On numerous occasions our lawyers have visited with individuals, the media, and regulators on the subject of what makes a good charity. There is no one formula that fits every occasion. There is, however, a general road map that if followed can result in significant success.
The elements of excellence from our experience include, but are not necessarily limited to, the following:
First, a meaningful cause has to be targeted. Charities should be formed to address a need. Goals are important.
Second, a name should be selected that describes the cause. Having a name that is non-descriptive can be a detriment.
Third, new charities are generally motivated by the energy of an entrepreneur who is dedicated to the pursuit of the mission. There is no substitute for good leadership.
Fourth, a meaningful and working independent board of directors is crucial. The mantra is that a board member should offer one or more of the following, to-wit: time, talent, or treasure. Not everyone can provide all three. Board members need to be independent. New organizations struggle to find board members. Large charitable organizations sometimes have too many. There is no ideal size of a board. There is always a tension of separation of the board from the day-to-day activities. The role of the board is to provide oversight and direction.
Fifth, in order for a charity to succeed it must develop a diverse base of funding. Some charities are blessed early on as a result of connections by the founders with the media or major corporations, while others struggle to get a foothold. Sources of funding are only limited by the imagination of those who lead the charity. Certainly, there are the traditional means of fundraising, but there are also some nontraditional means. Every avenue should be explored to determine the worthiness of the charity’s pursuit. Unforeseen circumstances can result in devastation, or a windfall, e.g., the ALS Association has benefited from a challenge by someone who suffers with ALS. At the time of this writing, the “ice bucket challenge” has netted the organization more than $30 million according to published reports.
Sixth, a good charity is transparent. Transparency means that those looking in can follow the flow of money and be assured of its proper use. Charities are charged with good record keeping and disclosure. Charities supported by public donations are a form of public trust. Part of transparency is having a conflict of interest policy, as well as policies for record keeping, whistleblower protections, and providing financial information in an accurate and forthright manner upon request.
Seventh, a charity must offer its stakeholders accountability. Charities are charged with meeting donor expectations, as well as compliance with state and federal regulations. Accountability means being forthright and accurate in the disclosure of revenues, salaries, and expenses. Accountability also means being honest on the progress of the charity and its accomplishments in pursuit of its mission.
Finally, acting through the board of directors, the charity should have a strategic plan. The plan should recognize the current situation and then set goals to be achieved in a five year period. The board should revisit the plan every couple of years to measure success and failure. Once goals have been set, the other components of planning will fall into place. The question the board must answer is “how do we get there from here?”
There are certainly other elements that could be detailed and considered in a much longer dissertation on this fascinating subject. These, however, are, in our view, the basics that can propel an organization towards excellence.