NCIB UNFAIR TO U. S. CHARITIES
NEW REPORT SHOWS HOW WATCHDOG AGENCY'S RATING SYSTEM MISINFORMS THE PUBLIC
Washington, D.C., September 27, 1994
The National Charities Information Bureau (NCIB), which evaluates 400 charities including most of the nation's "household name" charities, treats charities unequally. As a result, the NCIB's reports on the charities are "unfair and unreliable, and have the effect of benefiting some charities and damaging others".
These are the conclusions of a study commissioned by the Ethics and Accountability Committee of the National Federation of Nonprofits (NFN). At its meeting August 30, NFN's Board of Directors accepted the final draft of the report, which was prepared by the Nonprofit Service Group, and approved its distribution.
The report on the study, which NFN released today, observes how the charity watchdog agency "fails to fulfill its mission to help the public judge the merits of national organizations that solicit donations from the public". Readers of the NCIB reports, whom the watchdog seeks to assist, "are actually misinformed due to inconsistent application of the standards".
The study relates instances where NCIB does not apply its standards consistently to organizations it evaluates. Some charities were granted exemptions from strict adherence to a standard, but the exemption often was not noted, or the reason for the exemption not given. In some cases, charities with similar facts were not granted similar exemption. This lack of consistency is "unfair to the charities and misleads the public", according to Lee M. Cassidy, the NFN executive director.
"The public has a right to know when and why exceptions to standards are granted. And when exceptions appear to be a moving target, or when the NCIB grants exceptions without stating the reason, one senses discrimination", Cassidy said. "that, in turn, erodes the public's confidence in NCIB's administration of its standards."
The NCIB also requires charities to follow authoritative accounting guidance, known as Generally Accepted Accounting Principles (GAAP), when the charities and their independent auditors prepare financial statements. However, the NCIB departs from GAAP when it calculates how much certain organizations spend to raise funds or conduct their programs.
In such situations, the NCIB reports contradict the respective organization's audited financial statement, a public document also considered authoritative.
"This creates further confusion for the readers of NCIB reports", says Cassidy, "and harms the charities for which NCIB has created its own fundraising and program expense figures, substituting them for the numbers in the audited financial statements."
Cassidy went on to say, "the National Federation of Nonprofits today calls upon NCIB to develop uniform guidance for its staff evaluators, to make the guidance available to charities and the public, and to provide the staff with adequate training and supervision in the preparation of reports on charities. The purpose of such a written framework is to ensure consistent interpretation of standards, and to apply the rationale for a particular exception consistently to all organizations with the same or similar circumstances."
Media can obtain a copy of the NCIB study by contacting Lee M. Cassidy, Executive Director, National Federation of Nonprofits, at 202-628-4380.