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Who Watches the Watchdogs

By: Angie Herrington, Senior Consultant

Angie Herrington

History of Watchdogs

“Quis custodes ipsos custodiet?” is a Latin phrase from a Roman satirical poet which translates to “who will guard the guards themselves?” Variations of the phrase from 100 A.D. have influenced later writers questioning influence of the wealthy and the actions of governments and regimes. The phrase has been used in recent popular culture like Batman movies, the late author Terry Pratchett, graphic novels, video games, and the TV show Succession.

Merriam-Webster defines watchdog as “one that guards against loss, waste, theft, or undesirable practices.” It’s commonly attributed to consumers, charities, governments, and investigative journalism. When I think of watchdog journalists I think of Bob Woodward and Carl Bernstein exposing the Watergate scandal. Now the power of watchdog journalism is waning due to the closing of newspapers and substitution of editorial columnists and talking heads hired by media outlets.

Present Day

I was once asked to find watchdog lists during a time of corporate accountability for DEI, racial justice, human rights, women’s health, and more. These lists have historically helped us know when corporations, foundations, and individuals are behaving outside the lines of your nonprofit’s mission.

Now it’s 2025. I’ll do us all a favor and skip over the classic watchdog – government regulation and oversight. When I originally had ideas for this blog the world was a different place, and this post was going in a different direction. I’ve struggled and become jaded to see how the traditional form of a “watchdog” can still hold significance or be influential in today’s current environment. The world is changing quickly, and the volume of noise and contradictions makes it impossible to keep up with facts much less any accountability. Are watchdog organizations still relevant? Unbiased? Factual? Influential?

Prospect Development “Watchdogs”

What I do know is as researchers we are like investigative reporters who can still provide factual integrity and neutrality for our organizations. By providing due diligence research, our version of journalistic watchdog research, we help get the unbiased picture to make decisions.

As researchers we look past a company’s website’s glowing press releases and self-hype about their ESG (environmental, social, and governance) and CSR (corporation and social responsibility). It’s our job to find the facts and not make assumptions putting our organization in a compromised position. The William Wonka Chocolate Factory was fined $3 billion by the U.S. Department of Justice for unethical worker conditions. You might want to bring this up immediately to your gift officer as a red flag before their scheduled tour. Look at news, legal cases, and giving patterns to decide if a donor’s interests align with yours.

Criteria to Validate a Watchdog Organization

  • Who is the source and funder behind the data?
  • What is their evidence?
  • Is the language impartial with cited sources or holds bias?
  • Is the information promoting personal agendas, stereotypes, or conspiracy theories?
  • Is the information up to date and related to recent events?

Also consider:

  • Have you used more than one source?
  • Checking Media Bias/Fact Check or AllSides will help your awareness of a news source’s legitimacy, bias, or reputational history.
  • Internet Archive’s Wayback Machine will find older information that may have been removed from a website.

Suggested Resources

Remember to ALWAYS search for any updates and a primary source for verification!

  • The Helen Brown Group’s comprehensive and free site of due diligence and other resources.
  • Through Good Jobs First’s Violation Tracker (S., UK, and global) you can search by a company’s name and results include the parent company AND its subsidiaries’ offence(s), agency, and the penalty amount. Most importantly it provides the source of judgment, usually a detailed press release from a governmental agency.
  • Climate Action 100+ allows you to search by company name, sector, or region for information on companies connected to the global net zero emissions transition.
  • The Human Rights Campaign provides a searchable list of companies, municipalities, and healthcare facilities about their LGBTQ-inclusive policies, practices, and benefits.
  • OpenSanctions has multiple datasets to search politically exposed persons, debarred companies and individuals, maritime-related sanctions, regulatory watchlists, sanctioned securities, and warrants and criminal entities.
  • The Midas Project’s Watchtower tracks changes to corporate and government AI safety policies.
  • Yale School of Management maintains an updated list of over 1,000 companies who ceased or continue to operate in Russia since their invasion of Ukraine.
  • Use your favorite search engine to search ‘companies supporting [insert your cause]’

The Future

How can we look at “independent” watchdog organizations and their curated lists going forward? Like any other aggregated resource or subscription – a jumping off point. Think of them as a compiled list of companies or names with a starting place to then verify.

There’s a well-known adage journalists say, “If your mother says she loves you, check it out.” Verify and fact check.

 

 

 

 

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Due Diligence in Prospect Intelligence: The Why and the How

By: Grace Chandonnet, Senior Consultant

Grace Chandonnet

Grace Chandonnet

The Helen Brown Group has been discussing the need for due diligence in prospect intelligence in this space for years, and for better or worse, it is still an important topic – maybe more now than ever. It’s a sobering time for nonprofits for a variety of reasons, and if we can proactively avoid partnering with individuals or organizations that could expose us to risk, it is all for the good. It’s always been important to raise the red flag when we come across something negative when researching someone. Considering our 24-hour news cycle and the rapid spread of information, misinformation, and disinformation through both social and conventional media, I think now more than ever we need to keep our due diligence hats on during the course of our work.

Let’s take a look at the different avenues of due diligence, what to consider, and why they are important (and suggest some great resources!)

Source and Legitimacy of Wealth

It’s great to know that our prospect is wealthy, but it’s also important to know a bit about where their wealth came from. Was it through ethical means (e.g., inheritance, entrepreneurship, investments)? Is there any history of corruption, fraud, environmental harm, or labor abuses? Are their business interests  in controversial industries (e.g., tobacco, weapons, fossil fuels)? Does the company operate in countries with sanctions or embargoes? Does reported wealth and lifestyle match public records (e.g., real estate, SEC filings)?

Reputational Risk

We need to remember that the reputation of those with whom we partner can and will reflect on our organization’s reputation. We should be paying attention to our prospects’ behavior and what is being said about them. Are there any negative press, scandals, lawsuits, or regulatory actions? Could the prospect’s affiliations be seen as controversial or misaligned with your organization’s values? Have they made statements or engaged in behavior that could reflect poorly on your institution?

