Yesterday we got an email from someone looking for help on where to give, noting that two of our top charities do not meet the Better Business Bureau (BBB)’s 20 standards for charity accountability.

We believe that both of these organizations are reputable, accountable, and excellent, and were surprised to hear this. After checking out the BBB reports on them, we stand by our recommendations and feel that the BBB’s reservations come from technicalities, not legitimate issues.

Population Services International (PSI): financial transparency, but not in the BBB’s format

The BBB report on PSI states that PSI meets 19 of the BBB’s 20 standards. The missing one:

the detailed functional breakdown of expenses within the organization’s financial statements only included one program service category. It did not include a detailed breakdown of expenses for each of its major program activities.

PSI responds (same page) that it has one high-level program, Social Marketing, breaking down into hundreds of sub-programs, and so chose to list only the one on the financial statement.

Is PSI stingy with financial information? We don’t think so – in fact, we think PSI stands out for its willingness to disclose meaningful, helpful information about where its money goes. In our full review of PSI, we’re able to break out its expenses not only by expense type (promotion, evaluation, materials, staff, etc.) but also by region and by product. Getting breakdowns from several different perspectives is useful for truly understanding their activities, and it’s something that many other charities can’t or won’t provide (for example, it’s common to be refused information on how much was spent in each country).

But the BBB doesn’t look at several different breakdowns – it looks only at the official audited financial statement, and apparently this one wasn’t broken out as they expected. To me this looks like a case of an organization that is more generous with financial data than most, but didn’t anticipate the BBB’s requirements on a particular form.

Partners in Health (PIH): the Board Chair is salaried

Like PSI, PIH meets 19 of the BBB’s 20 standards. The missing one (from the BBB report):

Standard 4 : Compensated Board Members – Not more than one or 10% (whichever is greater) directly or indirectly compensated person(s) serving as voting member(s) of the board. Compensated members shall not serve as the board’s chair or treasurer.

PIH does not meet this Standard since the paid chief executive officer (CEO) also serves as the chair of the board.

The Board of Directors votes on compensation, so I can see why the BBB likes to see some distance between the Board and salaried staff. But it does allow paid staff to be on the Board as long as they don’t make up too many of its votes (as spelled out above); here the problem is that a salaried member has the formal Chair position.

I don’t have a copy of PIH’s bylaws, but to my knowledge (and based on our own bylaws, which are pretty standard and available at the bottom of this page), the Board Chair is distinguished from other members by procedural responsibilities, primarily presiding over meetings. The Chair does not have the power to cast extra votes, approve compensation without voting, or anything along those lines.

It seems worth keeping in mind that PIH is the same organization whose founder has been extensively written about and is known for things like not taking vacations because of his devotion to his work. I don’t know him personally and wouldn’t presume to guarantee an organization’s ethicality, but I’m guessing that if you polled relevant people, you’d find that Partners in Health is one of the more trusted and respected nonprofits out there, and that its choice of putting its CEO as Board Chair wouldn’t give pause to anyone in the know.

Bottom line

I think the BBB’s standards are well-intentioned and that there are sound principles behind them, but ultimately, they are measuring charities’ conformance to formal technicalities. I don’t believe there’s any substitute for carefully examining a charity’s activities, using all the documentation that’s available rather than just the documentation that’s standardized (such as the audited financial statement and bylaws). We reiterate our recommendations of both PSI (full review here) and PIH (full review here).