Charity Ratings Based on Administration Costs can do More Harm Than Good

This post has been moved to Good Intentions' new website. Click here to read the post.

Comments

[leonel curry]

Generally I think it would not. You have the chance to get over from miss manage non profit organizations.

[Dwight Hatcher]

Focusing only on administrative costs is probably not a reasonable criterion for judging a charity, but as simple as the star system may be, most potential donors are not savvy enough to parse the 990s that charities must file. As a veteran of the fundraising field, I try to distinguish between administrative costs and the cost of fundraising; in other words, when a non-profit pays 50, 60, or even 90 cents to raise a dollar, something is wrong. Also, check the 990 to see what they pay their executives or trustees. souls4souls (collects and distributes shoes) pays their founder and CEO $400,000, way too much. It's worth the effort to ensure that you are not being defrauded by dishonest charities designed to enrich fundraising/telemarketing firms.

[Saundra]

Unfortunately there is not a lot of recourse. I'd recommend you start with the Better Business Bureau. They have a section for US registered non-profits where you can lodge a complaint. They will take the complaint to the aid agency and then record whether or not they properly respond to the complaint.

Here's BBB's charity link http://www.bbb.org/us/Charity-Complaints/

Good luck

Saundra

[S Fagan]

One correction to my recent post should read "I am not familiar with the rules regulating 501-c3s".

[S Fagan]

I have worked for several small non-profits and have friends and family who have worked for others. I agree that the largest criteria for rating any non-profit should be the transparency of the company at all levels. Detailed financials, board member names and relationship to director/managers of the agency and the final listing should show the pay/compensation of each employee.

One company I worked for for almost 8 years now has a director who runs the company like his own personal fiefdom, where the board members are all friends and family and through that he controls his pay and compensation. Another non-profit of which I am familiar has a director and a limited staff which includes the director's wife in a "token" position. Since the company was founded about 10 years ago, the board has increased the director's salary from a low five-figure salary to a mid-six-figure annual salary. At the same time, board members have received six-figure loans from the non-profit. I am familiar with the rules regulating 501-c3s and other non-profits, but I have to think that most of these practices are not acceptable. Is there any procedure by which a "non-profit" can have that status revoked and is there an agency responsible for such monitoring?

[Saundra Schimmelpfennig]

Dear Ken,

Thanks for your comment. I have often thought about how to best rate aid agencies and know how truly difficult it is.

I'm glad to know you're on the road to a more comprehensive matrix and look forward to seeing what you develop.

[Ken Berger]

A major worry we have at Charity Navigator is that, without a performance/outcome measurement system within a nonprofit, they may do more harm than good. We are developing a system for our own internal operations and we hope that all nonprofits develop a sense of urgency to get this done.

In addition, in our view, to make a wise giving decision a social investor (donor with their eyes open) needs to consider three components of a nonprofit - financial health, accountability/transprarency & outcomes. We are working on developing a system of rating charities that encompasses all three components. I actually do sleep at night because we are on the road to more comprehensively capture these elements. We also will be re-examining our existing financial metrics to see how they might be strengthened. We welcome your feedback.