Public trust and confidence - studyfundraising.info

Public Trust and Confidence

 

Public Trust and Confidence

In this chapter we examined public trust and confidence. We outlined current levels of public trust and confidence as reported in the sector media, before moving on to draw a firm distinction between the two terms. We also looked at the distinction between trust in the sector and trust in specific organizations and reported what is presently known about the drivers of each. We concluded by looking at a number of sector wide initiatives designed to foster the public trust

 

Levels of Public Trust and Confidence

In the United States public trust and confidence in the nonprofit sector appears to be at an all-time low. Research from Paul Light of the Brookings Institution (2008) indicates that in the aftermath of the terrorist attacks of 9/11, confidence in charitable organizations dipped markedly. In 2002 only 13% of Americans indicated that they had a great deal of confidence in charitable organizations, down from 25% in July 2001 and the figure has remained remarkably static ever since. His data makes for depressing reading. Over a third of American society now have ‘not too much’ or ‘no confidence at all’ in our nonprofits.

For users in the U.K, the nonprofit research agency nfpSynergy have produced a series of excellent reports, one of which majors on public perceptions of charities – Disgusted or Delighted (2004).

The Charity Commission also conduct periodic research in this domain. Their 2005 report is available for download “Report of Findings of a Survey of Public Trust and Confidence in Charities’

 

Distinguishing Trust From Confidence

While many researchers and journalists regard the two terms as synonymous this is actually inappropriate. Both trust and confidence have a role to play in facilitating public support of our sector but the two are different and the mechanisms that bolster them are similarly distinctive and thus worthy of separate consideration.

We should note, though, that both trust and confidence do of course share much in common. They both involve beliefs about the likelihood of a given outcome. When we have trust and confidence in the nonprofit sector we believe that the sector will deliver the outcomes that it promises us as stakeholders and/or donors. When we have trust and confidence in an organization we have similar beliefs about the behavior of the specific organization. Where trust and confidence differ lies in the basis that we have for these beliefs.

Confidence is derived from the knowledge that one knows what to expect in a situation and that one has the ability to impose sanctions should this expectation not be met. As Shaw (1997) argues, for example, ‘Confidence arises as a result of specific knowledge; it is built on reason and fact. In contrast, trust is based, in part, on faith.’ Similarly, Seligman (1998) argues that ‘trust is distinguished from confidence in that the latter rests on knowledge of predictability of the alter’s actions, while trust is necessary to maintain in the absence of such knowledge’ (p1).

In a practical sense what both authors are saying is that donor confidence will arises in situations where he/she perceives that they have a degree of control over how their monies will be used. As a donor to my local branch of the Salvation Army I will have confidence in them if I am able to see firsthand the work they undertake in my local community and can therefore take action if it appears that my monies are not being used appropriately. My confidence can also be increased by the knowledge that others such as regulators or watchdog groups are undertaking that monitoring on my behalf. If I perceive that my local state officials, the IRS and other regulatory agencies are actively policing the activities of the organization and will impose sanctions in the event of any wrongdoing, my level of confidence will be enhanced. Equally, if the organization has the Better Business Bureau’s Seal of Approval I know that I have some redress if it transpires that funds are being used inappropriately. In such circumstances I can complain and this status would be removed. The existence of the scheme therefore increases the probability that monies will be used appropriately and my confidence is enhanced as a result.

By contrast, trust is necessary where there is no basis for confidence. It is characterized by the need to take  “leap of faith” from what is known to what is unknown. Most donors are not in a position to check that their funds have been used in the manner that the organization has promised and must therefore rely on trust when they take or evaluate their giving decisions. Trust is the critical issue in the presence of risk, uncertainty, vulnerability or the need to rely on the good faith of another (Mayer et al., 1995).

 

Building Trust in the Sector

Schlesinger et al (2004) argue that there are three key causes of the decline in the public trust in the sector.

1. Mission Vagueness

This refers to the fact that recent years have seen a blurring of the distinguishing role of nonprofits (Weisbrod 1998). We are no longer clear about who we are. Increasingly, nonprofits and for-profits are providing similar services and can therefore  appear very similar in terms of style and function.

