Restoring trust in the charitable sector.

If the recently announced self-governing code of ethics proposed by Imagine Canada is not enough to restore confidence in the transparency of the Canadian charitable sector—and I don’t believe it is--what additional steps could realistically be taken?

Set fair guidelines for administrative and fundraising costs varied by sector and type of charity:

The first step that everyone seems to miss is that we need to establish what is a fair expectation of the percentage of funds needed for administration and fundraising. No non-profit can function without paying the rent, insurance, office supplies and staff salaries. And to be fair, it has to be noted that the percentage of the budget spent on administration and fundraising can vary widely in different charitable sectors. We want to remove any excuse for obfuscation in reporting by allowing adequate costs for legitimate administration and fundraising costs. Consider these two scenarios:

Charity A runs musical after-school activities for children. The charity has one paid staff member who does grant-writing, foundation appeals and writes letters to private donors for donations to support the work of the program. The bulk of the staff members time is spent in organizing the programs, contacting schools, preparing program materials. The charity operates out of donated school space. Less than 20% of the charitable organizations budget is spent on administration and fundraising.

Charity B exists to organize one annual high profile special event to raise money for a health related charitable purpose. Special Event fundraising is the most expensive method of fundraising. All of Charity B's staff are involved in fundraising and organizing the charitable fundraising event itself. Charity B provides no direct charitable programming but transfers profits to charitable organizations that do. In a good year, the large fundraiser realizes 40% profits on the investment in the event. In a bad year, only 20% may be available for transfer. Arguably it may be money that could not be obtained any other way.

These are extreme examples of the apples and oranges that make up the charitable sector. Too often unrealistic goals of lean administration and fundraising costs are expected by donors, foundations and government programs, without any consideration of sectoral differences or other factors affecting a non-profit corporations real costs. These unrealistic expectations by some funders leads to a certain climate of obfuscation in the charitable sector. If a good organizational leader knows that showing an administration cost low enough to qualify for project support is impossible, she/he will naturally think of ways of funding the extra very real administrative costs from another program. The administrator thinks “it’s all in a good cause”. Volunteer Boards become used to hearing that we have to “rob from Peter to pay Paul” because the portion allocated to be spent on administration and fundraising is just too low. And Boards will be tempted to think "everyone's doing it". In such an atmosphere it becomes hard to draw the line and know just what are the real programming expenses and just how high is your fundraising and administrative costs.
Funding bodies, sectoral umbrella/advocacy groups, and non-profit administrators have to come clean with each other and set realistic standards for administrative and fundraising costs in order to set realistic benchmarks that organizations can then measure themselves by going forward.

Introduce standardized accounting systems that are geared to non-profit management

If it is all about the numbers, then how we count and what we count becomes very important.

Current systems of accounting only make donors aware of the hard dollar costs and benefits of non-profits without offering any other tangible cost/benefit analysis. There are some huge misses as a result. One of the most obvious is the benefit to the community when huge groups of volunteers are involved in a charitable activity. The volunteers benefit in training and a sense of well-being. They take skills back to their jobs and communities. Their work gives huge benefits to the charity whom they work for. Conversely what are the costs when a non-profit turns over its full staff almost annually because of poor management? Donors are funding unnecessary staff training and potential law suits when human resources practices are below par. But that’s not on the balance sheet either. A charity that is creating great work in the community with a mainly volunteer force supervised by a few paid workers may look identical on the books with a floundering charity with the same number of staff and little real activity.

We also need standard accounting practices to separate project versus operating expenses because so many of us are paying operating expenses out of portions of project funds. This is a legitimate practice when a number of project budgets have small amounts of administrative costs factored in. Keeping track of what is allowable becomes complicated as number of project streams increases. Having worked in one charity where large sums of project funds were allocated to administrative and fundraising costs, while being posted as program costs, I have seen that it can be done without ringing alarm bells at audit time.

Professor Jack Quarter, at the Ontario Institute of Studies in Education, Social Economy Centre, has been doing some ground-breaking work on Social Accounting that should prove useful in any initiative to restore public trust in our charitable sector.

Once new non-profit accounting standards are adopted it will be necessary to communicate these new standards through professional accounting bodies to assure that accountants, bookkeepers and auditors are aware of the new practices.

Accounting professionals to be held accountable

When things go off the rails in the corporate world, everyone looks to the corporate auditors. How did they miss this? Was there collusion? Should the auditing firm be punished?

