneurship also supports the fact that it isn’t all about the money. For example, the rising popularity of L3C organizations reflects this trend of doing good over big salaries. This is a relatively new form of for-profit organization that is committed to limiting profits so as to drive more social good. My colleagues in academia have observed that courses in social entrepreneurship at business schools often get closed out within minutes because they are so popular. Sure, some want to get rich while doing good, but many are not concerned with it. Rather, these students and young social entrepreneurs have a deep passion and drive to do good and find creative new ways to get new service models to scale quickly. So I think all of the above and more explains why the long anticipated “brain drain” has not happened and we have more philanthropic efforts going on than ever before in history.
However, I DO think there is one area where it appears for profits and nonprofits have a similar challenge. In the same AP article, one observer noted that, “there’s this unbalanced approach where there‘s all this energy put into how to reward executives, but little energy being put into ensuring the rest of the workforce is … paid appropriately”. THAT IS a big problem in the nonprofit sector, too! In my 30 years of direct service work as well as helping to run these types of nonprofits this problem was a constant challenge for us. My colleagues tell me it has only gotten worse in the 6 years since I left the trenches to come and work at Charity Navigator.
In other words, it is a tremendous challenge to find the resources to assure that front line staff get the pay and benefits they so much deserve. These are the people who have dedicated their heart and souls to providing vitally needed care to many underserved populations. They are not seeking notoriety or big pay packages, just a living wage and some assurance of a relatively decent retirement some day. Most of them are unlikely to get either in the current state of affairs.
Why isn’t there more of an outcry and attention given to this problem by some nonprofit leaders? Because they are not listening to the front line staff who are working in direct service in the sector. If they did, it is much more likely that they would develop solutions that include and flow from the “bottom up” so that their actions and ideas are grounded in the reality of day-to-day nonprofit work.
Nonprofit CEO salaries becoming comparable to for profits is not only a foolhardy solution to a much different problem, it is also just plain ridiculous. The 50% of the US population that pays taxes is, to one degree or another, subsidizing the work of charities. If you told the vast majority of them that many more of our nonprofit CEOs are now going to get million dollar and up pay packages, there would be out and out revolution and abandonment of those institutions that choose such a path. Sure we have some nonprofit hospitals and football coaches at nonprofit universities that appear to be an exception to the rule, but even there we are seeing serious questions being raised along with calls for changes in how we define a charity.
So I hope my brothers and sisters in the nonprofit leadership will wake up and smell the coffee. Let’s get serious about the real problems we face. Let’s stop trying to model everything along the lines of what for-profits do and tailor our efforts to our own unique strengths and opportunities. To begin with, here are a few suggestions to support front line staff that are informed by my own experience running nonprofits:
1. A nonprofit CEO should never agree to a pay or perk increase if the rest of the staff is told they will not be getting these things in a given year.
2. A nonprofit CEO should make every effort to minimize the technique of taking full time workers jobs and breaking them into part-time positions so they do not need to pay their employees benefits.
3. A nonprofit CEO should engage in ongoing conversations with staff regarding what can be done to “sweeten” the pot so that, if salaries and benefits are stalled, we consider other ways to enhance job satisfaction (such as vacation time, flex time, work from home when possible, etc.).
4. A nonprofit CEO should be doing whatever they can to educate their board and funders to this problem and work with them to maximize the flexibility to improve conditions for front line staff.
These ideas are just a start for the conversation. I would be interested in hearing your comments and suggestions for what we can do to help solve this ongoing problem. Our collective wisdom and creativity (as staff, volunteers, donors, beneficiaries, funders and Board members) has done amazing things to help the world. Let’s do our best to do more to help those who help others, too!
Photo: Alex Ionas/Shutterstock

