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JUNE 28, 2012 THE CHRONICLE OF PHILANTHROPY t 21 THE CHRONICLE OF PHILANTHROPYM ANAGING © The Newspaper of the Nonprofit World Governance and Regulation Volume XXIV, No. 14 • June 28, 2012 An MBA’sCharity SleuthingDonors Help WatchdogSkills Put Sniff Charities Out Financial on Waste the and Hot Abuse Seat Continued from Page 1 Bytute Suzanne of Philanthropy, Perry it has just adopted a snazzier name, CharityWatch,CHICAGO and a new logo featuring a black dog against a red background (Mr. Borochoff says the ROWING UP JEWISH in Tulsa, Okla., color signifies “Alert! Pay Attention!”). Daniel BorochoffIt is also giving learned its Web two site lessonsa face- that helpedlift so itprepare can offer him more for information the role on he G each charity it rates, for example, by has chosen to postingplay in the life—that sometimes-revealing of the charity notes world’s most persistentthat are attached watchdog. to audited financial statements. First, he says, thereBut otherwise,were not manyCharityWatch other Jewsto- there, so he gotday used operates to being much different. the same as it did when Mr. Borochoff started it two de- “I can be in acades room ago. where The group every examines single the person tax disagrees with forms,me; that’s financial okay,” statements, he says. and an- nual reports of national charities, quiz- Second, he found at a young age that asking tough questions couldUnder pay CharityWatch’s off. When he got argumentativestandards, a ingroup Sunday that school, he says, his teacherspends would less shipthan him60 percent off to the rabbi. But that wasof aits plus budget because on programs he could have a more sophisticatedis in discussion line for a bad with grade. a religious scholar than with a part-time teacher. In a commentzes that them won’t about surpriseany gaps it anyone detects, andwho gives them a grade from A to F. has watched himIts make work is waves, guided by Mr. one Borochoffoverriding adds: “This ideaphilosophy: of challenging Donors want ahow healthy people per- centage of their contributions to pay think, what peoplefor a charity’s say, is stated very mission—not much who for I ROARK J OHNSON , FOR THE CHRONICLE am.” direct-mail companies, telemarketers, Daniel Borochoff, head of CharityWatch, says he wants to influence Americans to give moreROAR Kthoughtfully JOHNSON, FOR THE CH soRONI CLE trinkets to entice recipients to give, charitiesDaniel can Borochoff,do more good head in of the CharityWatch, world. “When says you he get wants down to to influence it,” he says, Americans “that’s what’s to give driving more thoughtfully me.” Promoting Efficientoutlandish Causes executive perks, or big re- so charities can do more good in the world. “When you get down to it,” he says, “that’s what’s driving me.” serves. Now 54, Mr. BorochoffA group that is celebrating spends less than20 years 60 countinganachronistic. degree, an MBA,The andnonprofit a couple andlion tofundraising the charity forGreg transgressions, Mortenson, that co-founder collects donated of clothing,the Central sells it, as head of an percentorganization of its budget that on is charitable dedicated pro -to of establishmentyears’ experience ashas a Wallcoalesced Street an around- including the idea using that money Asia that was Institute, donat- a andcharity uses some that of buildsthe proceeds schools for inter in- grams, or whose assets have grown too alyst—wants to spend time boring into ed for charitable programs to buy and national-development programs. rooting out charitieslarge, is inwith line forpoor a bad financial grade. per- therating numbers, a charity which largelyhe says charitieson the percentageadvertise hisof bookrev- whileAfghanistan keeping all the and Pakistan,CharityWatch was charges the toast that of Plan the- formance so donors can give to the efficient knowenue how it tospends fudge. on fundraising and royalties.administrative town after he publishedet Aid misleads his bookdonors Threeby counting Cups as Focus on Finances “Saying the ratio shouldn’t be used,” The “60 Minutes” appearance was program costs the expense of collect- ones. Formerly knownIn a nonprofit as the world American that is obsessedInstitute hecosts, says, “is or like the telling “financial an investor ratio,” to sendsone of donorshundreds the of mediaof Tea interviews in 2007. Presidenting and processing Obama the even donated donated cloth- of Philanthropy,with it “performancehas just adopted metrics,” a “results,”snazzier ignorewrong earnings message. per share.” They should be lookingMr. Borochoff to sup has- givensome over theof years.his Nobel ing Prize and calling money it a charitableto the charity. recycling and “program evaluations,” that focus Just last month, CNN aired a report program. name, CharityWatch,on finances and can a seemnew anachronistic.logo featur - Scrutinyport organizations Pays Off that are highlyfeaturing effective, Mr. theBorochoff But that when accused calls fromThose potential are actually donors fundraising prompted costs ing a black dogThe against nonprofit a redand backgroundfundraising estab (Mr.