Friday, December 25, 2009

Merry Christmas and Happy New Year

International Committee on Fundraising Organizations
ICFO - association of national monitoring agencies

Dear colleagues and friends of ICFO,

Now on this Christmas Day of 2009, we have had the opportunity to reflect back on this past year. It has been a good year with some expansion of our membership and with new opportunities to participate more broadly on the international stage.

In February we visited Madrid and met with the leadership of
Fundación Lealtad, which we later accepted as a new member. While in Brussels, we met with the leadership of Donorinfo, which we subsequently accepted as a new supporting member of ICFO. While in Brussels we participated in meetings on nonprofit transparency in the context of the fight against terrorism, hosted by the European Commission, Directorate-General, Justice, Security, and Freedom for the Finance Ministers of the European Union countries and a number of invited guests from the third sector and from the European Centre for Non-Profit Law.

In May, we represented ICFO in London, UK at a meeting hosted by the New Philanthropy Capital on measuring impact effectiveness, and in December, we were in Taipei, Taiwan at the International Conference on NPO Accountability 2009: NPO Public Trust, sponsored by our ICFO member, Taiwan NPO Self-Regulatory Alliance and the National Taiwan University.

We have also initiated this blog as a means of interacting on the broader international stage addressing issues that are of interest to the third sector. We have found that the readership of this blog comes from at least 42 different countries, and that the blog is being read in 18 different languages through Google searches and through translation services of blogspot. The blog has generated discussion, primarily through email communications, and we have tried to be responsive to this online discussion in the subjects we have discussed and the treatment of those subjects. Clearly, the European Court of Justice January 2009 decision in the Hein Persche tax case from Germany generated considerable interest, primarily in Europe among members of the EU, lawyers practicing nonprofit law and philanthropy internationally, and academics in universities following the third sector.

Now we face another challenging year. We will continue to follow up on new contacts for potential membership, and the planning for and conduct of our Annual General Membership Meeting on 13 and 14 May 2010 in Toronto, Canada. Again, with security issues and financing of charity activity in the context of globalization and the fight against terrorism, this meeting promises to be an important meeting. As ICFO grows in membership and experiences greater involvement in the civil society movement, and as we consider how we should or will be involved in conducting international assessments of the major international NPOs and NGOs, this new year shapes up to be a busy year for us and for the third sector. All of this occurs as we face natural transitions required by our strategic planning and succession planning.

With such a large and internationally populated organization as ICFO with its constituent membership from around the world, not all, but many of us are religious people who are celebrating Christmas as the birth of Jesus. For all of us, I think, we celebrate Christmas as the symbol of hope, love, and solidarity. After all, those of us in leadership of ICFO are committed to these very ideals.

On behalf of ICFO membership, we wish each of you a Merry Christmas and Happy New Year in 2010

Rollin van Broekhoven (ECFA,
President, ICFO

Martina Ziegerer (ZEWO,
Vice President, ICFO

Burkhard Wilke (DZI,
Secretary General, ICFO

Adri Kemps (CBF.
Treasurer, ICFO

Eva Birath (SFI, www.insamlingskontroll,se

Sunday, December 6, 2009

Why Accountability?

The Taiwan NPO Self-Regulation Alliance (, a member of ICFO ( is sponsoring a conference in Taipei, Taiwan in mid-December 2009 to address the issue of NPO accountability and why we need it. The title is International Conference on NPO Accountability 2009 – NPO Public Trust. I was reminded of a similar conference in Milan, Italy in November 2008 held by ICFO member Istituto Italiano della Donazione (IID)( that addressed the subject of donor loyalty. This all started me thinking once again about the relationship between accountability and trust and donor loyalty in the nonprofit sector, especially during this time of year.

In the United States, we are told that most charities raise approximately 30 percent of their annual budgets during November and December of each year. A reasonable assumption is that the solicitation of funds and the giving during this period is related to holiday appeals, and maybe some end of year tax considerations, notwithstanding that much of the funding goes to year-long operating and mission expenditures.

Thanksgiving holidays in the United States, and I suspect Christmas season celebrations and recognition in much of the Western world at least, have something to do with motivations to give to charitable causes. This brings to mind the question as to whether accountability, whatever that is, plays an important part in most giving decisions during this time of year.

I have previously argued that there is a distinction in normal charitable giving and philanthropic giving and efforts. While this picture may be uniquely American, I think the point probably exists more broadly, certainly in the Northern hemisphere and particularly in the developed Western World. Whereas charitable giving tends to be individual giving and emphasizes the efforts to help the poor and needy and work toward alleviating the present situation, supporters of philanthropy see their efforts directed toward society and the future, and in addressing long-term solutions. Thus, philanthropic giving tends toward institutional and foundational giving to narrowly defined causes that address recognizable changes in social conditions. The recipients of philanthropy tend to be educational and arts institutions and organizations, medical research, and organizations that direct their activities toward promoting and improving the quality of human life.

There are different motivations in these two categories of public benefit activity. Whereas philanthropic organizations generally draw resources from wealthy donors and organizational foundations, the charitable organizations and religiously based organizations and churches draw their resources, both financial and volunteer labor, from individuals or small groups of individuals.

What the statistics show is that giving to charity in America during the most recent year for which we have statistics, totaled $306 billion. The largest percentage of giving reflected in these statistics was from individuals, with 85 percent of all households in the United States giving to charity, of which the total number of givers in the United States with annual incomes lower than $100,000 was 65 percent of the entire U.S. population. Moreover, 44 percent of all adult Americans provided volunteer services to charities. That is, 83.9 million American adults volunteered, thus representing 9 million full time workers at a value of $239 billion. Additionally, there are 12 million workers employed by nonprofit organizations. This represents a significant part of American economic life.