Tuesday, May 27, 2014

Charity Refuses to Show Proof of Housing Homeless

Originally aired on WESH 2 News on May 13, 2014

ORLANDO, Fla. —Hundreds of charities vie for your donations and time. One local charity claims it houses the homeless in campsites throughout Central Florida.
And he has repeatedly refused to show us proof the charity has provided shelter to anyone at all.
Inside a nondescript Leesburg thrift store is a charity that claims to be housing the homeless.
For James Worley, who lives out of his van, the promise of living on a tented camp site seemed like the hand up he'd been looking for.
"That could be possibly something to my advantage to help me get back on my feet," he said.
Before WESH 2 News Investigates began asking questions, The Foundation for America's Homeless website offered up photos of serene tented camp sites, even a cabin in the woods with working electricity.
After Worley called WESH saying he was told the campsites did not exist, we called the charity's founder Larry Hamer.
Hamer first told WESH 2's Matt Grant by phone that there are no campsites, but he hoped to build them eventually. However, when they met in person, he claimed to run several sites in Lake, Marion and Sumter counties.
"Where are these homeless camp sites?" Grant asked.
"I'm afraid I can't tell you," Hamer said.
Hamer says that's because he wants to protect the privacy of his clients. Last month, WESH 2 News Investigates met with Hamer to talk about the work he's doing to help the homeless.
"The pictures of the tents and the cabin on your website, those are actual places?" Grant asked.
"Mm-hmm," said Hamer.
"That are housing homeless people right now?" Grant asked.
"Mm-hmm," said Hamer. "Those are absolutely places that are housing homeless people."
But remember that cabin in the woods? It's actually a bathroom at Yellowstone National Park. And a photograph of a tent on the website was actually taken by a blogger in Canada who told us she never gave permission for the Foundation to use her photo.
WESH 2 News Investigates confronted Hamer with this information and he added a disclaimer to the website saying, "Pictures are a representation of furture (sic) goals. May or may not be factuel (sic) at this moment."
Over the weekend, WESH 2 News Investigates began promoting this report. And by Monday morning, several more changes had been made to Hamer's website. The photos of tents and campsites were removed and the headline on the Foundation's website had been changed from, "We are housing America's homeless," to, "We provide needs for America's homeless."
We asked Hamer to explain why he made the changes, and he said, "Because you pointed out my flaw (sic)" and "because the actual campsites are not pretty."
"Everything is inconsistent. It just raises more questions than it answers," said Ken Berger, president of Charity Navigator, an independent charity watchdog.
While Hamer refused to open his financial books to WESH 2 News, the Foundation's federal tax documents are public record. We showed the 2012 documents to Berger, who said there were a number of potential red flags, including not reporting administrative expenses and listing a salary expense while claiming the charity has no paid employees.
"You need to be able to trust a charity, and when they are manipulating images, when they are refusing to give you basic information. This seems like an organization that is questionable at best," he said.
Hamer updated his website again, writing a response to our story before it aired, insisting they do house the homeless, writing, "Do we or don't we house homeless? For those that just need to know the answer is yes! Will we ever tell where?  No!"

Monday, May 19, 2014

America Has More Than a Million Nonprofit Organizations: How Donors Can Sort Through the Good, the Bad, and the Ugly with Ken Berger, President and CEO of Charity Navigator

Originally published in Corporate Articles's Spring 2014 edition.

C:\Users\John\SkyDrive\Documents\FBA\Charity Navigator - Ken Berger interview\Ken_Berger_2011_Large.JPG

Ken Berger joined Charity Navigator in 2008 after almost thirty years’ experience working in the charitable non-profit sector. He has held leadership positions at a variety of human service and health care agencies, both large and small, and has operated programs serving the homeless, the developmentally disabled, the mentally ill, substance abusers, the medically underserved, and persons with HIV/AIDS, among many others. Ken earned his Bachelor’s degree at the University of Buffalo. He went on to obtain a Master’s degree in Psychology from Antioch University and a Master’s degree in Business Administration from Rutgers University.

Ken has a deep passion for helping donors become wise social investors (charitable givers who see their donations as a long term social investment) by learning how to identify and then support high performing nonprofits. He also has a deep interest in encouraging charitable non-profits to perform effectively and thrive even in challenging times. He is a regular presenter at conferences on both the domestic and international stage, is frequently interviewed by regional, national and international media on nonprofit issues and has published numerous articles on issues affecting the nonprofit sector's effectiveness. In addition, he is the author of Ken's Commentary, a blog about his thoughts on the non-profit sector. Ken is also a LinkedIn Influencer and writes a monthly article on charity issues there.