Legal and Compliance Issues

We also need to consider any potential legal and/or compliance issues. Do they appear on any sanctions and/or watchlists such as Office of Foreign Assets Control (OFAC) Sanctions List, Interpol, OpenSanctions, the U.S. Department of Justice’s National Sex Offender Public Website, or other sanctions/blacklists? Are there issues with offshore holdings or shell companies – do they or their businesses appear in the Internal Consortium of Investigative Journalists’ (ICIJ) Offshore Leaks Database? Is there any past or ongoing civil/criminal litigation for financial or ethical misconduct, or IRS issues that are public (note: most IRS issues will not be public unless you have access to court records, but federal tax liens on property are public record).

Philanthropic History and Intent

We are going to look at philanthropic history during our research anyway, but we should also do so with our due diligence eyes. Does it feel as though donations have been made for publicity, influence, or tax reasons rather than genuine interest? Has their nonprofit engagement been with organizations that are regarded with respect and not with organizations antithetical to your institution’s mission? Has there been any history of them retracting gifts or not fulfilling pledges?

Politically Exposed Persons

A Politically Exposed Person (PEP) is someone who holds or has held a prominent public position or function, often associated with government, politics, or international organizations. This includes heads of state/government; senior politicians; high-ranking military officers; senior executives of state-owned enterprises; judges, ambassadors, or central bank officials; and/or close associates or immediate family members of any of these. PEPs are not inherently high-risk, but their positions expose them to a higher risk of bribery, corruption, or undue influence, which necessitates enhanced scrutiny.

PEPs matter in our field for several reasons. Donations from a PEP (or associate) may be viewed as an attempt to curry favor, seek influence, or whitewash a public image. Media or public backlash can follow if a donor is later involved in a scandal or criminal investigation. PEPs may have political or ideological stances that conflict with the values of your organization and accepting funds from them could alienate your organization’s existing supporters, staff, or governance. Some PEPs (especially foreign ones) may be listed on sanctions lists or involved in corruption investigations, and donations from sanctioned individuals could trigger serious legal consequences.

You will likely know pretty quickly if the prospect you are researching is a PEP, and if they are, we should hold them to a higher standard of vetting than typical prospects. Use your organization’s protocols for elevated risk prospects. In many nonprofits, this may trigger enhanced due diligence.

When it comes down to it, doing your homework on prospects just makes sense. A little extra digging can save a lot of headaches later and can help ensure that your organization is partnering with people who genuinely support your mission and ethos.

Resource Checklist:

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Fact-Checking 101: Strategies for Reliable Information in the Digital Age

by: Heather Willis, Senior Consultant

Heather WillisIn today’s digital era, the ability to verify information online is paramount for making informed decisions and preventing the spread of misinformation. Fact-checking plays a vital role in prospect research and due diligence, particularly for nonprofits who are seeking to gather reliable data, enhance fundraising strategies, and cultivate meaningful relationships with donors. It is beneficial to periodically remind ourselves of the importance of these practices that enhance our search experiences across various platforms such as Google. Below are some effective strategies to ensure the accuracy and reliability of online content.

Cross-Referencing Multiple Sources

One of the primary methods to verify information is by cross-referencing it with multiple reputable sources. This involves checking if different sources provide consistent information on the same topic. If several credible sources confirm the information, it is likely to be accurate. This approach helps to identify any discrepancies and gain a more comprehensive understanding of the subject matter.

Evaluating the Author’s Credentials [Read more…]

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Deciphering Form ADV Filings

One thing that’s great about our profession is that we get to learn a little bit about a lot of things. Sometimes, though, the learning is more of a slog than we’d like. This week HBG Senior Consultant Heather Hoke forges a path for us through the dense mire of SEC Form ADVs, so that we can get better information about financial advisors and the companies they work for. Thanks, Heather! ~Helen

Heather Hoke

        Heather Hoke

There is so much wealth among people in the finance industry. If you are researching someone who is a founder, partner, or executive officer of an advisory firm, including private equity and hedge funds, be sure to look at the SEC Form ADV. It provides an abundance of information about registered investment advisory firms and their affiliated professionals.

I remember when I first started looking at Form ADVs and I felt completely overwhelmed! There were so many pages of information, sometimes hundreds of pages. Well, that was many years ago and I am now much more adept at finding the information that I need quickly. I thought I would share some tips with you to save you some time…

The Securities and Exchange Commission (SEC) requires all professional investment advisers to submit the Uniform Application for Investment Adviser Registration (or more commonly known as the Form ADV). For companies that manage funds in excess of $25 million, this form must be updated annually and whenever material changes occur.

Where to find a Form ADV

Form ADVs are publicly available through the SEC’s Investment Advisor Public Disclosure website. There you can search either by advisory firm name or by the name of the individual investment advisor.

For our work, the two most important things to look at are “View Form ADV By Section” and “Part 2 Brochures.”

Choose “View Form ADV By Section” so that it is broken down into sections to view rather than the full, often very lengthy, document.

Sections not to miss

 Part 1A Item 1 Identifying Information includes the name, address and phone number of the investment advisor.

Item 2 SEC Registration/Reporting specifies if the firm is considered a large or mid-sized advisory firm.

Item 5 Information About Your Advisory Business provides number of employees (in sections A and B), number and types of clients (in sections C and D), fee arrangements (in section E), assets under management (AUM) (in sections D and F), and advisory activities (in section G).

Schedule A includes direct owners of the registered investment advisor with a 5% or more ownership interest and executive officers (CEO, chief financial officer, chief operating officer, chief legal officer, chief compliance officer, directors).

Schedule B includes all of the indirect owners.

It is necessary to check both Schedule A and Schedule B to fully understand the ownership structure and ranges. Ownership codes specify a range of ownership interest which can be helpful in considering the capacity of an individual.

Schedule D includes other office locations and affiliated registered investment advisors and broker/dealers.