But does this happen when it is disclosed that charitable funds have been misallocated to admin and fundraising in charitable institutions? Why not?

In the past I have attempted to make an auditor aware of deceptive practices in an organization I was employed by and was frozen out. I reported the auditor and the Board Treasurer ( a chartered accountant) to their professional regulating organization and got no response. Why? The rationale I received was that they were volunteers or working below the usual fee, doing a good deed, and therefore couldn’t be expected to give the due diligence of a professional accounting job. This didn’t strike me then or now as acceptable.

Should accounting professionals be held accountable when private donations and public charitable funds are misused? That’s a question for the profession and the public to consider.

Sharing of information among charitable funders

Currently in researching information about a charitable institution you can find their charitable return information online which gives you broad categories of where they receive their funding from. You can also access information from some of the big foundations and government programs and discover the size of their program contributions to the charity.

What you can’t find out and what isn’t shared between funding bodies is what they have actually funded. This results in charities being able to double-fund activities and staff salaries with impunity while channelling the dollars into those administrative costs and fundraising costs that they really don’t want to report.

More information has to be publically available.

Volunteer Board Training and Information

In theory all non-profits and charities are governed by a volunteer Board of Directors who exercise a stewardship function within the organization. In actual practice, the Board is often comprised of very busy people with good hearts who really want to believe that their charity is doing the good job. Most of the time they are right.

Unfortunately, the main source of information and training on Board functions is often a non-profit manager who could have a vested interest in making the charity look more successful than it is. Boards need some measure of independence and Board members really need training and information on charitable standards of business practice that comes at least in part from somewhere outside their organization. As all charities have to provide a list of Directors as part of their annual information return, Revenue Canada could serve as a source to send all Directors a regular update on industry standards and provide the means for Board Members to be alerted to the tell tale signs that something might not be quite right in their organization.

Providing Disincentives for Breaking Ethical Standards

There are currently few mechanisms in place to deal with organizations that break existing ethical standards in raising charitable funds or who misallocate charitable funds. While it may be difficult for the small donor to trace the use of their funds, the same is not true of government programs that make tax dollars available for charities. When a public funder discovers a major breach of ethics, there should be repercussions and disclosure.

It is in the interests of all ethical and hard-working charities to see charitable licenses revoked for those that don’t play by the rules and contribute little or no social good.

Whistle-blowers

Almost everyone who has worked in the charitable and non-profit sector has had at least one horror story about unethical practices. Most never get reported. One simple reason is that there simply is no one to report the situation to outside of the organization’s own Board of Directors. Plus there is a lot of pressure to disregard the accounting irregularities on an “ends justifies the means” argument. Employees who take the step of going to the Board can find themselves jobless and without a reference, often not listened to at all. I know of one instance where a loyal staff member stealed themselves to take a troubling set of facts to a Board Member. The next day the manager came to her office and said, "Everything you tell a Board Member will come back to me in a few hours and if you ever do this again you will be fired and you will never get a job in this sector again." Even when groups of staff go to Boards of Directors, they are often simply labelled troublemakers. One of the first things a non-profit manager with something to hide does is try to isolate the Board from the Staff and discredit any staff member who might have knowledge of misdeeds. Boards should be highly suspicious of managers who inform them that direct communications between organization staff and Board is “inappropriate”. After seeing this suppression of staff in organizations I’ve worked with in the past, I’ve come to the conclusion that we need a Canadian tip line for charitable and non-profit wrong-doing and whistle-blowers need protection from reprisals in the workplace. We can’t solely depend on over-worked, under-informed volunteer Board members. Imagine Canada has taken the lead in formulating a new ethical standard for charities. They may the be the logical body to administer a tip line on charitable fraud and other unethical practices.

With all these steps in place, we can establish what the standards are, communicate those standards and weed out the few bad apples. The result will be restored public trust, an end to misallocation of charitable dollars, and a better working climate for some of the most idealistic and selfless workers in the Canadian workforce.

Self-policing code of ethics for Canada's charitable sector announced

The Association of Professional Fundraisers is show below updating its professional code of ethics in 1964. More than 40 years later the Canadian Charitable sector is catching up!


In the wake of exposes by the Toronto Star of fundraising practices by some charities that have resulted in as much as 90% of funds raised going to fundraising and administrative costs rather than charitable work, the charitable sector has announced the implementation of a self-policing code, reported in the October 22/07 Toronto Star story, “Charities Launch self-policing code” by Kevin Donovan. (note that link is time sensitive)

Is it enough?