2. Public misunderstanding of the sector

To compound our lack of identity, a high proportion of the public have a very old fashioned and idealistic view of what it means to be a nonprofit.

As Saxton (2004, p188-9) notes, few members of the public understand:

  • The size of the organizations they give to either in terms of the number of staff they employ or the income they generate.
  • The high degree of government funding that many fundraising nonprofits also receive
  • The economics of fundraising, particularly the fact that most nonprofits lose money on their donor acquisition activity
  • The nature of who is and who is not paid in modern nonprofits
  • Levels of fundraising and administration costs in relation to total costs

3. Inadequate accountability

The third major factor is one we alluded to in Chapter 10. Most US nonprofits must file a variant of the Form 990 with the IRS each year. Some are also accountable at the State level and must file separate documents there too, but the common denominator remains the 990. It is hoped that the recent revisions to the form and the simplification of reporting procedures for smaller organizations will encourage more accurate reporting, but sector research has indicated we have a long way to go. Unfortunately many nonprofit organizations still outright lie about their management and fundraising costs.

 

UK Initiatives

Charities in the United Kingdom have been wrestling with all these issues. Four key initiatives have been launched by the sector there in an attempt to bolster public trust.

 

1. The ImpACT Coalition

The Impact Coalition is an initiative of a group of over 180 UK charities and sector bodies including Cancer Research UK, Oxfam, UNICEF, WWF-UK, and the British Red Cross. Members of the coalition agree to regularly promote six key messages in the course of their normal communication.

  • Theme 1: Charities are effective and do a great job
  • Theme 2: To raise (more) money, charities have to spend money
  • Theme 3: Charities use donations carefully and wisely
  • Theme 4: Charities are highly regulated and adhere to a range of strict standards
  • Theme 5: Charities work together
  • Theme 6: Charities need the public’s donations because they really do make a difference

 

2. www.charityfacts.org

The currently inactive Charityfacts website was originally created by Elaine Jay and Adrian Sargeant on behalf of a cohort of six major charities. It aimed to educate members of the public and journalists about the realities of charity costs. It answered common questions about each of the major forms of fundraising and offered guidance to the public about how to make a complaint about fundraising activity and to whom.

 

3. Introduction of a Code of Professional Practice for Openness and Transparency

The Institute of Fundraising (IoF) is the leading professional body for individual fundraisers in the UK. It has codes of conduct which members must abide by for every major form of fundraising and also created a code for Accountability and Transparency. The code requires that members work to build trust in the sector by providing donors with a better understanding of how a modern charity works and what it means to be a charity.

It also requires that charities that state their costs of fundraising in communications should state how these fundraising costs are calculated or indicate where info on calculations may be obtained. Critically, in the Institute’s view:

 ‘charities ought not to make statements such as ‘all of your £1 goes direct to the cause’ or ‘our fundraising does not cost us anything’ or imply that fundraising does not cost anything’

(Institute of Fundraising 2006 p6.)

In our view too many charities presently make this claim. See additional commentary by:

 

4. Code of Fundraising Practice

A review of fundraising regulation led by Sir Stuart Etherington in 2015, identified a need for responsibility for the fundraising standards developed by the IoF and the Public Fundraising association (PFRA) to be transferred to a new Fundraising Regulator.

The new Code of Fundraising Practice and a selection of rule books were transferred from the IoF to the Fundraising Regulator upon it’s launch in July 2016.

These are now the relevant documents outlining the standards expected of all charitable fundraising organisations in the UK.

 

Growing Confidence in the Nonprofit Sector

Since the summer of 2003, the Better Business Bureau Wise Giving Alliance has offered national charities in the U.S. that meet the Standards for Charity Accountability the option of applying for a BBB national charity seal that can be displayed both online and in their solicitation materials. The seal provides the public with a clear, concise and easily recognizable symbol that the subject national charity adheres to the Alliance’s standards. Only national charities that meet the standards are eligible to apply for the seal and participation in the seal program requires a license agreement and a payment which is based on a sliding scale.