Disciplinary Reporting Page (DRP) provides details about felony or investment-related misdemeanor, regulatory discipline, or court judgments related to violation of investment-related statutes and regulations by the investment advisor or its affiliated persons.

Signature Page for the date of the document.

Next choose “Part 2 Brochures.” At the bottom of the page, you will find a PDF of the brochure which is a narrative of the advisory firm. Each firm lays out their brochure slightly differently, but there is a table of contents to help you find relevant sections. The document can include:

  • An overview of the registered investment advisor
  • Advisory fees
  • Types of clients
  • Background information on advisors
  • Disciplinary information of any legal or disciplinary events

Now you’re a pro at deciphering the SEC Form ADV!

The information in the ADV can be incredibly helpful when researching people in the finance industry or an advisory firm as it can provide indications of significant wealth for individuals and be useful in your due diligence research.

 

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NEDRA 2024: Top Themes & Take-Aways

by: Melissa Bank Stepno, VP of Data Insight

A couple of weeks ago, the entire HBG team attended the NEDRA conference.  Part annual team retreat, part professional development, we immersed ourselves in 3 days of learning, team building and networking.

It was so great to see everyone in person!  Especially in our post-COVID world, with many more of us working remotely, I can’t understate the power of “togetherness.”

Now that the dust has settled and I’m back in my remote world, and in true HBG fashion, I wanted to pay it forward for those who were not at the conference.

So, here are three of the top themes and takeaways from our time together (at least in my perspective!):

 

1. Family Offices – one of the most interesting sessions was a plenary session on family offices, given by Josh Roach, who manages one such office.  For those less familiar with the concept of a family office, these are typically small private business entities* that are owned by an uber-wealth family with the specific function of working on behalf of the family.

*Note that some large financial firms operate “family offices” that serve multiple families at the same time, however the information that Josh shared relates to single family offices that are fully dedicated to one family.

While Josh was clear that there is no typical or average, he did share that frequently, an office will serve multiple generations and broadly be responsible for supporting the family vision, assisting with transition of family leadership and assuring the family legacy is maintained.  Specific responsibilities typically include wealth and asset management but can also include a wide array of other concierge-style services such as travel planning, property management, general accounting, arranging social calendars, and, you guessed it, providing advice on philanthropy.

These offices are incredibly discrete and private – by design – since part of their role is to protect the privacy of the family that they are serving.  As such, sometimes one family office might not even know of the existence of another family office!

Families with family offices usually have net worth of at least $750 million – $1 billion and you rarely see one for families with net worth under $250 million.  Why?  They are expensive!  The average family office runs an operating budget of $6 million and employees 6-8 full-time employees.

If you want to learn more about Family Offices, check out this benchmarking study conducted by The Wharton School at University of Pennsylvania or the Family Office Association.

 ***

2. Data Compliance is an ever changing, complicated quagmire.

In addition to the ever-present General Data and Protection Legislation, or GDPR for short, which covers all of Europe, in the past few years the United States has seen a significant uptick in legislation covering data privacy.  In fact, there are currently 15 states with privacy laws in effect and 18 additional states with pending legislation.  The IAPP manages a fantastic website that tracks both pending legislation and existing laws – without it, I’m not sure how we would keep up!

Just last month, a bill was introduced in Congress called the American Privacy Rights Act, or APRA for short (anyone else notice the irony that the acronym is APRA?).

The good news is that a national law would supersede the variations in all the state laws.  The million-dollar questions are: what would be included in the final bill, when would it go into effect, and how would it impact our industry?

Heard at the end of the session: “I did not expect this to be a wild ride.”  When was the last time you heard a comment like that at a Prospect Development conference!?

For more reading on this topic, check out my two colleagues’ recent Intelligent Edge Blog posts: Data Privacy: Where We’ve Been and Where We are Going by Michele Borucki and Data Privacy (Part 2): Practical Tips and Better Practices by Jessica Woodbridge.

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3. Due Diligence – the conference included not one, but three sessions on due diligence.  It truly is a statement as to how much more important this topic is becoming for our industry.  Five years ago, there wouldn’t have been any sessions on this topic.

Essentially, due diligence is the subset of prospect research that focuses on the assessing the legal, reputational, and financial risk for our organizations when considering whether or not to develop a deeper relationship with, and/or accept a gift from, a donor.

At this point, it seems as though many organizations have a process in place for due diligence but the level of formality and how/when specific due diligence research is conducted varies from shop to shop.

It must be noted that what passes a due diligence “test” for one organization may not pass the test for another.  Due diligence is, and always will be, highly contextual and nuanced.  For more on my thoughts on the matter, check out my blog post Philanthropy’s Shades of Gray.  Also, look forward to a joint report on due diligence by Xapien and BWF that will be published later this year.

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Of course, there are a lot of other important topics in our industry right now.  These just happened to be the three that piqued my attention the most during this particular conference.

If you missed the NEDRA conference, perhaps I’ll see you in Seattle in August at the Apra Professional Development conference?  You can learn more about it and register here.

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Philanthropy’s Shades of Gray

By: Melissa Bank Stepno, Vice President of Data Insight

Last year, there was a story in The New York Times about Bard College’s decision to accept a gift from Jeffrey Epstein. To quote Leon Botstein, Bard’s president: “you cannot pick and choose, because among the very rich is a higher percentage of unpleasant and not very attractive people.”

Later in the same NYT article, while Botstein concedes that Bard would not accept money from Jeffrey Epstein today (if he were still alive, of course), since the college has specific programming for convicted felons and believes in second chances, Botstein noted that at the time of the gift, it passed the sniff test.

Of all the news stories in 2023, it might strike some as a bit odd that this is one of the stories that has been like an earwig in my brain.

However, the conversation of due diligence has been on the rise within nonprofit organizations. This is for good reason, and this is why the story has stuck with me. It is only through the proper due diligence process that a nonprofit will be able to “pick and choose.”

