These Standards are the result of a study in the late 1980's by a distinguished national panel. This study, which spanned two years and took hundreds of comments into account, went into full effect in 1992. NCIB believes the spirit of these Standards to be useful for all charities. However, for organizations less than three years old or with annual budgets of less than $100,000, greater flexibility in applying some of the Standards may be appropriate.

NCIB does not advise whether to give to any particular charity. Contributors are encouraged to familiarize themselves with NCIB Standards, and then decide for themselves the importance of an organization's compliance with or variation from those Standards. The information and analysis published by the NCIB is furnished to assist contributors in making informed decisions and is not intended to endorse or disparage the organization. NCIB Interpretations and Applications of some Standards are in italics.

1. Board Governance:

The board is responsible for policy setting, fiscal guidance, and ongoing governance, and should regularly review the organization's policies, programs and operations.

Fiscal guidance includes responsibility for investment management decisions, for internal accounting controls, and for short and long-term budgeting decisions.

The board should have:

a. an independent, volunteer membership;

The ability of individual board members to make independent decisions on behalf of the organization is critical. Existence of relationships that could interfere with this independence compromises the board.

b. a minimum of 5 voting members;

Many organizations need more than five members on the board. Five, however, is seen as the minimum required for adequate governance.

c. an individual attendance policy;

Board membership should be more than honorary, and should involve active participation in board meetings.

d. specific terms of office for its officers and members;

e. in-person, face-to-face meetings, at least twice a year, evenly spaced, with a majority of voting members in attendance at each meeting;

Many board responsibilities may be carried out through committee actions, and such additional active board involvement should be encouraged. No level of committee involvement, however, can substitute for the face-to-face interaction of the full board in reviewing the organization's policy-making and program operations. As a rule, the full board should meet to discuss and ratify the organization's decisions and actions at least twice a year. If, however, the organization has an executive committee of at least five voting members, then three meetings of the executive committee, evenly spaced, with a majority in attendance, can substitute for one of the two board meetings.

f. no fees to members for board service, but payments may be made for costs incurred as a result of board participation;

Organizations should recruit board members most qualified, regardless of their financial status, to join in making policy decisions. Costs related to a board member's participation could include such items as travel and day care arrangements. Situations where board members derive financial benefits from board service should be avoided.

g. no more than one paid staff person member, usually the chief staff officer, who shall not chair the board or serve as treasurer;

h. policy guidelines to avoid material conflicts of interest involving board or staff;

In all instances where an organization's business or policy decisions can result in direct or indirect financial or personal benefit to a member of the board or staff, the decisions in question must be explicitly reviewed by the board with the members concerned absent.

i. no material conflicts of interest involving board or staff;

j. a policy promoting pluralism and diversity within the organization's board, staff, and constituencies.

Organizations vary widely in their ability to demonstrate pluralism and diversity. Every organization should establish a policy, consistent with its mission statement, that fosters such inclusiveness. An affirmative action program is an example of fulfilling this requirement.

2. Purpose:

The organization's purpose, approved by the board, should be formally and specifically stated.

The formal or abridged statement of purpose should appear with some frequency in organization publications and presentations.

3. Programs:

The organization's activities should be consistent with its statement of purpose.

4. Information:

Promotion, fundraising, and public information should describe accurately the organization's identity, purpose, programs, and financial needs.

Not every communication from an organization need contain all this descriptive information, but each one should include all accurate information relevant to its primary message.

There should be no material omissions, exaggerations of fact, misleading photographs, or any other practice which would tend to create a false impression or misunderstanding.

5. Financial Support and Related Activities:

The board is accountable for all authorized activities generating financial support on the organization's behalf:

a. fund-raising practices should encourage voluntary giving and should not apply unwarranted pressure;

b. descriptive and financial information for all substantial income and for all revenue-generating activities conducted by the organization should be disclosed on request;

Such activities include, but are not limited to, fees for service, related and unrelated business ventures, and for-profit subsidiaries.

c. basic descriptive and financial information for income derived from authorized commercial activities, involving the organization's name, which are conducted by for-profit organizations, should be available. All public promotion of such commercial activity should either include this information or indicate that it is available from the organization.