Such schemes are important because they bolster confidence in the sector. They drive up standards and reassure donors that their funds will be used appropriately and in accordance with best practice. From a fundraising perspective, however, the current authors believe it is inappropriate for watchdog bodies to involve themselves in arbitrary benchmarks of what constitutes an acceptable fundraising performance or acceptable percentage of expenditure to allocate to this task, particularly when the 990 data on which they base such judgements is faulty. Putting aside inaccurate reporting, there are perfectly legitimate reasons why performance will vary. The sector may be better served by an attempt to educate the public about the realities of these costs and the questions to pose of organizations exhibiting what appear to be unusual patterns of performance.

The Better Business Bureau isn’t alone in forming a view on what constitutes acceptable performance. Sites such as Charity Navigator attempt to do likewise. Charity navigator offers a service to donors where it analyses the data reported in Form 990s by 501(c) (3) organizations and provides a rating to assist donors in taking decisions about their giving.

‘We rate charities by evaluating two broad areas of financial health, their organizational efficiency and theirorganizational capacity. We use a set of financial ratios or performance categories to rate each of these two areas, and we issue an overall rating that combines the charity’s performance in both areas. Our ratings show givers how efficiently we believe a charity will use their support today, and to what extent the charities are growing their programs and services over time. We provide these ratings so that givers can make intelligent giving decisions, and so that the philanthropic community can more effectively monitor itself.’

(Source: Charity Navigator)

Unfortunately the approach to assessing fundraising costs is far from perfect with organizations reporting zero costs of fundraising receiving a high rating. In our view organizations reporting zero costs of fundraising should be subjected to much greater scrutiny, not awarded top ratings. It is likely they are not being truthful. In respect of organizations reporting a high cost of fundraising, we prefer the approach of charityfacts in the sense that donors should be primed to ask charities that they care about to explain and justify their performance.

It is interesting that since our book went to print Charity Navigator, has issued a joint press release with Guidestar,  PhilanthropediaGiveWell, and GreatNonprofits, stating that “overhead ratios and executive salaries are useless for evaluating a nonprofit’s impact.” We applaud the stand these organizations are now taking on overhead, particularly as by taking it they will by definition be making their own work more complex.  Charity Navigator’s push to focus on outcome evaluation will certainly not be easy for it to implement, so this is a particularly bold and selfless act.

We now need a similar stance on the issue of fundraising and in particular, fundraising costs. An article by Stephen Smallwood and Wilson Levis makes the case for this very powerfully.

 

Building Trust in Organizations

The following drivers of trust in the organization are highlighted by Sargeant and Lee (2002, 2004). All four may inform fundraising communications.

  • Public trust factorsRole Competence: nonprofits can build trust by demonstrating that they have the necessary skills, abilities and knowledge to achieve their mission. Donors will still have to take a leap of faith when they give that the desired outcome will be achieved, but that belief will be strengthened if they are convinced that the nonprofit has the requisite skills and resources to make this a reality.
  • Judgement : Trust will also be strengthened if the nonprofit is generally seen to be exhibiting good judgment in the manner in which it operates. While donors may not be able to assess the quality of care provided to beneficiaries directly, they can and do use their knowledge of how the organization behaves in other circumstances as a surrogate. Providing illustrations of good judgment being exercised in fundraising communications is therefore important in developing trust.
  •  Service Quality: As one might expect the quality of service provided to donors is also routinely used as a surrogate for the quality of service provided to the beneficiary. Donors who receive a high quality of service will tend to infer that the same will be true for beneficiaries, while donors who receive a poor standard of care are likely to reach the opposite conclusion.
  • Performance: The reported performance of the organization is also an issue. While donors are typically not in a position to check the veracity of the claims made by an organization for the numbers of individuals aided, the improvements in the quality of life that have been offered etc. it does help to provide donors with this information. The very act of providing feedback enhances the likelihood that trust will be forthcoming.