He is a member of both the Alliance for Effective Social Investing and was a founding member of the Social Impact Analysts Association. He was also a member of the CFC-50 Commission which was formed under the U.S. Office of Personnel Management to strengthen the integrity, operation and effectiveness of the Combined Federal Campaign (the largest workplace giving campaign in the world).

Please tell us about Charity Navigator, its mission, and what makes it unique.
Berger:  Our mission is to be a guide to intelligent giving.  And that essentially means that we see our role as providing all the resources we can for donors to charities.  The key resource we provide is our website and within that is the system we use to evaluate the performance of charities through a rating system of zero to four stars.  It's a very rich site with all kinds of resources and tips.  In addition, we see ourselves as an advocate for donors in the public square, so whether it's speaking before Congress or interviews with the media or talking to nonprofit groups and their trade associations.  It's about providing a voice and perspective and interests of donors.  What makes us unique in this regard is the fact that we make judgments.  There are only a handful of organizations that actually rate charities. People often think that Guidestar does, but if you look at their exchange it just shows whether a charity has supplied certain information.  On the other hand, we actually judge the quality.   We are also somewhat unique in the sense that we don't charge anybody.  We don't charge the charities that we rate to use our seal and we don't charge the users of our service.  We are completely free to everyone.  I'm not aware of any service of the size and scope of Charity Navigator that is completely free.  I think we're distinctive in being the most scalable evaluation system out there that has some depth.  Scalable meaning that we're larger than anyone in terms of the number of charities we evaluate and we provide more depth of analysis than some of the crowd funding sites that are basically just the will of the crowd that often do not have expert analysis.

It sounds like Charity Navigator is similar to Consumer Reports in terms of your independence and objectivity in providing evaluations of charities?

Berger:  Yes!

How do you rank charities?  What are some of the major charity red flags donors should be aware of and how do you spot them?

Berger:  We rate charities on a scale of zero to four stars.  I emphasize that we rate rather than rank.  We use a three dimensional system.  Two of the dimensions are fully operational and the third is currently under development.  The first dimension looks at the finances of the charity and assesses their health from a financial perspective.  The second dimension, called accountability and transparency on the website, focuses on governance and best or ethical practices for their operations.  The third dimension, which we have begun to post information on but have not begun to rate charities on yet, is what we call results reporting.  It looks at matters related to outcomes, impact, and in some cases, outputs of the charity.  How are you meeting your mission in a meaningful way?  And are you reporting on that in a meaningful way in the public square, particularly on your website?  Those are the three major areas that we consider.

In terms of red flags for donors, there are a few that are quick and easy.  One is if a charity gets our lowest rating of zero or even a one start rating.  It means that it has poor or extremely poor performance compared to industry standards.  We would encourage donors to be very cautious about supporting organizations that are at that low level of scoring in our system.  There are two other ways that a person could quickly find red flags using Charity Navigator.  The second is called Donor Advisories.  We put up a Donor Advisory if we become aware that a charity has something significant going on that may go beyond what we typically rate a charity for that could be of serious concern to donors. Typically either the charity is currently under investigation by some governmental entity or had some major lawsuit going on often having to do with embezzlement or fraud issues. Even if the investigation or the court case is not concluded, it's something that might give a donor pause until that investigation or lawsuit has reached its end.  The last way to look for a red flag is something that is brand new called the CN Watch List.  These are situations where a charity might not be subject to a governmental investigation or lawsuit, but a reputable media outlet may have conducted an investigation and is reporting some concerns.  When there is a Donor Advisory we stop rating the charity because we wonder whether the information is necessarily accurate if there are other problems.  If there is a CN Watch List entry, we still continue to rate the charity since it doesn’t always rise to the level of severity of donor pause or a Donor Advisory.

Those are the quick ways we provide donors with red flags to be aware of.  Separate from Charity Navigator it would fall within these three dimensions.  So if you see a charity that has the vast majority of its money going into administrative and fundraising expenses rather than programs, we think that is a cause for concern.  However, remember we believe you need to look at an organization three dimensionally, so if an organization has slightly more overhead than another organization that you're considering, that should not be the only thing that you look at to make your decision.  What I'm talking about here is extreme cases, where let's say 60%-70% of the money is going to overhead.  But just because one organization has 25% overhead but another has 30%, it should not be the single factor in our opinion to decide which charity to support.

