November 23, 2007
Is Charity Navigator the 'National Enquirer' of Watchdog Groups?
Is Charity Navigator the National Enquirer of nonprofit watchdog groups?
Michael Soper, a nonprofit consultant, charges that Charity Navigator,
Mahwah, N.J., is similar to the infamous tabloid because its uses
flawed reporting to make sensationalistic reports, such as “10 charities routinely in the red.”
“In my view, Charity Navigator, its ratings, and its top ten lists are
nothing more than great merchandising of a weak underlying product,” Mr. Soper writes on Tactical
Philanthropy.
Specifically, Mr. Soper writes that the watchdog’s methods are flawed because:
- It only examines the financial health of a charity, not how effective it is at meeting its mission.
- It relies too heavily on the Internal Revenue Service’s 990 informational tax return, which charities often interpret differently.
- Its ratings could be skewed depending on a charity’s mission or the year Charity Navigator began examining a group. For example, Mr. Soper writes that if Charity Navigator were to begin looking at a nonprofit group at a time it is in capital campaign, “Future ratings and rankings could show the nonprofit in decline as a result of the decreasing revenue.”
Mr. Soper writes that he appreciates Charity Navigator’s mission —
and that it isn’t always wrong about the charities it ranks — but
that a more accurate and effective evaluation process is needed.
“I’m not suggesting that every poor rating of a nonprofit by Charity Navigator is incorrect or undeserved. I am urging the nonprofit industry to create better measures and/or methods of evaluating nonprofits’ mission-driven services in terms of effectiveness and efficiency,” he writes.
Mr. Soper’s criticism was part of The One-Post Challenge.
It is based on his original post on the blog Rare Medium.
What do you think? Are Charity Navigator’s rankings flawed? How can the nonprofit world create a better evaluation system? Click on the comments link below this post to share your thoughts.
— Ian Wilhelm
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I thought the Nonprofiteer had an excellent post about this topic which discusses the limitations of the 990:
http://nonprofiteer.typepad.com/the_nonprofiteer/2007/11/re-the-990.html
— a fundraiser Nov 24, 12:46 PM #
CharityNavigator’s duplicity continues unabated, now sanctioned by CNN. When their partnership was announced a few months ago, I contacted CNN to warn them of the inevitable, that far too many worthy, and imminently helpful, charities would be omitted from the listing of available relief organizations in a given disaster area—-even to a degree by their absence, blacklisted.
CharityNavigator has been employing their seriously flawed “star” rating system on non-profits for far too long. This self-appointed judge, one which itself escapes being rated, applies half-measures and faulty data to victimize hapless non-profits.
I’m just an old non-profit fund-raising practitioner, but with experience spanning thirty-five years, I have learned a thing or two regarding the dangers to non-profit organizations coming from the faulty financial manipulations made by self-styled “charity regulators.” My article, posted on my website, and reprinted elsewhere a number of times, was written in October of 2002, and I have not changed my opinion a bit about it since then.
—- The Fallacy Of Financial Ratios:
Why Outcome Evaluation Is The Better Gauge Of Grant Worthiness
http://www.raise-funds.com/100402forum.html
Many of us in the non-profit world are not happy, content, or enamored, with what Charity Navigator is doing. CN “ranks” non-profits mainly from the numbers reported on IRS Form 990 and other scant, widely diverse, spreadsheet information to rank non-profits to a four-star system.
But, who “ranks” CharityNavigator? How many “stars” to they get—-or give to themselves, as a non-profit organization taking it upon themselves to rate others with all of the much less-than-meaningful data they use?
— Tony Poderis Nov 26, 10:33 PM #
As a donor, I am grateful for sites such as Charity Navigator and Guidestar. Highlighting financial efficiency is only one part, but Charity Navigator goes well beyond that.
I think such sites also allow people to learn about smaller, less well known charities, as well as do a quick check when the telemarketer gets through.
It is nice to have a resource looking at things from the perspective of a donor.
If any charties on the “worst 10” lists are actually well run, effective organizations, please do tell.
— Erich Riesenberg Nov 27, 12:44 PM #
Valuable comments. I recommend the Nonprofiteer post and think Tony and Erich have framed the issue nicely.
Tony, clearly you and many others recognized the risks of an overly simple and unverified rating system long before me.
Erich, while I’d prefer not to address specific ratings (e.g., the worst ten), I believe your question points to the weakness in using Charity Navigator’s ratings. You don’t know — and can’t be sure that any organization’s rating is right (or wrong).
Some nonprofits may have unjustified poor ratings and be unaware of them. The fact is ratings are published and a nonprofit must challenge it if they feel it is incorrect. I’ve given real world examples of when this can happen in my post (links above). The risks are real and the burden on nonprofits is substantial.
Your comment underscores the tremendous demand for a quick evaluation of a nonprofit and reading 990’s (as opposed to ratios, ratings, rankings, and top ten lists) is a good starting point. After a telemarketer hangs up, I simply “Google” the organization — and I suspect you and many others do this as well.
— Michael B. Soper Nov 28, 09:16 AM #
Great comments on this issue. Another important point that donors may not consider, too, is that the healthiest charities have diverse sources of income (i.e., not just from grants). But it takes more administrative time to develop and maintain a healthy individual donor program, say, than it does to secure a few large grants — so comparing two charities side-by-side, the one with the lower administrative spending figure may in fact be less financially healthy than the one with the higher figure. But often donors just see that ratio and think, ah, the other group is more efficient. Just a thought.
— Molly Kramer Nov 28, 01:21 PM #
Great, maybe, to have the 4-star “approval” rating from CharityNavigator. Worse, to have it taken away. I wonder how CN does keep up on its star ratings to be sure those non-profits favored with it this year, continue to “deserve” it the next.
The organizations now proudly displaying the CN four-star logo to their supporters and the public for past performance, would have a great deal of explaining to do should they be asked by CN to remove it because they don’t deserve the high standing this year. Then there are the organizations branded with one star, victimized as they often are by the fallacy of financial ratios based upon numbers CN uses which are more often than not faulty and incomplete.
What would CN’s own donors think of the money they give to that non-profit organization, donations which are, as I see it, wasted to a great degree, money used which causes harm in the non-profit world? I think there is a serious question here regarding CN’s own use of their donors’ funds in they way they judge other organizations. The CN staff keeps busy spending money mostly for an ineffective result, causing harm to innocent non-profits. When non-profits are victimized in the way CN does it to them, you can bet that some of those organizations’ donors are concerned about how their money is being spent. CN’s donors should as discerning and demanding.
Again I ask, Who rates CharityNavigator?
At the end of the day, a donor to a shelter for abused children wants assurance that his or her money is helping a worthy organization to fulfill its mission, and the abused children want to be in a place where they are cared for and loved. Impossible to quantify. Certainly not at all possible from a financial spreadsheet.
Yes, we must and should eagerly pursue ways to develop our own outcomes measurements for our non-profit organizations. It’s tough to work to “measure” an organization’s success in human terms, to be sure, though we must try. But we should sound the alarm when the measurement is attempted—-and made to seem true and relevant to make non-profits accountable—-by computations made by an organization which itself is not accountable.
We simply should never place units of measurement before acts of compassion.
— Tony Poderis Dec 2, 10:25 AM #