The public is worried about donating wisely and--on the other hand-- those of us that work in the non-profit, charitable sector understand that the problem of getting the most bang for the charitable buck is deeper and more complex than the simple solutions suggested as first steps. We have some idea of where the bodies are buried.

The frustrating thing for those of us working in the sector is when we see a great program working very effectively in a sector fail to gain support, while a noisy charity that really does very little beyond generate hoopla and organize fundraising events, gets media attention, celebrity support and commands public dollars.

Through Imagine Canada, charities are being asked to sign a voluntary code. One of the first provisions of the new code is that signators will not use commission fundraisers as this practice can lead to both aggressive marketing and the use of charitable funds to simply pay fundraisers. The information that is missing in this recent announcement is that the Association of Fundraising Professionals has included this rule in their code of ethics originally adopted in 1964! Using commissioned fundraisers has been regarded as both sleazy and ineffective by non-profit managers for at least a decade. So it is shocking to hear large charities like Sick Kids and World Vision only swearing off the practice in 2007.

The next provision of the code mentioned in the October 22/07 article is that charities will adhere to a code of honesty in reporting to their donors. Imagine Canada is said to be cracking down on “wild claims of success by the charitable sector.” Good idea but very vaguely worded.

Nowhere in the report is there a clear criteria how “wild claims” will be detected nor how the sector will amend the practice. While some issues are more complex, there eally there are a number of ways that some charities deceive the public that could be identified, a test of accuracy applied and the practice cleared up fairly easily. One example is the use of self-aggrandizing and confusing titles for organizations and programs. Many organizations have “International”, “World” and “Canada” or “Canadian” in their titles. The public can be expected to presume that an organization with “International” or “World” in the title has directly-administered programs in a number of countries around the world. The sector should/could agree that having directly-administered programs in less than a set number of nations, (7, 5, … 3?) and using “International” or “World” in the charity’s name or program title, is deceptive. By the same token, charities that describe themselves as the X organization of Canada, lead the public to believe that they offer programs and services to Canadians in a number of provinces. Imagine Canada should include benchmarks for the use of these common attributions.

Another way that “wild claims” could be curtailed is by adopting a strictly enforced standard for reporting on statistics for programs. This is straightforward for programs that are solely and directly administered. It becomes more difficult in jointly-run programs. Sometimes charities give small donations to programs and then claim the entire program and its activities as part of the work of the charity. Real collaborations between agencies in the charitable sector is to be encouraged, but the public should be able to tell clearly who is responsible.

Here is an example of the way this numbers dodge can work in the charitable sector. Charity X raises money to run a cross-country literacy program that involves authors in doing readings in remote communities for the purpose of both literacy awareness and also to promote local literacy programs. Then charity X contacts grass-roots organizations and gets them to do all the work, undertake the lion’s share of the work and all the marketing expense in organizing the events. Perhaps a small “how to run your event” manual is written by Charity X from freely available material found on the internet, providing a token organizing effort. Another token support is given to the event in the form of subsidizing author airfare for example—transferring a small amount of funds raised to actual program costs. Meanwhile there is virtually no work or expense by charity X other than the transfer of that small portion of funds raised and yet Charity X takes credit for a national series of literacy awareness events, and furthermore enhance their reputation as a national organization while potentially running no real programs in Canada and keeping the lion’s share of money raised for their administrative and fundraising operations. A staff salary is paid to a “program coordinator” but that person’s daily work assignments relate to fundraising and general administration. A report to donors on the project includes the information that X people attended events in 15 locations across Canada and X dollars were expended on program costs, however the report on program costs includes the salary paid to someone for administration and a pro-rated portion of administrative costs such as photo-copies, office suppliers… even if none of these were used for program materials. About 80 % of funds raised is claimed as being used in “program costs” with a modest 20 % being accorded to administrative support of the program. However a hard forensic accounting look at the program might show that only 10% to 20% of the money donated to the program was transferred to direct program costs in the form of low hassle airfare subsidies to grassroots groups organizing their own events.

This is the complex face of garden-variety “wild claims” in the charitable sector. This type of practice is damaging to the climate of giving in Canada. It also hurts legitimate charitable organizations, and is poisoning the working climate in the non-profit sector-- both within “bad apple” organizations and within the good organizations who struggle to compete with the “bad apples” who misreport activities, results and proportion of money spent on administration and fundraising.