- argumentWhatever weaknesses goes, not critics those see that in scrimpthe Disabled on possi Veterans- Mr. National Borochoff Foun- tobecause start sniffingthey were incurredaround toin attract2009, lishment has coalesced around the idea his approach, Mr. Borochoff’s single- dation of spending most of the money donations, it argues. Borochoff saysthat the rating color a charity signifies largely “Alert! on the per Pay- mindednessbly vital overheadhas helped costshim detectso they can get a good he got suspicious:In The 2010, charity the watchdog could says, not Planet pro- Attention!”). centage of revenue it spends on fund- thingsrating. that others don’t. Greg Morten- vide an audit, andAid it actually promoted devoted Mr. only Mortenson’s 34 percent of raising and administrative costs, or son, co-founder of the Central Asia In- “I would question putting its expenses to programs. It is also givingthe “financial its Web ratio,” site sendsa facelift donors sothe it stitute,“I woulda charity question that builds putting schools a lot ofa lotweight of weight on onbooks fund- and speakingJohn tours Nagiecki, on its Planet Web Aid’s site commuwhile- can offer morewrong information message. They on shouldeach becharity looking it in fundraisingAfghanistan and expenses,” Pakistan, was says the Elizabethraising Boris, expenses. not It’s appearing to nicationsrecord anydirector, revenue says CharityWatch from them rates, for example,to support by organizationsposting the that sometimes- are highly toast of the town after he published his a much more complicated once sent a registered letter asking it effective, the argument goes, not those bookdirector Three Cupsof the of TeaUrban in 2007. Institute’s Presi- Center on Non- on its tax forms. to provide financial information, but it revealing notesthat that scrimp are on attachedpossibly vital to overhead audited dentprofits Obama andeven donatedPhilanthropy. some of his “It’s apicture much thanmore that.” CharityWatch publisheddecided not toseveral respond aftercritical looking arti at- financial statements.costs so they can get a good rating. Nobelcomplicated Prize money picture to the charity. than that.” cles in its newsletter.the group’s Web site and finding it “sen- “I would question putting a lot of But when calls from potential donors sational.” But otherwise,weight CharityWatch on fundraising today expenses,” operates says promptedWhile Mr. Charity Borochoff Navigator,to start sniffing another it raises prominent on outside fundraisingLast year, and di Mr.- BorochoffHe says Planet appeared Aid was on assured the tele by- much the sameElizabeth as it did Boris, when director Mr. of Borochoffthe Urban aroundcharity-rating in 2009, he gotservice, suspicious: has The responded rect-marketing to those firms, visionwhile providing program lawyers“60 Minutes” that it could along count withthe collec the- Institute’s Center on Nonprofits and charity could not provide an audit, and token donated goods like candy and tion activities as program costs. “We started it two decadesPhilanthropy. ago. “It’s The a muchgroup more examines compli- it concernspromoted Mr. by Mortenson’s adding ways books to and evaluate hand sanitizersnonprofits to veterans. author Jon Krakauer,have drivers,who charged trucks, there’sthat parts a whole of the tax forms, catedfinancial picture statements,than that.” and annual speakingin areas tours other on its than Web sitefinances, while not Mr. TheBorochoff coverage has prompted Mr. theMortenson’s Senate system books we were have fabricated. to maintain our bins While Charity Navigator, another appearing to record any revenue from Finance Committee to investigate the well,” he says. reports of nationalprominent charities, charity-rating quizzes service,them about has themstuck on itsto tax his forms. guns. He says a charitycharity cannot (which have responded In that April, as a new Montana’s CharityWatch attorney faced general its worst ordered crisis in any gaps it detects,responded and givesto those them concerns a grade by addfrom- impactCharityWatch if it publishedspends severalonly acriti small- organization portion of it itsneeded Mr. to invest Mortenson in ef- to1994, pay when $1-million Boys Town, to a youththe charity charity, ing ways to evaluate nonprofits in ar- cal articles in its newsletter. forts to recruit donors). sued it after receiving a failing grade. A to F. eas other than finances, Mr. Borochoff donationsLast year, Mr. on Borochoffprograms.