The second area for red flag would be in the issue of governance.  If you look at some of the metrics that we consider, one thing that we have found on a number of occasions that can be a worrisome indicator is a small board of directors.  The board is supposed to be in charge of the charity, not the CEO.  The board is supposed to set the direction for the organization and then the CEO executes that strategy.  But small boards that don't have diverse expertise or for boards that have friends and relatives of the CEO, the amount of oversight and independence is often not there.  We often see that these kind of fraudulent activities are much more likely to happen when the CEO is basically unfettered and unmonitored and unaccountable from a board perspective.

There have been several news stories about charities that spend most of their money on solicitors and a small percentage of their funds on direct cash aid in furtherance of their mission.  Some of the examples are quite shocking and may be hurting the reputation of the entire charitable organization sector.  Should Congress consider passing laws that impose minimum performance or conduct standards for charities to maintain their tax exempt status?  Or are there other ways to force sham charities out of business?

Berger:  Let me start by saying that because of the nature of this job I've had more exposure to the media and these types of stories than ever before.  There is a profound problem in the nature of news when it relates to the nonprofit sector because the typical news reporter will focus on controversy and problems.  Those charities that are doing bad things get highlighted and there really is a problem where some donors come to the conclusion, how can you trust anybody when there is all of this bad stuff going on?

Remember there are 1.5 million nonprofits and even if there are a hundred or even a thousand reports like this per year, it gets into the public consciousness more than the good news and it definitely can as you indicate hurt the reputation of the entire sector.   A number of my colleagues will still say that problems are very rare.  My experience is that it is not rare.  It is a real problem in the sector.  There needs to be more monitoring and oversight of the sector, but it's certainly not the majority of charities.  To say that it is rare as some in the sector do I think doesn't take it seriously enough.  It's a serious problem.

In terms of Congress passing laws in this area, when I think of that I think of a balloon and if you squeeze the bottom of the balloon then it all gets to the top.  I suspect that if you just pass a law with these kinds of things in place there will be other ways to manipulate and abuse the system.  It is one of the challenges of regulation.  I think a bigger problem here is the vast underfunding of enforcement organizations both at the state and the federal levels.  So even for existing laws, the amount of enforcement is minuscule at best and if anything we are moving in the wrong direction because with the imploding of state government funds and the fact that at the federal level the enforcement agency is the IRS whose mission is to collect taxes.  So if that's the mission, you can understand in part why its oversight of those organizations is tepid.  Additionally, you have lobbying efforts by multimillion or even billion dollar nonprofits such as hospitals and others.  So when I look at existing laws and their enforcement, we have a structural problem.  The point is if Congress were to simply passing more laws, they are not going to get enforced since the existing laws aren't.  I definitely do think that government needs to play a much more active role in investigating sham charities and in putting them out of business and in having clearer policies about what it is a nonprofit and what are the parameters around how a nonprofit operates.   The use of solicitors where only a small amount of money is going to the mission is an issue.   But a much bigger problem that has to be addressed is the increasing vagueness of what the definition of a nonprofit is.  I recently published an article titled Nudity, Ghosts, and Perpetual Indulgence and the question is what do these three things have in common?  They are the mission of a variety of charities promoting nudity, perpetual indulgence, and having ghost boxes in your house to get rid of your poltergeists.  Those are real charities!  On the other end of the spectrum you have nonprofit hospitals walk like a duck and talk like a duck when you compare them to their for profit peers.  More often than not they are virtually the same except they do not have to pay taxes, so they have the strategic business advantage.  I think the real fundamental problem in the oversight and the policy of how we define charities in the sector.

Are there any specific laws on the books that could be enforced easily that would have a big impact?

