Arthur “Buzz” Schmidt Founder, GuideStar

“It is an enormously important resource because it’s available to any member of the public who can look up any nonprofit organization’s tax returns,” says Walter Robinson, assistant managing editor of the Boston Globe. Robinson heads the paper’s “spotlight” team, which mined GuideStar’s data for a series of exposés on abuses at foundations. For example, the Globe used data from the National Center for Charitable Statistics (which in turn gets its information from GuideStar) to identify nonprofits with egregiously high ratios of expenses to program expenditures. Then it probed these organizations further by accessing their 990 forms from GuideStar.

By studying these documents, Robinson says, the paper discovered that one foundation with a mere $7 million in assets was paying a single official an annual salary in excess of $1 million. Forms 990 from larger organizations—such as Carnegie Corporation of New York—can run to hundreds of mind-numbing pages, but they can also be revealing. Globe reporters combing through one of these managed to discover that a Texas foundation had purchased a $37 million corporate jet. Those stories didn’t help the overall reputation of nonprofits, but they did serve the valuable function of helping root out questionable practices by illuminating them, which in the long run should build confidence in the sector.

Lighting the Way
While the Boston Globe was careful to investigate further before assuming wrongdoing when an organization’s administrative ratio seemed out of whack, GuideStar executives are conscious that in this arena, as in so many, a little learning can be a dangerous thing. As Stephanie Lowell, Les Silverman and Lynn Taliento wrote in a provocative piece on nonprofit management in the McKinsey Quarterly in 2001, the absence of good performance measures in the nonprofit world has led to “an excessive focus on the percentage of donations and revenues spent on overhead. Funders, and therefore nonprofit organizations, watch this crude measure of fiscal responsibility much as for-profits watch their stock price. Minimizing overhead is a worthy goal, but it is counterproductive when taken so far that it stifles critical investments in the organization.”

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