The new standard of giving: charities are now subject to updated regulations.

The board of directors of the Miami Valley Better Business Bureau (BBB) approved revamped national standards for charity accountability on July 29. The Charity Advisory Service, a committee that monitors the activities of non-profits and charities in the Miami Valley area, will implement the rating system beginning Jan. 1, 2004. Currently, there are more than 500 local charities listed with the program.

Since the 9/11 tragedy, charitable organizations have been under increased scrutiny. Not only was The Red Cross--one of the most respected and well-known charities in the world--accused of mishandling funds following 9/11, but a bevy of fraudulent online charities sprung up as well. That online trend continued in the wake of the Columbia disaster.

These incidents have made the public skeptical about giving to charities; they require more information about them than they did in the past. People today want to know exactly where their money is going and what pecentage goes to aid those affected by tragedy. Donna Childs, CAE, CE0 and president of the Miami Valley BBB discussed the public's need for information in a recent release.

"Donors seek more information than ever before to determine whether to make donations or not. In fact, nearly half of the public believes charities do not divulge enough information about their activities. Therefore, the BBB has decided that the more we can do to inform donors, the better."

Changing Standards

John O'Bryan, director of allocations and agency relations for the United Way of Greater Dayton, says the changes will, for the most part, be minor.

"I don't think there will be any major changes in the way we [The United Way] operate. We have been using the Better Business Bureau standards for years and the new items are for the most part applaudable," O'Bryan said.

However, O'Bryan sees one very positive change that will save smaller charities time and money: only charities with budgets of more than $250,000 will be required to perform an annual audit. Previously, any charity at the $100,000 mark was required to have one, often costing $4,000-$5,000, a staggering amount for a small organization.

"A lot of organizations that were just over the line didn't send in their applications for designation because they would be spending that additional money ... Now those smaller agencies only need the certification of a CPA rather than a full audit," 0'Bryan said.

The Internet Enigma

According to Childs, the updated regulations will examine several areas of an organization including auditing practices. They will certainly also focus on the ever expanding world of Internet business. A world that previously was almost completely unrestricted.

"Ten years ago, even five years ago, not everyone had a Web site and not everyone was comfortable spending money on the Internet. With the advent of secured sites, and more people being on the Internet, standards were needed that relate to the business we do on the Internet," Childs said.

In these times of spammers and telemarketers, many people are frightened that disclosing personal information to charities over the Internet is a good way to put oneself on an undesired mailing list, or worse. Finding a solution to that problem was of paramount importance to the BBB.

"A lot of charities now take donations over the Internet. Having privacy policies and secure sites are two of the things that have been added to the standards as well because that's what consumers want," Childs said.

The Internet is, to an extent, still an enigma for many people. In all likelihood fraudulent online charities and those looking for personal information for mailing lists will remain for years to come. But now, donors have a means of separating legitimate charities from fraudulent ones. If it is not a secure Web site, there is a very real possibility that the charity isn't as legitimate as first believed.

A New Standard of Accountability

That was not the only problem the BBB faced in creating their standards. In the wake of the Enron and WorldCom scandals, accountability is also a major issue. There must be a viable explanation in place for the expenditures and activities of today's organizations.

There is a belief that charities are not as accountable as they should be. Many feel that society should hold charities to the same standards as our country's for-profit corporations. The Better Business Bureau's new regulations are a step toward such accountability for charities.

With the implementation of these restructured standards, the public has access to written guidelines to which legitimate charities adhere. People can evaluate charities based on the organization's financial statements and board activities.

For example, the new standards state that at least 65 percent of a charity's total expenses should be spent on program activities, and there must be a governing board with at least five voting members. These are tangible guidelines which donors can use to make judgments about how a charity conducts its business.

The BBB's standards also contain a policy of full financial disclosure. Everything should be accounted for within the organization-from payments to employees, to event spending, to the actual donations distributed. There must be a breakdown of expenses in the disclosed financial statements showing the portions distributed to each of those areas.

Those financial statements must then be available in a public annual report that includes the organization's mission statement, a summary of the past year's program successes, all financial information, and ways in which the charity benefits from the sale of products or services.

The standards also require that the charity regularly scrutinize their activities to improve the effectiveness of its programs. At a minimum, the review should occur every two years and a written report of the analysis should be submitted to the organization's governing body. The full disclosure policy coupled with those ongoing attempts at improvement is a way to reassure donors that the organization is doing everything it can to provide for its recipients.

Charitable organizations in the Dayton area were introduced to the revamped list of standards in a seminar on July 31. More than 100 people were in attendance, most representing agencies from around the area. 0'Bryan said that the representatives were attentive and were interested in the updated list of standards. Childs said that most of the agencies" inquires were about expectations.

"Organizations wanted to know what was expected of them. I got a sense that for many the response was 'yes, this is a good thing,'" Childs said.

A good thing indeed, although the BBB standards are not new, merely updated, they serve as an important resource for donors. The aim is to make the public question the Legitimacy of an organization and compare the organization's practices to those approved by the BBB. The regulations should reduce public skepticism about giving and hopefully will spur an increase in public awareness of the activities and expenditures of charities across the country.

Brent Mulgrew Jr. was a communications intern with The Ohio Society of CPAs. He is a senior majoring in public relations at the E.W. Scripps School of Journalism at Ohio University. He can be reached at [e-mail]