While Imagine Canada is to be commended on this first step of a self-governing code of ethics, it is a very, very small step. Much more work is needed and it is not clear that this can be accomplished by the sector itself. In my next article I will attempt to write about what I see as a sickness in the heart of some charities and non-profits and some thoughts on how to tackle those difficulties.

Tags: Management, Leadership, Arts Non-profit, Charities, Donors Ethics

So you want to know how to get more bookings as a classical performing artist?

Daily as an arts manager I receive dozens of unsolicited emails and material from artists I've never heard of and those materials are instantly discarded to clear my inbox and desk of excess clutter. Meanwhile I sometimes meet talented artists who ask, "how do I get booked to play more?"

Quite a number of years ago I had my first fulltime job in arts administration in a major US orchestra. I assisted the General Manager in administering the contracting of guest artists. The first thing I was told was to throw out all unsolicited material--no one wanted to see it, or hear it. I was horrified at the waste and for awhile made the effort to return the material--only to be met with angry inquiries and indignant letters about why I hadn't put the material in the correct hands! Needless to say, from then on I simply trashed unsolicited promotional packages.

So if emails, glossy packages and promotional CD's won't get you a booking, what will?

Our business, the music business, is very much a word-of-mouth industry. Most of your bookings are going to come from direct or secondary contacts in the industry so you have to make sure that you make as many contacts as possible and that all those contacts are very positive.

1. The Music Director: When you perform with a conductor, remember that individual is likely also Music Director of 1 or more additional orchestras or ensembles. Find out about those connections, show interest, get details and you may be on the way to a follow-up performance with one of maestro's other groups.

2. The Orchestra: Remember that many of the musicians in the orchestra have contacts with additional orchestras and ensembles, and may themselves be administering a chamber series in the area. Be cordial and friendly with orchestra members and find out about these networking opportunities.

3. Arts Administrators: Far from all programming decisions are made by Artistic Directors. Often decisions are left up to Artistic Administrators and General Managers, and certainly administrative vetoes are something to be avoided. Unpleasant, pushy, demanding and disorganized guest artists are just unlikely to be invited back. And if you have an agent who falls into this category, you might like to re-think whether that bull-dog attitude is good for you in the long run. If your agent managed to push someone like me into exceeding the orchestra's capacity to pay or accommodate you in some way this time---enjoy it. You are extremely unlikely to be asked back and word that you are difficult or your agent is difficult will be telegraphed from manager to manager in short order. So unless you are a leading international virtuoso whose whims must be tolerated, think twice about bullying orchestra administrative staff. They will accommodate you once and then write you off the list. Remember that smaller organizations may not be able to provide as much as larger organizations. The simple willingness to take a taxi rather than demand personal airport pick-up will endear you to many a harried administrator's heart!

4. Other arts organizations. Don't forget the decision-makers in other local and regional arts organizations when you are performing. Likely you have more complimentary tickets than you can use. Invite decision-makers to be your guests at a performance. Don't just invite the top people. If they can't come, invite the Marketing Director, the Arts Administrator, the Program Assistant. Word of your great concert will travel in that organization.

5. Your web site: While aggressive forms of marketing (email spam, mega brochure mailers) are a waste of money, having a good up-to-date, easy to find website is essential in today's world. When I hear about a potential artist, I immediately Google them. If I can't find information right away I form a negative impression.

In addition, once I have booked an artist I need photos, bios, quotes from reviews. If they are all on your site, your promotion gets started months before artists who have to be asked for promotional material or who send material in paper format. We are simply too busy to be efficient at re-typing, scanning and editing copy that is in such an inflexible format. If you want to have more control over how your bio is edited, provide a number of "brief bio" options on your site. If you have one two page opus, be prepared to only see the first paragraph or two in print most of the time. If you think that's your agent's job, how well are they doing it? If not too well, it might be worth your while to bite the bullet and put your own site together.

6. Reviews--You need them. Post them on your website and circulate to all the contacts that you make in your developing career. Extracting a few choice quotes makes it easy for your bookers to get your promotion off the ground all that much faster!

What do you need to be booked?

1. Talent.
2. Opportunities for decision-makers to hear about your talent directly or through trusted contacts.
3. A comprehensive website for research purposes and promotional purposes. (doesn't need to be fancy)
4. A professional and agreeable attitude with everyone in the business so you don't shoot yourself in the foot!