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International Encyclopedia of Public Policy and Administration - Vol. 3

By: Jay M. Shafritz | Book details

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N
NATIONAL CHARITIES INFORMATION BUREAU (NCIB). An independent, nonprofit organization that encourages informed charitable giving by evaluating and reporting on the performance and behavior of major charities soliciting contributions or operating in the United States. The NCIB, itself a charitable organization (under section 501(c)(3) of the Internal Revenue Service Code), is one of several "watchdog" organizations operating in the United States (see also Philanthropic Advisory Service). These watchdog organizations all seek to educate and inform potential donors and encourage ethical and responsible behavior by charities and other nonprofit organizations.The NCIB was founded in 1918 by national leaders wishing to ensure that Americans' contributions to war relief and similar charitable organizations were used well and responsibly. The mission of the NCIB, as stated in its "Wise Giving Guide" (p. 2) is to promote informed giving. "The NCIB believes that donors are entitled to accurate information about the charitable organizations that seek their support. NCIB also believes that well-informed givers will ask questions and make judgments that will lead to an improved level of performance by charitable organizations."The NCIB judges an organization's accountability and performance by applying its "NCIB Standards in Philanthropy" a set of nine criteria developed in the late 1980s to become the basis for assessing governance, policymaking, financial management, and reporting. In keeping with the emphasis of financial accountability, many of the standards focus on the organization's willingness to maintain and share complete, accurate, and verifiable financial information. The Standards in Philanthropy in effect in 1994 comprise the following (consult with the NCIB for the most current and complete statements of its standards):
1. Board Governance: The board is responsible for policy setting, fiscal guidance, and ongoing governance and should regularly review the organization's policies, programs, and operations. The standard specifies several subcriteria by which to assess governance, including no compensation for board service.
2. Purpose: The organization's purpose, approved by the board, should be formally and specifically stated.
3. Programs: The organization's activities should be consistent with its statement of purpose.
4. Information: Promotion, fund-raising, and public information should describe accurately the organization's identity, purpose, programs, and financial needs.
5. Financial Support and Related Activities: The board is accountable for all authorized activities generating financial support on the organization's behalf. Three subcriteria further detail this standard, including open disclosure of all program and financial information for the organization and any subsidiaries.
6. Use of Funds: The organization's use of funds should reflect consideration of current and future needs and resources in planning for program continuity. Subcriteria further specify that a charity should spend at least 60 percent of its annual expenses on program activities, not have excessive fund-raising costs, maintain net assets for the following year that do not exceed twice the current year's expenses or the next year's budget (whichever is greater), and not have a significant deficit in the unrestricted fund balance.
7. Annual Reporting: An annual report should be available on request and key elements are identified that should be included in such a report, including audited financial statements or a comprehensive financial summary.
8. Accountability: An organization should supply on request complete financial statements; four elements of such accountability are specified:
-- preparation of financial information in conformity with generally accepted accounting principles (GAAP), accompanied by a report of an independent certified public accountant and reviewed by the charity's board;
-- full disclosure of economic resources and obligations, including transactions with related parties and affiliated organizations;
-- statement of functional allocation of expenses; -- a national organization with local affiliates should prepare combined financial statements of such financial information.
9. Budget: The organization should prepare a detailed annual budget consistent with the major classifications in the audited financial statements; the budget should then be approved by the board.

The NCIB standards are intended to offer a common measure of accountability and management for all charities, although young organizations (i.e., less than three years old) and those with less than US $100,000 in annual budget are granted somewhat greater leeway in meeting the standards. The NCIB monitors charities by reviewing information from a variety of documents, ranging from charities' annual reports, IRS tax returns, and audited financial statements to solicitation scripts and funder contracts. It also asks subject charities to complete disclosure forms on board and staff members and their compensation. Evaluated charities are offered an opportunity to review and respond to the NCIB's report on them.

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