***

This post is not about supporting, nor about criticizing, specific decisions that organizations, including Bard, have made regarding specific circumstances that they have been presented with.  Rather, Bard serves as an illustrative example.

Here are a few more to consider:

  • A children’s hospital decided to return an unsolicited gift from a major firearms manufacturer.
  • A university determined that it would not pursue a fundraising-based relationship a new international parent who was suspected of having ties to a terrorist organization.
  • Another university accepted a gift from a donor who was accused of child abuse, choosing to ignore the allegations under the basis that they knew the donor well enough to trust his denial of the incident.
  • An advocacy organization continues to evaluate a relationship with someone who sits on the board of a public company whose business practices go against what the nonprofit is advocating for.
  • Even just last week, a situation came up within the HBG team where one of our consultants was researching a couple and learned that their son had been arrested on some very serious charges. It is not known if he will be convicted.  Nor is it known if the couple – the prospects for our client’s organization – knew anything about their son’s actions.

In each of these examples, leaders at these nonprofits needed – or will need – to decide whether the potential money – the gift – is worth the potential risk – or exposure – to the organization.  We may see some of these scenarios as black-and-white decisions.  But they tend to be shaded in a lot of gray and take careful contemplation.

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At this point, you may be thinking that this is an instructional post on how to conduct due diligence. It is not. There are other resources that already cover the “how,” including Heather Willis’s excellent Intelligent Edge post from September 2023, The Good, the Bad, and the Ugly: Comprehensive Due Diligence Research. I also encourage you to check out Apra’s Due Diligence Toolkit and AFP’s Due Diligence Playbook.

Rather this post is about advocating for a systematic approach that will allow your organization’s leaders to “pick and choose” the appropriate shade of gray for your specific circumstances.  Just like when you pick a paint color for your wall (did you know that Benjamin Moore has 193 shades of gray?), one shade does not fit all.

Of course, due diligence research should be part of this framework, but so should a solid gift acceptance policy, as should be considering the broader role of the prospect researcher beyond simple information gathering.

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Gift Acceptance Policies

Every nonprofit organization should have a gift acceptance policy that is formally approved through both staff leadership and the board of directors.  The best policies address what considerations the organization will want to take when presented with questionable gifts or prospects.  This includes character and industry assessments of potential donors, as well as the types of gifts the organization will (or won’t) accept and whether or not there are any conditions under which a gift would be turned down.

Offering specific examples, while also underscoring that no set of examples will be exhaustive, is the best course of action.

Once in place, this policy serves as an initial framework for evaluating an organization’s shades of gray – in other words, how an organization will “pick and choose.”

Many organizations, such as The Chronicle of Philanthropy, Dartmouth College and the American Orthopaedic Association (just to name a few), share their Gift Acceptance Policy directly on their website, assuring that there is full transparency around their decision making approach.

The Association of Donor Relations Professionals and aasp both offer best practice guides for those looking to craft  a gift acceptance policy (note that the assp document is more recent but requires a membership to access).

The National Council of Nonprofits and the Markkula Center for Applied Ethics at Santa Clara University’s Controversial Donors: A Guide to Ethical Gift Acceptance for Nonprofit Organizations also offer good advice.

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The Role of Prospect Research

It goes without saying that a major portion of a prospect researcher’s job is finding information.  However, in some instances, finding information is the easiest part.  And, over time, as both technology and AI continue to improve, it is also the part that is most likely to be replaced by automation.

Prospect researchers have a unique skill set beyond being just information gathers. This skill is to interpret, synthesize and draw conclusions from the information. While taking a “just the facts” approach is critical so that implicit bias does not get in the way, the true value of the prospect research industry is to provide analytical guidance.

Note that in this instance “analytical” is not referring to the type of data analytics that might require a sophisticated process, algorithm, code or procedure.  Rather, Merriam Webster also defines “analytic” as “skilled in or using analysis especially in thinking or reasoning.”

As strategic partners in the fundraising process, after information has been collected, prospect researchers should also be called upon to “think and reason.”  In other words, we must be part of the systematic approach to assess the grays that may present themselves to an organization.  Ultimately, while the final decision likely won’t sit in the hands of a researcher, we’ve come far enough to expect that we firmly have a voice in the decision-making process.

Contact Melissa Bank Stepno at: melissa@helenbrowngroup.com.

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It’s Time: Highlighting Six Changes

Two weeks ago, I attended my last Apra Board Meeting, immediately followed by the 2023 Apra Prospect Development Conference.  As a team building exercise, we kicked off our board meeting with “6 Word Memoirs.”  As one might expect in a group of about a dozen people, the tone and tenor of our memoirs varied – some professional, some personal, some serious, some funny, some focused on being “in the moment”, others focused on lifelong characteristics.  Mine was as follows:

This Year.  Many Changes.  Reflective.  Bittersweet.

For those who do not know me, 2023 has been a year of change.  About 6 weeks prior to the conference, I started in my current position at The Helen Brown Group.  And, after 6 years of being on the Apra Board, my term was coming to an end.

As such, my mood was very, well, reflective.  As you might imagine, a 6-year board tenure could feel like both a short and long amount of time.

On the one hand, some things within Apra and within our profession have not changed over the past 6 years – and maybe they never will.  We are still debating whether the full prospect profile is “alive” or “dead.”  We are still complaining about database conversion projects.  Most of us are planning, in, or about to finish some type of large capital campaign.  You get the idea.

On the other hand, over the past 6 years our industry has changed, evolved and grown substantially!  Like many of us, I don’t always like change.  But, change is not only a constant, it is also necessary.  I have learned to embrace the later.

Also like many of us, I often have trouble seeing the forest through the trees.  So, since the themes of change and sixes have both been on my mind, I thought: it’s time to highlight 6 “trees” that have sprouted in our industry’s “forest” over my 6 years on the Apra Board.

 

1. COVID – COVID had a transformative impact on almost every aspect of our lives – professional and personal. Did I really need to mention this?  Probably not.  However, it was so impactful that how could I not mention it?  Enough Said.