 

Building Confidence in the Organization

Remembering our earlier distinction, organizations can also take steps to increase public confidence in what they do. Aside from compliance with the law, nonprofits can identify and subscribe to accreditations and codes of conduct appropriate to the services they provide. Many professions have established codes of conduct designed to reassure individuals that certain standards of care and/or professional practice will be maintained. Donors can therefore be reassured by membership in such schemes that the desired impact on the beneficiary group will be accomplished.

Equally, the fundraising team can subscribe to codes of conduct designed to reassure donors  about the work that they undertake. Such codes reassure donors that the organization’s promises will be met and offer access to sanctions should this prove not to be the case. In the U.S. the AFPs Code of Ethics and the Donor Bill of Rights are two such initiatives. In the UK the Institute of Fundraising offers a Code of Fundraising Practice for each major form of fundraising. These documents provide an overview of the law and beyond that, what the profession regards as good and ethical practice. FSB tick logoEvery UK based fundraiser should have a copy of these on their shelves.

Organizations that adhere to the codes can apply for membership of the FundRaising Standards Board and may use their tick logo as a symbol of their professionalism.

Critically nonprofits can also provide supporters with greater control when things go wrong or are perceived to go wrong. The establishment of an appropriate complaints handling scheme can be a highly effective confidence boosting measure, particularly where it is established according to the principles of best practice and that the organization is prepared to genuinely learn from the input it receives. This may be done in relation to service provision, establishing a scheme that addresses perceived deficiencies in the services the nonprofit provides, or a scheme can be set up to handle disputes about the organization’s fundraising. It is worth noting that in other countries that have established a ‘self regulation of fundraising scheme’, that membership routinely requires nonprofits to have a formal mechanism for handling complaints about fundraising. It is worth noting that the UK’s Self Regulation of Fundraising Scheme overseen by the FundRaising Standards Board (FRSB) requires member charities to properly administer a complaints scheme.

An interview with the Chief Executive of the FRSB is also available on YouTube.


 

File Downloads

The True Costs of Fundraising and Should Donors Care?


 

Recommended Reading

  • British and Irish Ombudsman Association (2007) Guide To Principles of Good Complaint Handling, British and Irish Ombudsman Association, London.
  • Institute of Fundraising (2006) Accountability and Transparency in Fundraising, Institute of Fundraising, London.
  • Light, P.C. (2008) ‘How Americans View Charities: A Report on Charitable Confidence, Brookings Institution, Washington DC.
  • Mayer, R.C., Davis F.D. and Schoorman F.D. (1995) ‘An Integrative Model of Organizational Trust’, Academy of Management Review, 20, 709-734.
  • Rooney, P.M., Hager, M.A. and Pollak, T.H. (2003) ‘Research about Fundraising and Administrative Costs.’Giving USA Update, Issue 2. Indianapolis: AAFRC Trust for Philanthropy.
  • Sargeant A and Lee S (2002) ‘Individual and Contextual Antecedents of Donor Trust in the Voluntary Sector’, Journal of Marketing Management, 18 (7-8), pp779-802.
  • Sargeant A and Lee S (2004) Donor Trust and Relationship Commitment in the U.K. Charity Sector: The Impact on Behavior, Nonprofit and Voluntary Sector Quarterly, 33(2), pp185-202
  • Saxton, J. (2004) ‘The Achilles’ Heel of modern Nonprofits Is Not Public Trust and Confidence But Public Understanding of 21st Century Charities,’ 9 (3), 188-190.
  • Schlesinger M., Mitchell, S and Gray B.H. (2004) ‘Restoring Public Legitimacy to the Nonprofit Sector: A Survey Experiment Using Descriptions of Nonprofit Ownership’, Nonprofit and Voluntary Sector Quarterly, 33 (4), 673-710.
  •  Seligman, A.B. (1998) ‘Trust and Sociability: On the Limits of Confidence and Role Expectations,’ American Journal of Economics and Sociology, 57(4), 391-405.

Test your knowledge with our Quiz: Public Trust and Confidence

The charity that is a trifle to us can be precious to others.

Homer