Basic descriptive and financial information may vary depending on the promotional activity involved. Common elements would include, for example, the campaign time frame, the total amount or the percentage to be received by the organization, whether the organization's contributor list is made available to the for-profit company, and the campaign expenses directly incurred by the organization.

6. Use of Funds:

The organization's use of funds should reflect consideration of current and future needs and resources in planning for program continuity. The organization should:

a. spend at least 60% of annual expenses for program activities;

b. insure that fund-raising expenses, in relation to fund-raising results, are reasonable over time;

Fund-raising methods available to organizations vary widely and often have very different costs. Overall, an organization's fund-raising expense should be reasonable in relation to the contributions received, which could include indirect contributions (such as federated campaign support), bequests (generally averaged over five years), and government grants.

c. have net assets available for use in the following fiscal year not usually more than twice the current year's expenses or twice the next year's budget, whichever is higher;

Assets available for use are essentially unrestricted and temporarily restricted net assets (excluding property, plant and equipment used in operations, less related liabilities, and assets restricted to investment in property, plant and equipment) adjusted to include deferred income and exclude long-term debt.

In all cases the needs of the constituency served should be the most important factor in determining and evaluating the appropriate level of available net assets.

d. not have a persistent deficit in net current assets.

An organization which incurs a deficit in net current assets should make every attempt to remedy the deficit as soon as possible. Net current assets are essentially unrestricted and temporarily restricted net assets, excluding property, plant and equipment used in operations, less related liabilities, and assets restricted to investment in property, plant and equipment.

Any organization sustaining a substantial and persistent deficit is at least in demonstrable financial danger, and may even be fiscally irresponsible. In its evaluations, NCIB will take into account evidence of remedial efforts.

7. Annual Reporting:

An annual report should be available on request, and should include:

Where an equivalent package of documentation, identified as such, is available and routinely supplied upon request, it may substitute for an annual report.

a. an explicit narrative description of the organization's major activities, presented in the same major categories and covering the same fiscal period as the audited financial statements;

b. a list of board members;

The listing of board members should include some identifying information on each member.

c. audited financial statements or, at a minimum, a comprehensive financial summary that 1) identifies all revenues in significant categories, 2) reports expenses in the same program, management/general, and fund-raising categories as in the audited financial statements, and 3) reports ending net assets. (When the annual report does not include the full audited financial statements, it should indicate that they are available on request.)

In particular, financial summaries or extracts presented separately from the audited financial statements should be clearly related to the information in these statements and consistent with them.

8. Accountability:

An organization should supply on request complete financial statements which:

a. are prepared in conformity with generally accepted accounting principles (GAAP), accompanied by a report of an independent certified public accountant, and reviewed by the board;

and

To be able to make its financial analysis, NCIB may require more detailed information regarding the interpretation, applications and validation of GAAP guidelines used in the audit. Accountants can vary widely in their interpretations of GAAP guidelines, especially regarding such practices as multi-purpose allocations. NCIB may question some interpretations and applications.

b. fully disclose economic resources and obligations, including transactions with related parties and affiliated organizations, significant events affecting finances, and significant categories of income and expense;

and should also supply

c. a statement of functional allocation of expenses, in addition to such statements required by generally accepted accounting principles to be included among the financial statements;

d. consolidated or combined financial statements for a national organization operating with affiliates prepared in the foregoing manner.

NCIB may provisionally accept compilations of financial reports, if the organization has shown progress toward producing consolidated or combined statements and expects to provide such statements within a reasonable time.

9. Budget:

The organization should prepare a detailed annual budget consistent with the major classifications in the audited financial statements, and approved by the board.

Program categories can change from year to year; the budget should still allow meaningful comparison with the previous year's financial statements, recast if necessary.