 

2. ChatGPT, AI and similar – do I think ChatGPT or AI is going to replace our profession?  No.  Do I think they are going to change the way we do our work.  Absolutely.

Some of us are old enough to remember when the Internet was rumored to replace our profession and it obviously didn’t.  We are still here!

However, I think we’d all agree that the way we work is significantly different – more efficient and faster – than the days of library visits, stacks of books and lots of phone calls to request information.  My suspicion is that this era of technology innovation will have the same type of impact, forcing (in a good way!) us to evolve.

 

3. DAFs – Did Donor Advised Funds exist 6 years ago?  Yes.  In fact, there’s a great blog post by my colleague Jayme Klein here that reviews the history of DAFs.

However, in the past few years the importance of DAFs and their impact on our industry really started to explode.  In fact, according to the National Philanthropic Trust, DAFs grew 28% in 2021 alone.

Those who follow GivingUSA have also noticed that over the past couple of years there has been a decline in individual giving alongside an associated increase in foundation giving.  Most experts attribute a portion of this shift directly to the impact of DAFs.

If donor giving patterns are changing, our industry must learn to adapt and keep up with those changes.

 

4. Data Governance and Privacy Landscape – while FERPA and HIPAA certainly existed for way longer than my six-year looking-glass, we now have an alphabet soup with GDPR, CCPA, PIPEDA and VCDPA added to the mix. This, of course, is an evolving landscape with legislation pending (or already in effect) in other states and countries.

Sites like The Nonprofit Alliance can help us track legislation.  However, knowing about the law is only ½ the battle.  Perhaps the bigger challenge will be in the nimbleness and complexity needed to adhere to all of variations across so many laws.

 

While my first 4 are broad and impact the entire philanthropic landscape, I wanted to reserve my last 2 specifically for Apra, since my tenure on the Apra board was the inspiration for this post.  Of course, many trees have sprouted within Apra over the past 6 years.  I’ll highlight two:

 

5. Apra’s DEI Data Guide – In 2021, Apra published its first version of a new DEI Data Guide (spoiler alert: an updated version is due to be published later this year, along with a brand new asset on data minimization!). The Guide’s purpose is to serve as a resource for best practices in the ethical collection, storage, and usage of DEI data.

Sure, Apra was talking about DEI 6 years ago.  And, Apra has always prided itself on providing an ethical guidepost for the philanthropy profession.  It even has an entire section of its website focused on Ethics and Compliance.

But talking about something and having text on a website does not make it a seminal cornerstone of a professional association.

It is to this end that the importance of the DEI Data Guide cannot be understated, especially as Apra is a community that lives, breathes and thrives on using data to advance philanthropy.

In quick stead, the Guide has also served as a launch pad that helped elevate Apra as “The Leader” in assuring the proper collection, use and protection of donor data across the entire philanthropic sector.  In fact, the Guide has been promoted in efforts by AFP, CASE, aasp, and the Chronicle of Philanthropy, just to name a few.

 

6. Due Diligence – Okay, full disclosure: I was having a bit of trouble picking this last one. There was so much to choose from that I really couldn’t decide!

My mind was quickly made up when I read Heather Willis’s Intelligent Edge post last week on Comprehensive Due Diligence Research.  Of course!

Due diligence has always been in the back of a researcher’s mind.  I distinctly remember an example from my time as a Prospect Researcher at Boston University when a colleague realized that a prospective donor was possibly connected to a terrorist organization.  Yikes!  What to do?  We talked about it and made some ad hoc decisions on how to handle next steps.  We had no formal policy or procedure in place.  This was twenty years ago.

Now, Due Diligence is a practice of its own with guideposts and guardrails to follow.  We’ve come a long way, baby!

In addition to Heather’s great insight, also check out Apra’s Due Diligence Toolkit, published in 2020, along with about a dozen other resources in Apra University, all published in the last few years and including a 2021 webinar featuring HBG’s very own Michele Borucki and Jayme Klein! (note: some links require an Apra membership).

 

Each one of my “sixes” is worth a full blog post on its own!  But for now, I’ll leave you with these brief thoughts on each as I set my sights on building my next 6 Word Memoir…

 

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The Good, the Bad, and the Ugly: Comprehensive Due Diligence Research

This week we welcome HBG Senior Consultant Heather Willis to The Intelligent Edge. Heather has been with HBG for over 11 years, and her breadth of knowledge on many topics – wealth held in ranching and farming and today’s topic, due diligence, are just two examples of why she’s frequently a go-to expert for all of us on the team. Today, Heather shares important issues to be aware of as you consider due diligence research for your nonprofit. ~Helen

Heather Willis

Heather Willis

The Good, the Bad, and the Ugly: Conducting Comprehensive Due Diligence

In the world of nonprofits, donors play a crucial role in funding and supporting various initiatives. Prospect research serves as the foundational step in any decision-making process with a potential donor, however, it’s equally important for nonprofit organizations to ensure that potential donors align with their values, ethics, and mission.

This is where due diligence comes into play. When a person closely associated with a charitable organization becomes the subject of a scandal, the organization’s reputation can be tarnished too. The stringent due diligence practices seen across the financial services industry to comply with regulatory standards are increasingly being adopted by nonprofit fundraising teams to protect their organization from financial and reputational threats.

By conducting thorough due diligence, nonprofits can establish productive and lasting relationships with donors while safeguarding their reputation and integrity.

Understanding Due Diligence on Donors

Due diligence involves the process of investigating and evaluating potential donors before establishing a partnership or accepting their contributions. This process goes beyond simply checking financial backgrounds; it delves into the donor’s history, motivations, and potential impact on the organization. Comprehensive due diligence helps nonprofits identify potential risks and ensure alignment with their goals.

