Commentary: The “Club” That Uses Nonprofit Accountability Clubs

• Author: Ken Berger
• DOI: http://doi.org/10.1111/puar.12632
• Published date: 01 September 2016
• Date: 01 September 2016

The “Club” That Uses Nonprof‌i t Accountability Clubs 723

Public Administration Review,

Vol. 76, Iss. 5, pp. 723–724. © 2016 by

The American Society for Public Administration.

DOI: 10.1111/puar.12632.

Ken Berger is executive director of

CTC Academy and partner at Algorhythm.

Previously, he was chief executive officer of

Charity Navigator for seven years and, prior

to that, spent nearly 30 years in leadership

positions in human service and health care

nonprofit organizations dedicated to serving

the underserved.

E-mail : kberger@ctcacademy.org

Commentary

I n their article “Regulation by Reputation:

Monitoring and Sanctioning in Nonprofit

Accountability Clubs,” Joannie Tremblay-Boire,

Aseem Prakash, and Mary Kay Gugerty explore

the notion that “nonprofits seek to enhance their

reputation for responsible management by joining

… accountability clubs.” The authors observe that

stakeholders of nonprofits seek assurances beyond

public regulations that organizations are behaving

responsibly and that such clubs provide a vehicle for

“signaling” such good behavior.

In my seven years as head of Charity Navigator,

our purpose was aligned with this notion, and our

star rating system was a vehicle to provide signaling

for good performance and behavior. However, the

majority of our users were what I would call “drive-by

donors” who spent no more than about a minute

on the site to see what the rating of their preselected

group was. Most did not show evidence that they were

checking on what was being measured or how it was

done. Therefore, the signaling was based on a great

deal of implicit trust in the organization (i.e., Charity

Navigator) conducting the assessment. I suspect that

accountability clubs are usually given the same benefit

of the doubt. Therefore, the rigor and independence

of these accountability clubs often are not considered,

even though this is a vitally important question. The

researchers set about to explore this matter in this

article.

However, there is a fundamental characteristic

of the nonprofit sector that is given only passing

reference in the article. The nonprofit sector has an

enormous concentration of resources in the hands of

a relatively small number of organizations. In most

countries, merely 1 percent of nonprofits garner the

vast majority of resources that go into the sector

each year. In the United States, about 86 percent of

the $2 trillion that comes into the nonprofit sector

each year goes to an elite group of fewer than 20,000

organizations—out of 1.5 million total. At the

other end of the spectrum, nearly 50 percent of all

nonprofits have annual budgets of $50,000 or less,

and 9 out of 10 have no paid staff.

The authors note that “if [accountability club]

obligations are sufficiently costly for members to

implement, only nonprofits that have the incentives

and capacity [emphasis added] … will select

themselves into the club,” and later, “For nonprofits

with modest budgets—and there are quite a few—

these are significant obstacles.”

Given this concentration of resources, those

nonprofits with the capacity to join the more rigorous

clubs are few and far between. As I read the article, I

wondered how many nonprofits actually are in these

clubs relative to the sector as a whole in each country

(for example, how many of the 1.5 million in the

United States are in clubs that conduct certifications

and what is their typical size?). I suspect the answer

is very few, and those that are will typically be among

the aforementioned 1 percent. Given this reality, the

research results set forth in the article apply only to a

small, elite minority of nonprofits.

The article looks hard at the stringency of monitoring

and sanctioning by accountability clubs and

concludes that “most … seem weak” in both areas.

This observation suggests that these clubs may serve

more to sustain the appearance of accountability

than the reality. Larger nonprofits may pay the club

fees and use their reports as marketing tools, thus

helping to maintain their dominance in the sector.

In my 30 years of nonprofit management, prior

to my association with Charity Navigator, I had

occasion to work with some of these clubs. I found

that even when there was a certification process that

included site visits, the rigor of the assessments was

usually quite superficial. The researchers confirm this

observation in their findings.

In fact, when sanctioning is publicly disclosed, the

results are especially weak: “very few clubs … use

public disclosure as a tool”—so few (11 out of 224)

Ken Berger

Algorhythm

The “Club” That Uses Nonprofit Accountability Clubs