Accreditation – a kitemark for the non-profit sector?

How do you judge whether a non-profit organization is doing a good job? This is an important issue both for NPOs themselves and for donors. Unfortunately, it is also one about which there is little agreement even within the NPO community.

In most walks of life in the late twentieth century, the consumer is king. Standards in industry, food production, hospitals and so on are carefully regulated, and the consumer can look for certain 'kitemarks' or industry standard numbers as verification. In a broader sense, consumers are increasingly told what they can expect by way of good practice. In the UK, for instance, this has materialized in the form of 'charters', statements of what the consumer as passenger, patient, parent, etc should expect.

The consumer as donor

But what about the consumer as donor? Somewhere between the rigid technical requirements of industry standards and the knee-jerk populism of charters, it ought to be possible to identify a set of widely accepted criteria by which a non-profit organization can be judged. In most countries of the world this is not the case. Certainly there is no universal standard.

The donor is not of course the only stakeholder with an interest in how NPOs do their job. Perhaps most important are the people and communities who benefit from the services provided by an NPO. Yet if we frame our core question on the lines of 'Can we be sure that the non-profit organizations we are supporting are honest, well-organized and effective?' then the issues are basically the same for donor or user/beneficiary. Few donors would be satisfied with being convinced simply that the charity to which they’ve entrusted funds is honest, ie that it will not misappropriate the money. Most donors want to be sure that the people or cause which motivated their gift in the first place does benefit from their generosity

If we accept that honesty, organizational efficiency and effectiveness (impact) are the three dimensions of NPOs in which donors might be interested, what is the fit with existing attempts to monitor or assess NPOs?

Assessing honesty

Appropriate registration by a public authority establishes non-profit (distributing) or 'charitable' status, but does it demonstrate anything else? While a 501(c )(3) registration or charity commission number might satisfy donors in the US or UK, official registration doesn’t convince, for instance, most Indian donors.

Is it the rigour of the system that satisfies British donors? Hardly -- for it is extremely easy to register a charity in the UK. Donor confidence in British charities probably has more to do with the tradition of almost four centuries of charitable activity. In countries in which the non-profit sector (as opposed to broader traditions of philanthropy) is relatively new, it is perhaps not surprising that donors are more suspicious. This is particularly true where international funding has encouraged a rapid expansion of the sector. Put simply, registration as an NPO does not even guarantee probity.

Assessing organizational efficiency

There is a wealth of material setting out models for best practice in all aspects of establishing and managing an NPO. One of the most widely relevant is the Commonwealth Foundation’s Guidelines for Good Policy and Practice, produced after extensive consultation throughout the Commonwealth by some of the sector’s leading professionals. These guidelines are for NPOs to use themselves, so there is no external check, no mechanism for a donor (or user/beneficiary) to know that standards are being applied.

One of very few attempts to establish a universal set of standards that can be judged by an external body is the International Council of Fundraising Organizations (ICFO), which has national members in 11 countries. In the UK, however, the Accrediting Bureau for Fundraising Organizations (ABFO) has struggled to win acceptance for its programme of accrediting the larger fundraising organizations.

While it is hard to contest the good sense and desirability of most of the standards adopted by ICFO-type organizations, supporters of this type of accreditation need to ensure that their standards do not impose a particular organizational model imported, for instance, from the private sector. Many NPOs develop systems and structures of management that empower their paid and volunteer staff and which in themselves are an important part of the essence of the NPO.

What does formal accreditation achieve?

Supporters of this type of accreditation must also prove its relevance. While individual donors may be pleased to see a stamp of approval from an accrediting body, most grantmakers will still insist on some form of organizational assessment prior to considering funding applications. Given that these assessments can be extremely rigorous, many NPOs may not see the benefit of going through the (often time-consuming and costly) accreditation process.

This may not be the case if the NPO depends heavily on support from individual donors/members -- or if this source of funding is likely to become more important in the future. In low and middle income countries, where NPOs have tended to be grant-dependent, there is now a major push to develop professional fundraising and encourage regular giving to NPOs. Accreditation may then be an asset for the NPO.

Assessing impact

It is obviously much more difficult to develop a set of universal standards for assessing impact. Yet if an NPO is to retain donors it must convince them that their contributions are having a substantial and beneficial effect.