Berger:  There are a couple of states, I believe Oregon and Florida, that tried to pass laws stipulating that if you don't have at least 30% of your funds going to programs then they would revoke your tax exempt status.  These were the simple laws that they tried to pass and I believe the lobbying juggernaut wiped them out.  We're talking 30% and that can't pass!  There is an organization that was recently founded called the Charity Defense Council that is aggressively fighting against anything to do with overhead at all.  They argue that even if it cost a charity more than a dollar to raise a dollar, maybe that's not so bad because now you have a new donor list and in years two and three you could raise more money.  So there's a real resistance to this, some real opponents to any basic accountability in the fiscal realm. So to directly answer your question, no I do not think any specific laws could be enforced easily. However with hard work, laws are on the books that could have a big impact. For example, enforcing intermediate sanctions can penalize a “disqualified person” who is in a position to exercise substantial influence with respect to the organizations affairs and receives financial gain from the organization that exceeds the value of services provided.

If someone is interested in becoming a board member of a non-profit what steps should they take in terms of their due diligence, reaching out to an organization, etc.?  Are there any formulas that charities use to determine what their “give or get” requirements will be?

Berger:  In terms of due diligence I would humbly submit that looking at the kind of metrics that we consider at Charity Navigator would be a good part of the exercise, so looking at the financial statements, the 990's.  Does it appear the organizations are managing their money well?  Do they have sustainability?  Do they have some reserves?  Do they typically have a surplus rather than a deficit?  There can be deficits on occasion but overall there should be evidence of positive financial health. Does it have a diverse board?  Also really eyeballing the organization, going and visiting and seeing what they are doing on the ground, especially when it comes to the results that I mentioned as the third dimension we consider.  Unfortunately, there is just so little currently available in the public domain on the meaningful evidence of results for an organization.  So you probably have to go there.  There are all kinds of reasons for going and actually seeing for yourself what they are doing, and learning about how they measure their performance for meeting their mission.

In terms of give or get formulas, they are all over the parking lot.  There is everything from $100,000 for certain boards, such as universities and some of the arts organizations that may be in that sort of stratosphere. There are some that have no requirement at all, it's whatever you can give or get.  So there is tremendous diversity in requirements.  I think another thing a board member should do is very quickly, early on, find out about this because if it turns out that there is not going to be an alignment with their capacity or interest then you may not have to go through the rest of the process.  I do think though that there are a couple of fundamentals that anyone interested in joining a board should have in mind.  Every board member should have a responsibility for helping with fundraising or helping with getting the message of the organization out.  This could include going through their rolodex and seeing their friends and colleagues that might be able to support the organization or hosting events.  Even if they are not a person of high net worth, every board member should be involved in the critical role of raising the funds, especially because the most precious funds for many nonprofits is general operating support. Often government and foundation grants are restricted so the money for unexpected events and needs and services is critical and the board can help in that regard.  I think that the give or get requirements also vary by the size of the organization and the type of organization.  There are some organizations that are almost entirely government funded and may have a very soft touch on this subject, where there are other organizations that receive almost entirely private contributions and really need a much more involved board in that regard.

Governance best practices have been a major focus in the corporate world over the last several years.  Are non-profits also being scrutinized for their governance practices, and if so, what are the current hot topics?

Berger:  A few years ago, Independent Sector spent millions of dollars and years working with a number of nonprofit experts to develop a manual which is now free and online. Not only is there a manual of guidelines for governance practices but also a workbook that can walk you through implementing and ensuring you have the best governance practices.  It is called Principles of Good Governance and Ethical Practices – A Guide for Charities and Foundations.  There has been a lot of work on this for quite a few years and I think it was very much in the minds of Independent Sector, which is a major trade association, a few years ago when various scandals and problems arose in the sector.  If an organization is following the handbook they would be much less likely to have problems.  The issue is that people will start a nonprofit and not do their own due diligence.  So it's not just prospective board members; founders of nonprofits will often not do the due diligence to see what are the best practices for governance and finance and so forth. They also will not do the due diligence to see whether or not within the universe of 1.5 million nonprofits, perhaps there is already an organization that is already doing this that I should align with and put my ego at the door, rather than having to create yet another nonprofit with my name on it.

In the corporate world there was a backlash against “overboarded” directors, i.e. individuals that serve on too many boards at the same time to be effective.  Do non-profit boards take current levels of responsibilities and commitments into consideration for current or prospective directors?  If not, should they?

