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Which charity “watchdog” is best?

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Which charity “watchdog” is best?

Of the three main databases of information about charitable nonprofit organizations (GuideStar, Charity Navigator, and the Better Business Bureau Wise Giving Alliance) what do you think the strengths of each is? Is there one that you find the best to work with? My company produces Public Service Announcements for 501(c)(3) organizations and I am looking for a reliable database of information about organizations, CEO and CFO names, revenue level, and to a lesser degree ratings. I would like to use this to evaluate potential clients from both a marketing and credibility perspective.

Each of the three organizations, sometimes called charity “watchdogs,” has its strengths but I personally tend to utilize GuideStar most frequently because I can find a complete IRS Form 990 tax information return for virtually every charity that files one and I understand how to read them. Charity Navigator and Wise Giving Alliance use these returns as a major basis for their reports. 

Charity Navigator says it rates about 8000 charities, while the Wise Giving Alliance says it has reports on about 11,000.  Those reports are a small portion of the 1 million public charities registered with the IRS or the 375,000 or more that file a detailed tax return each year.  They cover many of the larger charities, however, and particularly for those who are not familiar with the Form 990, these reviews can be helpful.

Charity Navigator has developed an incredibly detailed methodology for measuring and rating financial statistics provided on the Form 990.  They turn these numbers into numerical ratings, that in my view, like many computer printouts, take on a sense of precision that isn’t fully warranted.  Wise Giving Alliance focuses more on other criteria and considers a charity’s response to complaints by it or others. But both rely heavily on ratios from the 990s for program service expenses, fundraising costs, and general administrative overhead, however, and reduce the ratings of charities that fail to meet their criteria. 

Despite the significance of the ratios in their rating systems, they joined with GuideStar a few years ago to urge the donating public to disregard the “overhead myth” that a low percentage of expenses for administration or fundraising is necessary for a good performance.  In fact, they all said, many charities should be spending more on overhead to give themselves a greater capacity to pursue their missions.

One significant advantage of Charity Navigator and Wise Giving Alliance is that they can warn donors about questionable issues with a specific organization.  GuideStar generally doesn’t rate charities, and state charitable solicitation regulators almost never say anything more about a charity than the numbers they received from the charities themselves.

Both Charity Navigator and the Wise Giving Alliance give ratings that, if bad, could seriously undercut the credibility of your prospective clients.  But if I were prospecting for your type of business, or for a place to make a donation, I wouldn’t use any one of them alone as a litmus test.  I would carefully review the charities’ websites, review their 990s personally, and do a computer search on the publicity they have generated and received.  I would also try to find people who had direct personal experience with them.  You can learn a lot this way that the national “watchdogs” can’t possibly duplicate.

I would love to hear what our readers think on these issues.  Your experience may be different from mine.

Tuesday, June 30, 2015

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Comments

Don --
I serve as Regulatory Counsel to the DMA Nonprofit Federation. I spend a considerable amount of time in the arena of accountability. Apparently, my experience matches yours, and I wholeheartedly endorse your advice to your inquirer: look at the watchdogs, if you wish, but do not rely upon them.
I take small issue with the characterization of GuideStar. I believe they would say, rightly, that theirs is not a watchdog service. They do not rate, evaluate, or otherwise offer opinions on individual nonprofits. Rather, they are information providers, often adding audited financials, annual reports, and program information to their core function of making Forms 990 readily available (yes, I am a fan).

Don

As you mention in your article, these organizations evaluate less than 1% of the charities in this country and do very little to support the remaining 99%. I would even venture to say that their technologies are built on dated platforms at this point and would require a significant investment to modernize.

I would like to bring to your attention an organization that is quickly emerging in the nonprofit reporting sector with new and innovative technologies. OrgHunter.com is dedicated to donor education and awareness while simultaneously supporting all nonprofit organizations by providing them with an open platform to tell their side of the story. They are plugged into 4 primary data sources, the IRS, The Office of Foreign Asset Control (OFAC), The Combined Federal Campaign (CFC) and the non-profit organization themselves. There are over 10 million digitized 990 images available and details on 2 million US based charities, best of all - the service is free.

In addition to providing reporting via their website, they are also the non profit vetting and charity search technology behind a number of recent innovative mobile and donation platforms. They are the first organization to provide geolocation services on all of the charities in the IRS database. It is certainly prudent to bring this group into this discussion as a valuable resource for donors and nonprofits.

Great article as I was going through the process and developed similar conclusions. it even gets more complicated if like here in Texas you check the Attorney Generals website. Very comprehensive with code citations agency links but as a non lawyer very confusing. i came to the thought of responding to a very recent email by the government warning about choosing charities. of course, simplistic advice without and real help to people to do what they stress.

It is amazing that articles do not point out they are corporations, chartered and uncharted by the state yet both could get 501c IRS waivers. They both can do business like acquire property and other assets if their unpublished bylaws, and within IRS guidance.

I am asking the Texas Attorney if their incorporation documents. board meeting minutes, if they elected to have one, and of course their "ByLaws" are accessible under the Open Records Act. To me, rating organizations are looking at superficial data. I also disagree with you on operational cost as it applies to paid staff and number of paid staff and we should not disregard the growing cost spent in obtaining contributions from the general public which may become even more a true reality under the implementation of the new govt. tax laws on donations levels.

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