Monday, March 16, 2009

We Are A Critical Friend To The Charitable Sector

I believe the most common perception of Charity Navigator is driven by the label we are given by the media as a watchdog organization. Due to the sad reality that most media stories require conflict and controversy, we are most often contacted for comment when they suspect unethical behavior of some charity. Hence, we are most often thought of solely as a watchdog organization that highlights bad charity leaders and practices. Charity Navigator does much more than that. The essence of our desired relationship with charities as a whole is to be a critical friend, incorporating the two most common definitions of the word “critical”.

Firstly, we provide critical analysis and, like an honest friend, plainly and openly provide feedback on the strengths and weaknesses of the charities we evaluate. Specifically, we analyze financial data reported on IRS form 990 by relatively large; US based charities (over 80% of all revenues go to just 4% of the charities in this country). We focus in on those charities which derive at least one-third of their funding from direct public support because our users tend to be individual and corporate donors. We then evaluate the charities on a zero to four star scale according to their relative financial strength. If a charity does not score well under our methodology, our intention is not to play “gotcha” and see them wither away. Rather, we hope that they will use our feedback as a motivator to get a better handle on financial management. Our perspective is that good charities must always keep both money and mission in focus. It is a sad reality that some do not. As a friend to the sector, we feel it is imperative to tell the honest truth about poor financial efficiency and capacity to those who are performing badly.

Secondly, we believe we are a critically important friend in leveraging donations to charities. From all the research we have seen, there is a real hunger for objective third party information from donors to charity. In addition, given the many scandals in charities both large and small, the public has become more skeptical of the self reporting of charities. They are looking for independent experts to help them understand which charities are doing the best job. We believe our work has helped to increase the amount that is donated to charity as we have helped to restore the trust of many donors. Charities which rate highly have told us often that they have seen a marked increase in donations when they promulgate their Charity Navigator 4 star seal. In a survey we conducted, we found that 92% of the over 3 million people who annually visit our site have changed their giving decisions based on our ratings. A recent study by researchers from the Universities of Idaho and Wisconsin corroborates this fact.* An estimated $10 billion per year of donations are influenced by our work.

I believe we have also been critically important in educating donors and the public at large about the charitable sector. We are frequently asked to speak on the national and increasingly on the international stage. We are contacted by the local, regional and national media on a daily basis for commentary on issues of concern to the charitable sector. In this role as critical friend, we have always highlighted the fact that 65% of the charities we evaluate are rated Good to Exceptional. This tells us that, at least when it comes to financial effectiveness and capacity, most charities are doing a good job. However, as noted earlier, our friends in the media do not seem to find such information particularly newsworthy.

Before joining Charity Navigator, I worked for charitable organizations for over 25 years. I know the challenges that are faced day in and day out by both front line staff and charity leadership. I also know how critically important their work is to this country and to the world. Two of my core beliefs are that the best organizations are collaborative and strive to continuously improve. We hope that this blog will further this relationship between us and the charitable sector as critical friends.

*Gordon, T & Knock, C., “The Role of Rating Agencies in the Market for Charitable Contributions”, University of Idaho & University of Wisconsin-Milwaukee, 2008.


Jeff Sliger said...

I doubt that the importance of what you do here can be overstated.

In the economic climate all charities face, the ability to establish trust and reputation are the crucial to survival.

The Navigator serves to set minds of donors at ease and let them know their money is actually being used responsibly. And in this case more trust equals more funding for the worthy cause.

Ken Berger said...

Thanks Jeff!

Anonymous said...

After I discovered Charity Navigator, I found out I had been hood-winked quite a bit...Now I know better and my limited funds go to approved charities. Thank you, Charity Navigator.