Berger:  They definitely should but I think just like in the case of give or get the reality on the ground is all over the place.  There are some well-run organizations where they have not just a nominating committee but a governance committee.  I think it is a best practice to have a governance committee rather than a nominating committee because the governance committee not only helps to recruit new board members, but also does a self-assessment of the performance of each and every board member on some periodic basis to make certain that they are fulfilling an adequate commitment to the organization.  There is not enough of that going on.  I think in the nonprofit sector, most are desperate for getting more talent and commitment on their board.  There are often boards where people are sort of show-boated and aren't really actively involved.  I think the best practice is that if you are on a board, you are not just there for your name; you are actively attending and participating at the board and committee meetings.  You see your role as funding and evangelizing for the charity as a core part of your duties and that the vetting of new board members considers their commitment and understanding of the responsibilities. There should be an orientation for new board members to reinforce their understanding of their responsibilities and commitment, and then there should be an ongoing assessment of those board members to see that they are indeed walking the walk of those responsibilities and commitments.  The governance committee should compile a scorecard on an annual basis or at least every three years, where they conduct an assessment of individual directors that includes attendance at board and committee meetings, meeting the give or get policy, recruitment of others, etc.

At one point attorneys were not considered ideal candidates for corporate boards but recent studies have shown an increase in lawyer-directors.  Is there a general bias towards or against attorneys as directors of non-profit organizations?

Berger:  It is perfectly fine to have attorneys on the board.  However, it is very important and many boards don't realize this - it is generally inadvisable for the attorneys on the board to provide legal advice to the board or the organization because of the exposure and conflicts that can entail and hamstring that board member. The best practice is if the board wants to have that legal counsel and I think it's a good idea, they should have a pro bono legal counsel attend the board meetings who is not a board member, and that distinction is important.  There are a lot of very affluent and influential attorneys out there, so generally charities would welcome their knowledge.  For example, the attorney that is on our board is very good at reviewing the factual accuracy of documents which doesn't put him in harm’s way, but his attention to detail and language, for example, is very helpful to the board.

Do non-profit boards reflect the same level of diversity (e.g. gender, race) as you find in society?  If females and/or minorities are underrepresented are there any efforts being taken in the industry to correct this?  

Berger:  The answer to the first question is no, the answer to the second question is yes, and now the details.  Absolutely there is a real problem in terms of the lack of diversity.  In addition to gender and race there also needs to be a diversity of skills on the boards.  Part of the reason for this may be that structural problems remain in the society that I think are reflected back in the boardroom. We still have the reality that women make less money than men.  We still have the reality that African Americans make less money on the whole than whites.  If a nonprofit board is looking for high net worth individuals to support the organization, there is an implicit if not explicit bias by gender and race because of the socioeconomics.  There is that built in challenge.  I think a lot of people within the nonprofit sector just by their nature and values aren't happy about that and are making efforts to change this, which also includes finding younger people too.  They are trying to get more of a match between boards and people looking for board service and I do think they have emphasized diversity in the people they are trying to bring in.  Nonprofits have been encouraged to be very conscience about setting policies in this area.  I still think we have a long way to go and there are some structural realities on the ground that nonprofits are struggling with.  In some cases there have been interesting efforts, like for community health centers to get funding from the federal government it is required that at least half of the board is made up of the people you are serving.  That is one kind of effort being undertaken to correct the situation.

What are the most frustrating and rewarding parts of your job?
Berger:  I think the most frustrating part of the job is that there is so much more we would like to do, and this is a typical nonprofit problem so I'm sorry if it sounds kind of generic but it's the case. There are a million 501(c)(3) organizations and we currently rate 7 thousand.  The good news is those 7 thousand receive 55% of all private contributions each year (not including houses of worship). That translates to our covering $110 billion out of $200 billion that Americans donate each year.   People will come to our site and say, well I looked up my charity and it’s not there, I'm frustrated.  I think a lot of people don't realize we are also a charity and that the only way we are going to get to the scale that they want us to will be if people step up voluntarily and help us to get there.

