The Houston & South Texas Charity Information Service, which promotes ethical practices among area charities, uses the Better Business Bureau's Standards for Charity Accountability to evaluate area charities. These Standards provide suggested guidelines and minimum requirements in key areas of nonprofit management.
The Standards require, among other things, that a charity soliciting funds from the public:
- Provide an annual report and either audited financial statements or a copy of its most recent IRS Form 990 upon request. The financial information provided should be detailed enough to allow a donor to make informed decisions.
- On all solicitation materials, clearly indicate the programs and activities that the requested donation will support and disclose the portion of every item’s cost that will benefit the charity.
- Have an independent governing board that meets regularly. No more than 10% of the board should be compensated, either directly or indirectly.
- The Standards require also that the organization allocate its funds appropriately. In particular, they require that a charity
- spend at least 65% of total expenses on program services, and
- spend less than 35% of related contributions on fundraising.
A number of charities meet or exceed the BBB's Standards. In rare cases, however, there may be extenuating circumstances that cause a legitimate charity, operating ethically, to be unable to meet these Standards. Houston & South Texas Charity Information Service takes these special circumstances into account when preparing its reports, and encourages donors to use the Standards as guidelines and not absolute rules.