Grantmakers expect evaluations and reports, and most donors receive some type of communication illustrating impact. For most donors in high-income countries with a well established non-profit sector, such communication is sufficient. In a sense there is a market mechanism at work: the public arena in which NPOs operate enables donors to build up a knowledge of those NPOs which are well regarded, which 'do a good job'.

Yet this may change. In the UK, for instance, the introduction of 'league tables' for schools is an explicit acknowledgement that any assumption that 'schools do a good job' is no longer valid. The league tables allow consumers as parents to see which schools are 'effective' -- as long as one judges effectiveness on the basis of examination results. Opponents of league tables point to the many other purposes and achievements of schools which fall outside the ranking system. NPOs as service providers could easily find themselves caught up in this type of debate.

Developing countries

Although ICFO has no members in developing countries, the debate about regulation or some form of accreditation is increasingly important. In most low and middle income countries, NPOs make an ever more significant contribution to national development, and it is usually quite easy to register as an NPO or simply to operate as an NPO if official registration is difficult.

This is not always a good thing. The greatly expanded number of NPOs worldwide includes a substantial minority of the corrupt and opportunistic. Accreditation on ICFO lines could offer honest and well-organized NPOs a means of reassuring potential donors and partners. However, the standards or criteria to be used in the process must not exclude smaller, less formal NPOs.

Identifying international standards

This is just one element of a general problem about what to include in a set of standards. From an international perspective, donors often have to satisfy their own internal revenue authorities that the proposed recipient of their gift would be deemed 'charitable' if it were located in the donor’s country. While there are usually some common requirements (official registration, board of trustees, governing document, etc), different countries have specific requirements too -- a winding up clause, exclusion of political activity, and so on. Also, some activities deemed charitable in one country may not be so classed in another. CAF carries out validation activities for a number of donors, but would aim to establish primarily honesty and to a lesser extent organizational efficiency.

Many donors are concerned that as much of their contributions as possible actually contributes to direct charitable activity. Grantmakers often state a maximum level of administration support within their grants, but individual donors can rarely impose such conditions. Yet it is almost impossible to set universal standards for reasonable expenditure on administration. There are too many grey areas, too much room for interpretation. It may be possible to set standards for an acceptable level of financial reserves, but even here factors such as the nature of the activity and the vulnerability of funding make a real difference.

But the difficulties of establishing standards should not obscure the fact that donors should be able to expect high standards. Donors are not the only stakeholder for an NPO, nor probably the most important, but they are a stakeholder none the less.

Who should carry out the process?

Another issue is who should be responsible for the process of regulating, monitoring or accrediting NPOs. Few question that governments at national or local level should be responsible for giving official status to NPOs -- though there are possibilities for outsourcing the registration process to some sort of apex body (a council of NPOs for instance). There is much more doubt about the appropriateness or acceptability of an external body such as an ICFO member setting itself up to accredit NPOs.

Legitimacy is much less of an issue if NPOs in a particular country agree to establish an accrediting body, working with a set of standards agreed across the sector. This has happened with the Philippine Council of NGO Certification. There will still be issue of cost: someone must pay for the process, and there will always be a majority of NPOs that would struggle to pay for external accreditation. But if the NPOs don’t pay then who does? If the accrediting body relies on government funding it will be open to charges of political influence.

Self-accreditation

Finally, there are possibilities for 'self-accreditation'. A rigorous and transparent process of review such as social auditing challenges the NPO to set standards for all aspects of its work (including impact). To be sure that the standards being set are being achieved (or even to know the standards), however, a donor would need to spend considerable time exploring the NPO concerned. The advantage of an externally granted 'kitemark' in this respect is clear.

An enormous step forward would be to establish a common international framework within which NPOs could present information on themselves and their work. This could enable donors to make useful comparisons and challenge NPOs to develop their capacity. CAF is exploring the possibilities of using the internet to establish such a framework. 

Under this sort of system NPOs would provide the information themselves on the basis of a pro forma. The information provided must as far as possible be verifiable: references to grants received, reports produced, statistics in the public domain, registration documents. The information must also be sufficient to satisfy an international donor that further checks would verify that the NPO was eligible for a grant -- for instance, would be classed in the US as 501(c )(3) equivalent. The pro forma could also allow the NPO space to present additional information to demonstrate its effectiveness as an organization.

How you assess an NPO and its work is a crucial question for NPOs and their various stakeholders -- including donors. This issue of Alliance takes a look at some of the ways in which this thorny issue is being tackled.

Andrew Kingman is International Development Director at CAF.