Does meeting standards affect charitable giving? An empirical study of New York metropolitan area charities

TLDR

Charitable donations are a major revenue source for nonprofits, and watchdogs such as the BBB Wise Giving Alliance have created standards to guide donors, yet the effectiveness of these standards in directing resources to well‑managed charities remains largely unstudied. This study empirically examines how meeting BBB standards influences public giving while controlling for known donation determinants, and calls for further research into the mechanisms linking standards compliance to increased contributions. The authors regress public support on the degree to which local nonprofits meet BBB standards, controlling for organization size, board size, service category, government funding, fundraising expense, and giving price. The analysis shows that BBB standards positively affect giving behavior, with standards compliance associated with higher public support, suggesting nonprofits should pursue assessment programs to boost funding.

Abstract

Abstract Charitable donations constitute a significant revenue source for many nonprofit organizations. To help donors decide which nonprofits to support, watchdog organizations such as the Better Business Bureau (BBB) Wise Giving Alliance have developed standards to promote wise giving. The effectiveness of these guides in channeling limited resources to the best‐managed nonprofits is not widely studied. This research attempts to empirically investigate the effects of standards on public giving, controlling for factors that have documented effects on donations. Specifically, it regresses public support on the extent to which local nonprofits meet the standards of the Better Business Bureau Serving Metropolitan New York, Mid‐Hudson and Long Island Regions, controlling for organization size, board size, service category, government funding, fundraising expense, and giving price. The study found that BBB standards have a positive effect on giving behavior. Meeting BBB standards is associated with higher levels of public support. Participating in assessment programs and striving to meet the standards are recommended for nonprofits seeking to improve funding through charitable contributions. Further study that extends the search for the mechanism that links meeting standards to improved donations is recommended.