Carnegie
Corporation
of New York
Fall 2005
SHIFTING GEARS
In 2003, two years into the replication process, Maryland Nonprofits
had much to feel good about. The ethics and accountability model it
had built from scratch and made work in Maryland was now up and running
and apparently making a difference in five additional states. [For more
on how the Standards for Excellence made a difference for individual
nonprofits, see sidebar.] Many more state associations were also interested
in adapting the model, as were a number of management-support organizations
for nonprofits, university-based nonprofit centers, foundations and
others.
Despite this success, however—or perhaps partly because of it—Maryland Nonprofits found itself at an uncomfortable crossroads in 2003, contemplating a dramatic shift away from the methodical, step-by-step replication approach it had employed to that point. Instead, Berns and Madsen began developing plans for bold and risky new course: nationwide replication.
By 2003 the nonprofit sector found itself embroiled in a growing firestorm. Just over a decade before, in 1992, the United Way scandal—which saw United Way president William Aramony resigning under accusations of misusing the organization’s funds (he was convicted in 1995 of various counts, including fraud and filing false tax returns)—had been followed by a steady stream of similar (if less spectacular) revelations in the following years such as corruption at the Washington, D.C. chapter of the United Way; dubious insider land deals at the Nature Conservancy; and a series in the Boston Globe exposing lavish spending and excessive compensation at several philanthropic foundations. In 1999, Johns Hopkins University nonprofit sector scholar Lester Salamon was prompted to warn that “...important questions have been raised about the effectiveness and accountability of nonprofit organizations...this (and more have) undermined public confidence in the sector and prompted questions about the basic legitimacy of the special tax and legal benefits it enjoys.” Then, in 2001, in the wake of the terrorist attacks on the World Trade Center and the Pentagon, both the Red Cross and the September 11th Fund, which had been created by the New York City Community Trust and the United Way of New York City, were faulted by many for their handling of donations intended for victim relief. Soon, Senate Finance Committee chairman Charles Grassley began commissioning studies on the nonprofit sector and convening high-profile hearings. Meanwhile, the Brookings Institution released a series of studies showing that public confidence in the charitable sector eroded substantially between 2001 and 2002 and then remained at historic lows.
With so much attention suddenly focused on ethics and accountability, Maryland Nonprofits decided it was time to shift the project into a higher gear. A 2003 renewal grant proposal to Carnegie Corporation declared that, based on its success to date, “Maryland Nonprofits recognizes the opportunity for the Standards for Excellence to become the national standard for ethics and accountability in the nonprofit sector.” At the same time, the proposal conceded that “the existing state-by-state replication approach, while successful, is so labor intensive and expensive that the Standards program is not likely to achieve national scale in a time frame that is responsive to the interest that has been expressed by nonprofit technical assistance providers throughout the United States and elsewhere.”
The new plan called on Maryland Nonprofits to establish a Standards for Excellence Institute to raise the profile of the program nationally and support broader replication efforts. Through the Institute, Maryland Nonprofits would seek to sign on additional replication partners—both state associations, and other types of management support organizations—and also to launch a new still-to-be-defined “direct service track” that would make the Standards code (as well as training, support and the opportunity for certification) available to nonprofits located in regions where no replication partner was operating.
In seeking to establish the Standards program as “the national standard for ethics and accountability,” Berns was embarking on an uphill struggle. In the years since Maryland Nonprofits launched the Standards for Excellence, the heightened focus on misbehavior in the nonprofit sector had spawned a number of parallel initiatives aimed at monitoring the performance of nonprofit agencies or holding them accountable for ethical behavior and efficient programming. For instance,
Guidestar, a web site posting tax returns for 850,000 charities
nationwide (see Carnegie
Results, Winter 2005), began producing “Analyst Reports”
in 2002. The reports provide basic information on about 200,000 individual
nonprofits nationwide and compare each with other organizations in their
sub-sectors and their home communities on a variety of indicators.
Charity Navigator, launched in 2001, uses tax return
data to rate 4,300 charitable organizations nationwide on seven financial
measures, including fundraising expenses, administrative expenses, organizational
growth and cash reserves.
The Better Business Bureau’s Wise Giving Alliance
launched a charity rating service in 2003 to assess national charities.
Designed as a resource for donors, the ratings assess 500 organizations’
adherence to minimum ethical standards in governance and oversight, measuring
effectiveness, finances and fundraising.