News and analysis
August 04, 2014

Charity Watchdogs Scoff at Direct Marketers’ Self-Reporting Effort

An association of nonprofits and companies that solicit donors through direct marketing has unveiled a new tool for measuring fundraising performance that it hopes donors will consult instead of turning to charity watchdogs.

The Direct Marketing Association Nonprofit Federation, long at war with evaluators like Charity Navigator and CharityWatch, says the new "accountability dashboard"­—which it plans to present at its annual conference in New York on Tuesday—will provide a more accurate picture of fundraising efforts. The nonprofits that use it will post data online in areas like how many new donors they have acquired over the previous three years.

But watchdogs scoffed at the notion of nonprofits reporting on themselves.

"There’s no independent scrutiny or analysis which would provide a benefit to a donor," said Sandra Miniutti, vice president of marketing at Charity Navigator, which grades charities partly on how much money they spend on programs as opposed to fundraising or administration. "It appears to be no different than when charities publish their own pie charts and annual reports showing donors their best attributes."

Media reports and charity regulators often highlight nonprofit fundraising campaigns that channel most of the donations to commercial solicitors. The federation argues that approach can be misleading since some campaigns that appear expensive will pay off in the long run by attracting new donors.

"The Nonprofit Accountability Dashboard takes a long view rather than judging the results of a single fundraising campaign," Tom Harrison, chairman of the direct-marketing firm Russ Reid, said in a statement.

The tool asks nonprofits to enter three years’ worth of data about the number of people served, total revenue and expenses, the amount spent on programs, the amount spent to acquire and cultivate donors, and the number of current donors.

But Daniel Borochoff, president of CharityWatch, which also marks down charities for high fundraising costs, said listing the number of donors is "not meaningful" since it says nothing about the quality of donors—for example, whether they gave a small or large amount or will continue to give. "It almost shows you that it’s written for the groups that oversolicit," he said.

Shannon McCracken, a senior fundraiser at Special Olympics and chairman of the federation’s ethics committee, said the federation wants to remind people that it costs money to find and keep the donors that support nonprofit work. She said organizations should enter financial data that match what they report in their audited financial statements, but the dashboard will "streamline" the information to make it easier for donors to find.

Ms. McCracken said the group will not police the dashboards, but its ethics committee could investigate if a member is accused of misrepresenting financial information.

The federation last year issued its first set of fundraising guidelines. They say that a nonprofit should spend a majority of annual revenue on programs, and they offer recommendations for agreements between charities and commercial partners.

Send an e-mail to Suzanne Perry.