Charity Navigator to truly empower donors

If you believe in empowering donors, you pretty much have to like charity rating services, like Charity Navigator and GuideStar; they provide donors with objective outside information that help them make their own giving decisions.

Trouble with both of these organizations -- as well as nearly all others like them -- is they rate nonprofits solely by their efficiency, as measured by their ratio of program expense to overhead. Which doesn't tell you very much about how effective an organization is.

Efficiency matters, and an out-of-whack expense ratio should give a potential donor pause. But it's only part of the picture. Effectiveness is more important. The type of work a nonprofit does can inflate or deflate its efficiency. The charity raters ignore this fact, leaving the very complicated question of effectiveness up to individual donors.

That's why it's great to read an announcement from Ken Berger, CEO of Charity Navigator that his organization is interested in giving donors more information. You can read about it at Ken's Commentary blog, A Measure of Outcome.

Hats off to this fine organization for embarking on the important (and difficult) project of finding a way to better equip donors. I wish them well, and look forward to what they come up with!

Comments

[Ken Berger]

Oops. Correction: It was not NonprofitSOS but Donald Griesmann who claimed we do not have our 990 on our site.

[Ken Berger]

Thank you for the hats off!

I do want to correct the comment by NonprofitSOS. Our 990 is on our site. Here is the link - http://www.charitynavigator.org/__asset__/_etc_/CN_990_FYE2007.pdf

We also now have a 990 finder (thanks to The Foundation Center) on our site to locate the report for any charity, whether we rate it or not.

We believe that our rating system of charities remains an important indicator of financial efficiency and capacity. We have always emphasized that donors need to also look at outcomes. We intend to do everything we can to bring this information onto our site directly, so donors do not have to look elsewhere for it. We are and will be consulting with experts, charities and donors in this endeavor and plan to get things up as soon as we can. We welcome people's input into the process. I can be contacted at kberger@charitynavigator.org.

Best,
Ken Berger, President & CEO
Charity Navigator

[Shari Ilsen]

Thanks for this posting!  GreatNonprofits is finding another way to present both successful and unsuccessful charities- "user" reviews. At www.greatnonprofits.org, you can read reviews of nonprofits written by people with first-hand experience with the nonprofit - their clients, volunteers, board members, donors. Definitely an excellent supplement for pure financials.
~Shari Ilsen
Outreach Director
GreatNonprofits

[Kimberley MacKenzie]

Donors will empower themselves if they want too. All Data and financials can be cut a 1000 differents ways to tell a 1000 different stories. I don't think most people want that much information.

Our job is to be honest, transparent and have the nuts and bolts of operations availabe for the few who actually want the details.

I'm not concerned about charity rating services. Frankly I'm more concerned about my donor ratings.

[Donald Griesmann]

The Wall Street Journal on December 19, 2008 featured this headline:

Charity Rankings Giveth Less Than Meets the Eye - The Ratings of Nonprofits Are Often Uncharitable, Sometimes Failing to Credit Crucial Factors Such as Success by CARL BIALIK, The Numbers Guy

It is an excellent appraisal of the watch dogs of charitable organizations and the choices offered to donors. The reporter particularly demonstrates some of the weaknesses of Charity Navigator. The BBB Wise Giving Alliance does not escape notice.

The article begins:

"Call it a false sense of humanity.

It may make you feel better to know that your charitable donations are going to organizations that have been highly rated by any number of online charity rankings. But these sites fail to quantify the most-important and most elusive charity measurement: success in achieving its mission.

Like stocks, charities typically are rated by their financial numbers or by qualitative characteristics such as corporate governance -- or both. Unlike stocks, charities have no single measure akin to business profit to determine successful performance. There is a widespread search for such a number, but the challenges may be too daunting. Meanwhile, some of the measures that are used may inspire bad actors to try to game the system.

"In the nonprofit world, it is a billion times more complex," Michael Soper, a consultant to nonprofit groups based in Midway, Utah, said. "They're not here to produce a profit; they're here to provide a service."

For the full article see http://online.wsj.com/article/SB122963299671419401.html

But that is not all.

Mr Bialik also takes on the raters in his blog of December 18, 2008. There is room for comment here.

http://blogs.wsj.com/numbersguy/evaluating-the-charity-evaluators-478/#comment-24389

For my own diatribe here is what I added:

Charity Navigator (CN) says of itself that they work “to advance a more efficient and responsive philanthropic marketplace by evaluating the financial health of over 5,300 of America’s largest charities”. There are over 1.4 million tax exempt organizations in the U.S. CN barely make a dent in the charitable choices available for potential donors to consider. They limit charitable choice. They do not make the charity marketplace fair and open and transparent.

They base their information on a poorly developed IRS Form 990. They purposefully limit membership in their own little club. The 990 is filed every year by nonprofits with gross receipts of $25,000 a year. It is not a quality document. As noted above, auditors and nonprofit accountants have not agreed where to put or allocate certain information in a 990. A new 990 series comes on the market for the 2008 tax year.

CN has no way to measure the accomplishments or lack thereof in any charity. They have no clue what is happening because of the work of charities. They show a small wedge of light about very few charities and then claim they are the beacon on the mountain shedding light for all donors to know where wisely to give. The workhorse small and mid-size nonprofits on the Side Streets of America are not members of the CN club and are not listed on the CNN use of CN information.

CN does not show us there own annual 990 and other fiscal information about themselves and yet they are asking for donations. CN, because of its own serious limitations, does not help charities receive the deserved help they need. CN is a barrier to charitable giving.

http://charitychannel.com/default.aspx?tabid=414&EntryId=10

[NonprofitSOS]

I think it is hard for any type of organization to truly empower donors. These types of audits rarely tell donors what they really want to know- is my money making a difference? And how exactly is my money making a difference? Also, I'd like to take this oppportunity to highlight another nonprofit- the Charities Review Council (CRC), which is currently based in Minnesota and is expanding nation-wide in the next couple years. The organization not only looks at the ratios, but also looks at things like: do all board members attend meetings, does the organization have their 990s/audits on their website, are their board minutes public, etc. This is in addition to their work on informing nonprofits on how they can be more transparent and accountable. You can read a guest post by the ED of the CRC on nonprofit transparency here: http://tinyurl.com/8j9xqz

[Dan Smith]

Jeff,
This sort of post begs a question from me. You say that to empower my donors I should naturally like these services, which I don't mind. But if most services measure efficiency, and even if they offer more information than that, what does it mean for me, the "small-time" fundraiser?
Do my 100-200 dollar donors need the same empowerment that a multi-million dollar corporation needs? Or are we talking about two different entities?
Thanks for the information!