Steps to Conduct Due Diligence on Donors

  • Define Your Criteria: Clearly define the criteria that matter most to your organization. Consider aspects such as ethical values, mission alignment, financial stability, and the potential for a mutually beneficial partnership.
  • Gather Information: Collect information about the donor from public sources, such as their website, social media profiles, news articles, and press releases. This information can provide insights into their philanthropic history, affiliations, and interests.
  • Verify the donor’s identity, criminal history, and any potential legal issues. Various online platforms offer tools to perform such checks.
  • Financial Analysis: Evaluate the donor’s financial stability and the source of their wealth. This step helps ensure that the donations are legitimate and that the donor’s financial situation aligns with the intended level of contribution. Some sources of wealth may be considered sensitive to your organization.
  • Previous Philanthropic Activities: Research the donor’s history of philanthropic activities. Understanding their past contributions and partnerships can shed light on their values and interests.
  • Stakeholder Interviews: If feasible, consider interviewing individuals who have interacted with the donor, either in the philanthropic sector or otherwise. Their insights can provide valuable perspectives on the donor’s character and reputation.
  • Mission Alignment: Examine how closely the donor’s priorities align with your nonprofit’s mission and goals. A partnership is most effective when both parties share common values and visions.
  • Legal and Regulatory Compliance: Ensure that the donor complies with all relevant legal and regulatory requirements. This includes assessing their potential involvement in any controversies or legal disputes.
  • Conflict of Interest: Evaluate whether accepting a donation from the donor could create conflicts of interest for your organization. This is particularly important if the donor has ties to industries or causes that could compromise your nonprofit’s integrity.
  • Consult Experts: For more complex cases, consider seeking professional advice. Legal experts, financial analysts, and ethical consultants can provide valuable insights to aid your decision-making process.
  • News: General news helps you stay alert to trends, but for mitigating reputational risk, you’ll want the ability to narrow in on negative news. Given the increased focus on environmental, social and governance (ESG) commitments, it’s also useful to have the option to narrow to ESG news. Not only can this help you identify donors who might NOT be a good fit, but it can also help you identify prospects who align with your own mission.
  • Sanctions, watchlists and PEPs lists: Geo-political volatility like we’re currently experiencing means that sanctions and PEPs (politically exposed persons) are changing rapidly. Doing business with a sanctioned individual or entity could do more than put your reputation at risk; it can lead to regulatory risk and fines.
  • Legal news: This type of news can help you see if an individual or entity has a litigious past that could put your organization in jeopardy.
  • Company and executive information, including beneficial ownership: When it comes to corporate sponsors, you need to look beyond the entity itself. For example, a company may have hidden beneficial owners who might not be a good association for your nonprofit. Likewise, corporate hierarchies can show tangential relationships that could prove problematic or another likely corporate sponsor, but the only way you’ll know is to do your due diligence.

Balancing Ethics and Accountability

While the intention behind donor due diligence is to maintain transparency, accountability, and ethical standards, it is not without its controversies.

  • Preserving Donor Privacy vs. Ensuring Transparency: Controversy often arises from the tension between preserving the privacy of donors and ensuring transparency within nonprofit organizations. While donors may wish to keep their personal information confidential, nonprofit organizations argue that transparency is essential to demonstrate their commitment to ethical fundraising practices and maintain the public’s trust. Striking a balance between these two perspectives can be challenging, as both donor privacy and organizational transparency are valid concerns.
  • Potential Chilling Effect on Philanthropy: Critics argue that if donors feel their intentions are being scrutinized too closely, they might be discouraged from contributing to causes they care about. This fear stems from the idea that donors may perceive the due diligence process as invasive and overly skeptical. This perspective emphasizes the importance of fostering a philanthropic environment that encourages generous giving without unduly deterring potential donors.
  • Selective Acceptance of Donations: Some argue that extensive due diligence may lead organizations to reject donations from sources that may have had controversial affiliations or actions in the past. While this may be seen as a way to maintain ethical purity, critics point out that it could result in missed opportunities to redirect funds towards positive change. The debate lies in determining the appropriate level of scrutiny that aligns with an organization’s values while still capitalizing on potential contributions for the greater good.
  • Misuse of Donor Information: Organizations that collect and store donor data must ensure robust data protection measures to prevent leaks, breaches, or unauthorized access. Mishandling sensitive donor information not only jeopardizes donor trust but also raises ethical and legal questions about the responsible use of such information.
  • Uneven Implementation and Resource Allocation: The controversy surrounding donor due diligence is compounded by the uneven implementation and resource allocation across different nonprofit organizations. Larger, well-funded organizations might have the capacity to conduct thorough due diligence, while smaller ones might lack the resources to do so. This leads to potential disparities in accountability and transparency, which can undermine the sector’s credibility as a whole.

Conducting due diligence on donors is a critical practice that nonprofit organizations should prioritize to protect their values, reputation, and mission. While the process may require time and effort, it’s an investment that can lead to meaningful, sustainable partnerships with donors who are genuinely aligned with your cause.

By following these steps and staying diligent, nonprofits can ensure that their relationships with donors are based on trust, transparency, and shared objectives. The debate over due diligence on donors underscores the complex ethical landscape within philanthropy. While the practice is aimed at maintaining transparency, accountability, and ethical standards, it is not without its controversies.

Striking a balance between respecting donor privacy and ensuring organizational transparency, while also avoiding a chilling effect on philanthropy, requires careful consideration and open dialogue. As the philanthropic sector continues to evolve, finding common ground on this issue will be crucial in fostering a climate of ethical giving and meaningful impact. For an extensive list of due diligence resources please visit the Helen Brown Group’s Due Diligence Resources Page and let us know if you have others that we may have missed!

By

Prospect Research and AI

“Spot the 8 Differences” Photo by Theen Moy (https://www.flickr.com/photos/theenmoy/)
Copyright https://creativecommons.org/licenses/by-nc-sa/4.0/

Let me start by saying what this article is NOT about.

This is not about the increasing presence of artificial intelligence (AI) and machine learning (ML) tools that are being used in the fundraising sector, primarily for the purposes of identifying, segmenting, and/or communicating with constituents. Used wisely by those who understand its limitations and its strengths, AI does have applications that can help fundraisers be more efficient, saving time (and therefore, money).

