What’s Your Rating?
By: Crystal Stasyszen, CPA, HoganTaylor Tax Senior
There are several charity watch organizations that rate charities to help prospective donors make informed decisions. Below is a discussion of the rating systems of three of these charity watch organizations and how charities can use them to promote their charitable purpose.
Charity Navigator’s goal is to foster an efficient and responsive philanthropic marketplace where donors and the organizations they support work together to conquer the most persistent challenges of the nation and the world. To achieve this, they offer an “unbiased” evaluation system that measures the financial health and the transparency of charitable organizations. Their website also provides a list of tips for donors, and the Charity Navigator Advisory System, which is a rating system of alleged or proven misconduct of charitable organizations.
The metrics Charity Navigator uses to evaluate an organization’s financial health include the percentage of total expense spent on programs, revenue growth and fundraising efficiency. To measure an organization’s accountability and transparency they examine information of an organization’s form 990 and website to rate them on 17 metrics such as independence of the board of directors, whether or not the organization has had a material diversion of assets, or if they have a conflict of interest policy in place. Charity Navigator only rates organizations that file form 990 and have more than $1 million in revenue with at least $500,000 of that coming from individual donors. While they do not rate smaller charitable organizations, those organizations can use these metrics to evaluate their operations against industry best practices.
Give.org – BBB Wise Giving Alliance
The goal of the Wise Giving Alliance is to help donors make informed decisions and promote high standards of conduct for public charities. Information they gather to promote this cause is used to produce reports about national charities and evaluate them against Standards for Charity Accountability. They also used the information to publish “The Wise Giving Guide” Magazine three times a year. Charitable organizations can get accredited by Give.org through a free BBB evaluation process and donors can access the evaluation online. They evaluate charities on 20 standards that cover governance, effectiveness, finances, fundraising and information materials. For each standard, they assign a finding of “standard is met”, “standard is not met”, or “unable to verify”. National charities that meet all of the standards can pay to have a BBB accredited charity seal on their websites and to use in their fundraising materials.
While it doesn’t technically rate charities, Guidestar provides a free platform for nonprofits to manage their online identity with several features including data analysis, a nonprofit compensation report, and economic surveys. This allows donors to analyze nonprofit data from an organization’s form 990 to help them make better decisions about which organizations to support. Organizations can update their profiles for free and earn certifications from Guidestar based on that information. Basic information is required to obtain a bronze or silver certification. To obtain a gold certification an organization must provide qualitative information about the organizations impact. To receive a platinum certification, an organization is required to provide quantitative information about program results.
These websites are excellent tools for charitable organizations as well as donors. Charitable organizations can manage and grow their online presence by proactively providing and updating information on these websites. Even if an organization can’t get strong ratings in all areas (due to trends in finances or spending allocation) the standards these charity watch organizations set can be used as benchmarks for organizations when comparing themselves to the rest of their industry or setting their goals for the future.