Moreover, if the published statistics are accurate, giving by individuals comprised 75 percent of all charitable giving in the United States, totaling more than $222.89 billion. Independent Sector recently reported that 85 percent of all religious households that gave to the church and religious charities also supported secular organizations. Those households accounted for 81 percent of all donations to charities. Similarly, patterns of volunteering between both religiously-based organizations and secular charitable organization are much the same. What this tells the researchers is that the connection of the donor with a church tends to define the donor’s heart and character. The conclusion of this study was that faith-based generosity, whether measured in terms of dollars or time, is real, measurable, and carries considerable impact.

I cannot help but wonder how much of this level of giving, particularly during the end of the year holiday seasons, and more specifically, individual giving, is based on some level of accountability practiced by charities, and specifically, to whom the charity is accountable. Of course there is some minimal level of accountability to governments in the form of the necessary requests for authority to engage in the solicitation of funds and the informational tax returns required for most charitable organizations.

But, how many of us seek specific information, such as, financial statements, reports on projects, reports on the effectiveness of public benefit activities undertaken by the charity, information about the board and its governance policies and style before we give to charities? My guess is that few of us as individuals engage in much due diligence in this respect before we respond to requests for charitable donations. If I were to examine my own giving patterns over the past 40 plus years, I cannot remember ever asking for financial statements and annual reports from the charity before making a donation, nor can I remember asking for detailed copies of the corporate minutes of the nonprofit organization or information about the members of the board of the organization.

My guess is that the due diligence practiced by major givers, such as wealthy philanthropists, foundations, or corporate givers, is much different. In most, if not all cases, these major philanthropic givers and foundations require detailed applications and information. Basically, it seems to me that these major givers do their own due diligence and do not rely heavily on what a charity monitoring organization may determine concerning the charity, other than that the charity is accredited.

What all this suggests to me is the importance of trust between the donor and the charity or nonprofit organization. I will expand on this in future posts, but will address the general definition and nature of trust here. Without trust, there is no loyalty by donors, and as I have said before, the goal of the charity should be donor loyalty and retention. It is well-known that far more expense is required to generate new donors than to keep those donors that have been cultivated and encouraged to be loyal givers. Fundraising or solicitation costs and administrative costs increase in the process of donor acquisition and the ratios of administrative costs are unfavorable to the balance sheets which are disclosed publicly.

But, what is trust? And what does accountability have to do with trust?

The Hebrew word for trust most often used in ancient texts is bāțaḩ, which with its derivatives connote a feeling of security, which often comes through reliance on someone or something. Another Hebrew word for trust is ̓̓̓̓̓̓̓̓̓̓̓̓̓̓'āman which means to have faith in something or someone because one is convinced of its, or his, or her reliability. It regularly denotes faithfulness in the sense of trustworthiness. Faith in this context often included the idea of the body of truths believed. Beliefs, as such, are convictions held on grounds, not on self-evident, but on evidence that is trustworthy.

In the social sciences, the subtleties of trust are a subject of ongoing research. In sociology (and psychology) the degree to which one party trusts another is a measure of belief in the honesty, benevolence, and competence of the other party. Based on the most recent research, a failure in trust may be forgiven more easily if it is interpreted as a failure of competence rather than a lack of benevolence or honesty.

From this perspective, trust is a mental state, which cannot be measured directly. Confidence in the results of trusting may be measured through behavior, or alternatively, one may measure self-reported trust (with all the caveats surrounding that method). Trust may be considered a moral choice, or at least a heuristic, allowing the human to deal with complexities that outgo rationalistic reasoning. In this case, machine-human trust is meaningless, because computers have no moral sense and rely on rationalistic computations. Any trust in a device under this characterization is computer-mediated trust of the user of the machine in the designer and the creator of the device, who has implemented the rational rules into the device.

Trust, therefore, involves the idea that something is committed or entrusted to one’s care for use or safekeeping, as an office, duty, or the like, and where the obligation or responsibility is imposed on a person in whom confidence or authority is placed. In law, what this defines is that there is a fiduciary relationship created in which one person, the trustee, holds the title or property, for the benefit of another, the beneficiary. This latter sense of trust is not unlike our understanding of stewardship that is relevant to our thinking about the relationship between the nonprofit organization and donor, and indeed, perhaps, theologically, the obligation of the donor with respect to the property or funds contributed to the nonprofit organization.

Of particular interest to me is the role in which computers play in the accountability and monitoring process in a modern setting. Information is submitted by nonprofit organizations to the monitoring organizations online, often in a format that is initially evaluated automatically on a specially designed software program. Indeed the mechanization of information on the informational tax returns required of exempt nonprofit organizations results in the computerized screening and data evaluation of information submitted on the informational tax return. Similarly, non-governmental monitoring organizations, such as those which are members of ICFO, may have the mechanized means of screening and analyzing the data submitted to determine if submitting charity is in compliance with certain standards promulgated by the monitoring organization. Do these capabilities enhance trust between the charity and the public, including donor and potential donor?

If trust is important for moral reasons, for developing donor loyalty, for donor retention, and indeed, for the success of the public benefit goals of at least the charitable sector, what kind of accountability advances that trust, and how? If it does not, what other purposes does accountability serve?