The most rewarding part of the job is that I spent 30 years running charities being in the trenches, and I observed a lot of the good, bad, and ugly in the nonprofit sector. After I started this job, all of a sudden people wanted to know my opinion and I had microphones in my face, I'm on CNN, NPR, quoted in the New York Times, etc.  The reward is being able to take those 30 years of experience and observations and have the opportunity to have a platform to share what I know and to have some sense of leverage and impact to be able to help to move along some changes to make things better for the way the nonprofit sector operates, and for the way people have information to give to charity and to think about charity.  That is definitely incredibly rewarding to be able to do that.  To be working in a charity where you can see the impact and feel the impact.  We estimate that we're influencing $10 billion of charitable giving each year at this point, and each year that I've been here we've broken records in terms of the number of visits to the site, the number of people who are using the information so that's been very rewarding.  I just continue pushing to do more.

More information about Charity Navigator, including how to donate, can be found on its website,

Interview conducted by John Okray, chair of the Federal Bar Association’s Corporate and Association Counsel Division.

Monday, May 12, 2014

Keeping Quiet About Wrongdoing at Nonprofits Only Makes Matters Worse

Originally published in The Chronicle of Philanthropy on May 8, 2014.

Keeping Quiet About Wrongdoing at Nonprofits Only Makes Matters Worse 1
By Ken Berger and Jeremy Kohomban

New momentum has been growing to create activist organizations that defend nonprofits from public attacks and from regulations and laws they believe would harm their operations.  Witness the efforts of CForward, an organization that seeks to influence local and state politicians and went so far as to organize a PAC; and the Charity Defense Council, an effort to thwart unfair criticism. Both of those groups are trying to give nonprofits more political muscle and also responding to the sensationalist news media, which more and more recognizes that controversy sells and often presents information about charities that lacks context and in some egregious cases, intentionally distorts information.

The result has been that some well-functioning charities have been depicted by prominent journalists as incompetent or deceitful and sometimes both. To the extent that these efforts defend nonprofits that need defending and educate the public on the complexities and challenges facing the nonprofits world, we say, Bravo.  But we fear that too often, allegations of true mismanagement and scandal at nonprofits either get no response from charity and foundation leaders or even worse, a defense that is unwarranted.

Cases of mismanagement abound, some researchers have estimated that tens of billions per year are lost due to unethical behavior, typically by the leadership of nonprofits. For example, last month William Rapfogel pleaded guilty to stealing more than  $9-million from the Metropolitan Council on Jewish Poverty, an organization he  led for more than 20 years. Mr. Rapfogel said he been involved in a complex scheme with other top executives of the charity where they systematically overpaid  the council’s insurance and then obtained kickbacks from the insurance company. 

One can’t pretend the news media sensationalizes nonprofit corruption when it comes to such cases.
In our opinion, based on our 60 years of collective experience, a culture of constructive self-criticism has yet to embed itself in the ethos of most nonprofits, their staff leadership, and their boards of directors.

The reasons for these poor responses are varied.  Nonprofits, like other organizations, often follow a commonly held view about the best way to handle an attack:  If you ignore it, the public will forget and move on. The media thrives on controversy, so just don’t discuss it and don’t highlight it in any way and the will move on.  But many nonprofits also think because they are doing important work that serves society, the public should focus on the end result and little else. What’s more, many nonprofit leaders believe it’s unnecessary to speak out because bad deeds are so rare at charities. Just like in business or government, wrongdoers exist, but nonprofits don’t see any reason why they should be held to a higher standard than any other institution in our society when it comes to punishing bad players.

The result is a sense of denial and defensiveness throughout the nonprofit world that is damaging our credibility with the public. We recognize the deep commitment of people who work in the nonprofit world, and the great good they do for society. But we strongly disagree with those who believe “results are all that matters” when assessing how a charity operates. Financial management, good governance, ethics and high operating standards must continue to be vital measures of a nonprofit’s worthiness.

If a charity mismanages its finances, today’s results can be tomorrow’s bankruptcy. If a charity has poor governance, an unethical and unaccountable chief executive or board might embezzle funds that won’t go toward producing results. And if we persist in saying results as all we care about, we will continue to see a never-ending series of scandals and mismanagement that will rock the nonprofit world and damage the public trust. We need to look at both performance and accountability for financial, operational and results to assess nonprofits.

Charities should also be held to a higher standard of ethics because of the way we are structured and how we raise money. We benefit from tax exemptions and the charitable deduction and we are governed by volunteers. The public expects independent oversight of our organizations to ensure that tax-exempt money benefits society as a whole and not the institution or its leadership.

