Comments on: Charity Navigator’s Vital Mission Hides Flawed Rankings

By: Michael B. Soper

Michael B. Soper — Mon, 31 Dec 2007 02:38:56 +0000

Author’s Reply to WW: I wish there were a easy, simple answer to your question about “Where else you can go besides Charity Navigator?” As I pointed out in my post, Charity Navigator has some great suggestions about how to evaluate nonprofits that they don’t rate — and the same suggestions could be applied to the evaluation of any nonprofit.

I support Charity Navigator’s mission, but not its rating / ranking methods or “Top 10″ list approach to merchandising information. But CN, Guildestar , Better Business Bureaus, and others provide a good starting point — just not a good end point with regard to understanding a specific nonprofit. Nonprofit success and failure has many measures.

The fact that nonprofit organizations (NGO’s) are about “service” and not “profit,” makes using overly simple ratios a problem. Rather than look at CN’s rankings of nonprofits, I’d begin by scanning an organization’s IRS Form 990 forms for the past five years. I’d look to make sure that on a financial basis the NGO is solvent — that it doesn’t have a long, unexplained, series of expenses that exceed annual income.

From there, I’d begin to examine NGO’s that fit the types of missions you believe most deserving of support. Check out the NGOs’ web sites. Google search them by name. Send them an e-mail or letter requesting more information. Pick up the phone and ask for explanations of anything that seems complex, difficult to grasp, or unclear.

Make a modest gift to each of the NGOs you believe are deserving of support after going through the review described above. Observe and make note of how each organization responds to your gift. Do they provide you with more information on “where they funds come from” and “where they spend them”? Obviously, the more you are prepared to invest, the more you’ll want to know.

My advice would be to support causes (missions) where you want and believe you can make a difference. Start with gifts to many, not just one organization. I think you’ll find that the individual NGO’s will prioritize themselves in your mind by how, among other things, they plan, measure, and report success toward achieving their mission — and their stewardship of you as a financial supporter.

I hope other readers will share their perspectives and advice as well.

By: WW

WW — Sun, 09 Dec 2007 00:18:41 +0000

Thanks for this information.

My question is where else can I go besides Charity Navigator to get reliable ranking of non for profit and charity organizations?

By: Ray Brooks

Ray Brooks — Sun, 02 Dec 2007 21:00:46 +0000

These criticisms are not all realistic. There is no consensus in the accounting community about what constitutes an audit suited to Charities – should it be financial, vfm, compliance, or some other form?
There is no agreement between economists what constitutes a reliable measure of efficiency, effectiveness, economy or equity for health & social services organizations.
The response of the Auditors’ Generals has been contextual and focussed on the techniques used to measure inputs, process, outputs, outcomes and consequences.
Responses by practitioners in the various health & social sciences charities & NFP’s subject to these measures has been to suggest that complexity and severity are not measured adequately, thus invalidating that particular study.
Given these circumstances it is unrealistic to expect any attempt to rank, rate, assess or measure meet the criteria set down in this article.

By: Judy Hatcher

Judy Hatcher — Sun, 18 Nov 2007 19:49:48 +0000

Thanks for this! A few years ago, a national nonprofit I worked for received a “negative” rating because it was being compared to a national and a regional organization (one of which I’d previously worked for) that between them had three totally different structures, outcomes, constituent models and income streams. I politely told someone at Charity Navigator that they were comparing apples, oranges and bananas, and was blown off.

It’s good to encourage transparency and best practices, but it’s misleading to pretend that donors can make good judgments based on summaries of financial information, and Charity Navigator seems more interested in being the voice of authority than in helping people put the numbers into context or understanding the diversity of the nonprofit sector.

By: Ed Tickner

Ed Tickner — Tue, 13 Nov 2007 18:08:46 +0000

I agree with your assessment of ratings based on numbers alone. As a person who works with numbers a lot I know that numbers can not tell the full story and even be misleading.
For instance, we have a foundation that manages an endowment and provides our organization with a small source of income. Accoutning and IRS rules say that we have to treat the foundation as if it were a part of the organization. Market gain or loss on investment is shown as part of revenue on the 990. As a result if the market goes down so does our reported income and our ratio of administrative cost to revenue goes up. Conversly, if the market goes up it can look like the organization is not spending the money it has taken in.
The Minnesota Charities Review Council has come up with a solution. It does in fact use other information to determine whether or not the charity is being run appropriately and grades accordingly. If the charity does not get a tpo rating then the website will indicate why a top score was not given. Their survey, which they call “Accountblilty Wizzard” takes a good deal of effort to complete, but once done initially updateing it is easy. If you are not familiar with the CRC their website is smartgivers.org.
Ed