The standards outlined by the Better Business Bureaus' Wise Giving Alliance include stipulations that at least 65 percent of what a charity spends should go to programs. The current standard is 60 percent.
It also says that no more than 35 percent of the money a charity raises from donors should go to fund-raising and administration.
Ken Hunter, president of the Council of Better Business Bureaus, said Americans tend to be smart shoppers but are miserable at making smart charity decisions.
"They ask very good questions before they make their purchases, but the same savvy shoppers consider it rude to ask discerning questions concerning charities," said Hunter, who helped investigate hundreds of charity frauds when he served as chief U.S. postal inspector. "We need to get over that to be successful."
The alliance compiles reports on about 500 major charities. Its new "Wise Giving Seal" program marks the first time charities could declare that they have the alliance's backing on solicitation materials, advertisements and web sites.
Among the requirements for charities to get the seal:
Many charities are trying to restore public confidence following recent controversies over management and spending practices. The American Red Cross, for example, was criticized for directing some Sept. 11 donations to other purposes; the United Way of America is still under close scrutiny after its former chief was convicted eight years ago for defrauding the charity of $600,000.
Organizations meeting alliance standards must apply for its new seal and pay a fee that would range from $1,000 to $15,000, depending on the group's revenue. The first seals are expected to be issued sometime this summer, alliance president Art Taylor said.
Daniel Borochoff, president of another watchdog group, the American Institute of Philanthropy, questioned whether the fees would influence reviewers.
"You can see how many people would think this could water down the standards," said Borochoff, whose group gives A-through-F grades to about 450 charities and allows the groups to advertise its grade for free.
But Bennett Weiner, the chief operating officer for the alliance, said the fees are necessary to help cover administrative costs, such as follow-up work. He added that his organization will continue to name charities that fail to meet standards in its reports and on its Web site.
The revised standards stem from a three-year project involving charity organizations, accounting groups, regulatory agencies and the Better Business Bureaus.
By Eun-Kyung Kim