No nonprofit should tolerate serious ethical failures, and we must all be outspoken when somebody violates our trust. We therefore urge nonprofit leaders and boards of directors to step-up and take the risk of confessing to abuses of funds and other serious misdeeds. This is not easy for anyone to do know. We know that those who speak out could face ostracism from movers and shakers in the nonprofit world, donors, and powerful political leaders. 

Personally, neither of us has always been so bold. We have failed to speak when we should have and we wish to begin by noting the missed opportunities in our careers. Just last year during a scandal in New York City, Jeremy raised the need for a public statement from a well-regarded nonprofit membership association where both Jeremy and the perpetrator were Board members. The refusal was almost instantaneous. In this case, the excuse was that this “happens” and because of the powerful parties (allegedly, including politicians) involved, it was best to say nothing.  Rather than pushing for further discussion and an open discussion, Jeremy simply backed-off because he feared alienation.

A few years back, Ken witnessed a CEO stealing a large amount of money from a charity.  Although the CEO was eventually caught and removed due to a reporting system Ken helped create, the length of time the theft went on should never have been tolerated.  Ken’s fear (and that of others within the organization) of retribution for reporting the problem, permitted this situation to go on for far too long. For some time now (since the above events occurred), we both have been committed to being more forthright about our own errors and missteps, as well as speaking out when we see scandalous and unethical behaviors.

However, we believe it will take this generation of nonprofit leaders, and likely the ones who follow us, to truly breed the type of culture that celebrates the notion of openly discussing these things.

The nonprofit world has already lost enough time and credibility, now is the time to start doing better.

Ken Berger is president of Charity Navigator and Jeremy C. Kohomban is chief executive of the Children’s Village, in Dobbs Ferry, N.Y.

Wednesday, April 30, 2014

Career Curveballs: How to Handle a Bad Boss

Originally published on Linkedin on April 28, 2014.

Before I joined Charity Navigator, I had a few pretty unethical CEOs I worked for. Don’t get me wrong, I believe that the MAJORITY of charities are run by well-meaning people. However, there are also some bad apples, just like in any group of people and any type of organization. There is also research and other compelling evidence that documents this problem specifically within the nonprofit sector.
In my case, I’ve worked for a few charity leaders whose primary focus was to line their own pockets while providing low salaries and benefits to their staff, as well as inadequate support for the programs and services serving the people the organization was supposed to support. However, I have also worked for and with amazingly dedicated professionals and volunteers who are all about achieving results to meet the mission, and doing things with the highest ethical standards in mind. Based on my almost 30 years working in the nonprofit sector I have thought much about the twists and turns of my career and what I could learn from the path I have been on. Charity Navigator and now LinkedIn have also afforded this opportunity to share with you some of the lessons I have learned along the way. Here is a list of some of my writings on the subject to help you with bad supervisors, if you encounter them, as well as my thoughts on the policies and principles to follow to help you excel. I also recommend starting with this great general resource on how to maximize the possibility that your organization follows good ethical practices:
1. Principles of Good Governance and Ethical Practice – is a wonderful free guide developed by the Independent Sector in consultation with many charities over a number of years. There is also a workbook to help you find additional resources and track your progress in following all the ethical practices they recommend.
Let’s never forget that supervisors and especially CEOs who do bad things do not just rip off donors (although that is quite serious in and of itself), they also demoralize staff (sometimes causing great people to leave the sector), they damage the quality of services (causing some people to get sick or even die because the quality of care is so below standard) and they damage the OVERALL public trust. They do not just damage the public trust for their organizations but for the entire social sector and all of us who are working in it for the greater good. We need to call them out more aggressively and give them no quarter.
Let’s also never forget that the vast majority of people who work in the nonprofit sector are dedicated to serving others and giving of themselves. This is a truly noble and honorable profession and I believe that most people who work in nonprofits have the personal character and integrity to do the right thing. The majority of charities that we evaluate at Charity Navigator are rated good or exceptional. That is because, among other things, the majority of those who do this work are in it for the right reasons. I salute all of you who fit that profile and hope your career does not have too many curveballs. I also wish you many home runs in your efforts to make the world a better place.
Photo: Tim (and Julie) Wilson/Flickr