(It’s also not about the fact that nearly three quarters of the words I have typed so far for this article were pre-filled in as I typed them based on words and sentences I had written previously. That’s AI and ML for you: helpful, at times. Well, equal parts annoying and helpful, to be honest.)

This article is about being able to trust the resources we use to provide reliable data to frontline fundraisers. Data we produce that informs their decisions about whom they should ask for support and at what level. And, from a due diligence perspective, who is safe to ask to affiliate with a nonprofit.

Trust, but verify

I learned early in my career from my mentors to verify every piece of information that would go into a profile unless it came from a rock-solid source, like a newspaper or magazine, Who’s Who, an assessors database, or Standard & Poors. Not all blue-chip resources made the ultimate-trust list, though, just because it had a well-known name. (yes, I’m looking at you, D&B).

Generally speaking – newspapers and magazines made that trustworthy list because of the prevalence of fact-checking in journalism.

Obviously, things have changed over the last several years with the proliferation of media outlets catering to increasingly segmented audiences, but – as long as you consider the source and confirm stray-seeming threads – big-name periodicals have remained a reasonably safe bet for reliable, trustworthy information.

Enter the dragon

What was one of the first things you did when you signed up for ChatGPT? For prospect research folks, let me guess – you asked it to provide a definition of prospect research, right? Yeah, me too. It did a pretty good job, didn’t it.

But ask it to write a blog post on a topic related to prospect research and you get something so dull that it makes our endlessly-interesting profession sound like a month-long visit to the Museum of the History of Nuts, Bolts, and Screws, with the full two-hour introduction documentary filmed in 1967. In the original Flemish,  with Danish subtitles.

But dull is one thing. Providing unchecked – and seriously flawed – information is entirely another.

Last week Men’s Journal published an article called “What All Men Should Know About Low Testosterone” that was written entirely by artificial intelligence but without giving readers a heads-up that a machine created the copy. It didn’t take long for people, including experts, to notice.

Bradley Anawalt MD, the chief of medicine at the University of Washington Medical Center told science and tech site, Futurism, that there were 18 factual errors in the short, 659-word article.

Futurism reported that “Some [errors] were flagrantly wrong about basic medical topics, like equating low blood testosterone with hypogonadism, a more expansive medical term. Others claimed sweeping links between diet, testosterone levels, and psychological symptoms that Anawalt says just aren’t supported by data.”

Now, I’m not saying that I’d trust Men’s Journal for medical advice over, say, the Harvard Health Letter, or the Mayo Clinic newsletter, but it’s not like it’s some quack click-bait-y site. As someone on Mastodon quipped the other day, Men’s Journal is “truly the SunnyD of journalism.” But, you know, SunnyD’s got some fruit juice in there.

We expect this from clickbait. But we’re talking about information from (formerly?) reliable outlets here.

Anyone who has been on the web for awhile can gennnnnerally guess when an article is click-bait. If not, it becomes pretty clear once you’ve gotten to whatever website they pulled you to.

But you expect Men’s Journal, owned by Arena Group, also publishers of Sports Illustrated and The Street (“Business news that moves markets, award-winning stock analysis, market data and investment ideas”) to publish reliable (or at least, vetted) info. You don’t feel like you should have to fact-check it at a basic level, especially when it’s providing health advice on such a serious topic.

But until it was fact-checked and fixed, that Men’s Journal article could have seriously affected someone’s health if they took its advice on testosterone levels.

Finance and technology, too

The same concern about negative impact goes for CNET, the site that’s been a resource on all-things technology since it debuted in 1994. CNET is held by Red Ventures, owners of other venerable media titles like ZDNet, Healthline, and Bankrate (“The trusted provider of accurate rates and financial information.”)

In November of last year, CNET quietly started publishing articles generated entirely by AI, which in certain cases aren’t such a bad thing, but it turns out this group of articles were lousy with errors. And the information that they did have right…was proven to have been plagiarized. From competitors.

Yeah, it’s not a good look.

I’ve got nothing against AI. In fact, as I said up top there are areas it’s been applied to in our industry (and beyond, of course) that have definite potential.

The problem is that I’ve used The Street and CNET as sources. If I were researching an athlete, Sports Illustrated would probably be one of my first stops. I probably would (have) put those publications on the “Do Not Need To Verify” list. Now they’re firmly on my “Grain of Salt” list.

Stuff like this undermines our confidence in outlets we’ve previously trusted. Or at least not mistrusted. Verifying more and more adds to the time it takes us to do our work.

What to do?

It’s going to get murkier as time goes by, as article generation technology is used more widely.

So first of all, make sure you’re double-checking bylines. Look for a real person (or several) listed as the authors and/or editors. After the serious cutting in newsrooms, much of what we read is created by freelancers instead of staff writers – and that’s okay. You can check LinkedIn or see other articles they’ve written if you’re concerned about their own fact-checking and you need to rely on the information they provide.

Keep it old-school: If the information is critical, verify it from at least two sources (that weren’t cribbing off each other). And if you’re not sure, a written disclaimer and a quiet word with the information recipient are your best CYA friends. Yesterday’s Washington Post has a good article on the use of AI, chatbots, and things you can do to get reliable information from search engines.

Finally, stay educated. Be aware of what the tech is capable of now, what its limitations are, and plan accordingly in terms of how you gather, synthesize, and present your own work. And if you can, support local, regional, and national journalism that works hard to vet the facts.

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Mind the Foundation 990 Data Gap

It’s no secret to all of us working in fundraising that finding up-to-date information about foundation giving is a tricky part of the search process.

Foundations normally take a 6-month grace period to file their annual PF-990 tax form. Then there’s the possibility of filing extensions. So information about foundations can take two years in a normal year to be uploaded to the places that we normally find them, in free services like ProPublica’s Nonprofit Explorer, impala, and the Internal Revenue Service’s own website as well as fee-based services like Guidestar/Candid.

And by a “normal year” I mean prior to 2009. Because since 2009, things have rapidly gone downhill at the IRS. From 2009 through 2020, budget cuts resulted in a 36% reduction in the number of revenue agents, a 44% reduction in the number of revenue officers, and a 25% reduction in the number of special agents at the IRS[1].

Post 2020, things got even worse: Andrea Suozzo reporting for ProPublica wrote in December:

In a letter to Congress in June, the Treasury Department pointed to historic staffing shortages: “The IRS has been stretched thin at a time when its workforce, already depleted to 1970s levels, has been battling personal and familial health challenges posed by the pandemic.”

If that’s not bad enough, the 2023 report from the IRS outlined that 60% of the IRS employees plan on retiring in the next six years.

Last week former IRS Commissioner John Koskinen commented in a podcast with Government Executive that only 17% of people calling into the IRS last year with a question actually made contact with a person on the other end of the phone. Less than 1 in 5 people with questions got through to the IRS! Yikes. And they don’t anticipate that 2023 success rates for calls will be much higher.

Now, none of us probably think of the IRS as a cuddly organization, but on an institutional level it’s a critical resource for nonprofits needing to get reliable information about potential funders. And for donors wanting to get information about nonprofits. More on that in a minute.

It turns out that because of this funding/staffing shortfall, the IRS is w-a-y behind on uploading 990s to their website. ProPublica reports that the slowdown at the IRS started two years ago, and it is behind on releasing nearly half a million 990s.

What does this mean for the services that rely on the IRS uploading data in a timely manner? Impala’s co-founder and CEO Shahar Brukner says this:

The entire sector is affected by this issue, but importantly, nonprofits end up carrying the heaviest burden because it directly affects their ability to fundraise effectively. On top of this, it also means that funders end up asking nonprofits for significantly more information during the due diligence process – information that could have been easily found if their most recent 990 was made available by the IRS. While work-arounds do exist (for example, nonprofits send funders a more recent 990 or update their impala profile), this isn’t a scalable solution. The simple fact is that until this issue is resolved, hundreds of thousands nonprofits and foundations will continue to go without basic information they need and rely on on a daily basis.”

It’s not just an issue of nonprofits researching prospective funders, either.

In a recent keynote address at the Nonprofit PRO conference, Vanguard Charitable’s Research & Strategy Group manager Vicky Kelberer mentioned that the back-end information that donor advised fund (DAF) sponsors like Vanguard, Fidelity, and the Boston Foundation rely on to help guide their DAF donor clients is sourced directly from this IRS data through Candid.

If the available data on the nonprofit you work for is two years old it’s not helping potential DAF donors find and support your nonprofit, either.

This worries the National Association of State Charity Officials for other reasons. In their open Get-A-Move-On letter to the IRS in November of last year, NASCO wrote:

“For charity regulators, the Form 990 series not only helps ensure transparency and accountability, but also provides vital information for state investigations into potential fraud and misuse of charitable resources. It is critical that the availability of that data be timely.”

And there’s more.

Timely access to 990 information can be key to solving huge current issues that we face together as a nation. An absolutely fascinating article by the Stanford Social Innovation Review detailed really interesting ways that researchers are using open 990 data to solve real world problems. For example: Russell James, Director of Graduate Studies in Charitable Planning at Texas Tech University used open 990 data to discover that when nonprofits encourage donors to give noncash gifts as well as cash donations, contributions to those organizations increase over time.

But bringing it back to the practical:

How might nonprofits workaround this issue for now?

If you’re researching foundations for funding, you should always go directly to the foundation’s website to see if they’ve posted updates on their giving or funding priorities.

Also check free resources like impala that crowd-source data directly from nonprofits, grant-making foundations, and community foundations (as well as pulling in 990 data direct from the IRS), so you may find up-to-the-minute information on the foundation you’re searching there.[2]

And if you want to help DAF sponsors and donors find your nonprofit, it pays to keep your website up to date and, like Vicky Kelberer says, build and foster personal relationships with local community foundations so they know who you are and what your nonprofit does for your community or region.

FOR MORE INFORMATION:

GovExec Daily podcast, January 19, 2023: “The IRS Has More Things to Do and Less Staff to Do Them.” Interview with Former Commissioner of Internal Revenue John Koskinen. https://www.govexec.com/workforce/2023/01/irs-has-more-things-do-and-less-staff-do-them/381927/

National Association of State Charity Officials update, November 29, 2022: “NASCO submits comments to the IRS regarding Tax-Exempt Organization Forms”. https://www.nasconet.org/2022/11/nasco-submits-comments-to-the-irs-regarding-tax-exempt-organization-forms/

NonprofitPRO, December 6, 2022: “6 Steps to Establishing a Donor-Advised Fund Strategy” by Gabby Houck and Jessie Farrigan. https://www.nonprofitpro.com/article/6-steps-to-establishing-a-donor-advised-fund-strategy/

ProPublica article, December 22, 2022: “The IRS Hasn’t Released Nearly Half a Million Nonprofit Tax Records” by Andrea Suozzo. https://www.propublica.org/article/irs-hasnt-released-nearly-half-million-nonprofit-tax-records

Wiley Online Library: “Cash is not king for fund-raising: Gifts of noncash assets predict current and future contributions growth” by Russell N. James III. First published: August 20, 2018. https://onlinelibrary.wiley.com/doi/10.1002/nml.21334

Stanford Social Innovation Review, Sep. 8, 2022: “Unlocking the Potential of Open 990 Data” by Cinthia Schuman Ottinger & Jeff Williams. https://ssir.org/articles/entry/unlocking_the_potential_of_open_990_data#

[1] (Robert A. Warren and Timothy J. Fogarty, “More Tax Cops Are Needed to Close the Tax Gap,” Tax Notes Federal, vol. 172, pp. 1763-1770, 2021

[2] Full disclosure, I’m on the development advisory committee for impala. I receive no compensation from impala. I just think it’s a cool tool.

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