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Susan Herr, a former credit analyst, discusses Charity Navigator’s ratios and says they are useful for formulating questions, but useless as answers. I think that’s a good way to look at them.
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ABOUT SEAN STANNARD-STOCKTON
Sean Stannard-Stockton is the president and chief investment officer of Ensemble Capital Management, located in Burlingame, CA, midway between San Francisco and Silicon Valley. From 2006 through 2012, Sean authored the Tactical Philanthropy blog and wrote regular philanthropy columns for both the Financial Times and the Chronicle of Philanthropy. In 2012, Sean officially ended the blog to focus on growing Ensemble Capital.
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2 Comments
Did you even read the post you are linking? The commenter’s so called analysis of the reason for the star rating was completely wrong, which anyone spending a few minutes could easily figure out, especially a self described former credit analyst. He works in advancement at Richmond Community Foundation, which my guess translates into a fundraiser for a group that works as a non profit gatekepper. It does not surprise me he wants to say evaluating charities is too hard, and fundraising and expense ratios are not meaningful. If you want to know more about the star rating in the example he cited, read my comment there.
What surprises me about all the criiticsm of Charity Navigator is first, it is not real criticism. Most of the comments about how to use the ratios could be taken directly from Charity Navigator’s web site. To paraphrase Holden, it is a straw man argument to say the ratings should not be used in isolation, as CN definitely does not recommend that.
My second point is that most of the criticism of the ratios presented by CN are based on nothing. They are intuitive comments without any factual basis. People claim they are worthless, then concede they obviously identify some of the worst charities, and then claim they should not even be published, for some undisclosed reason. It is curious to me that people who proclaim the need to perform detailed analysis of charities spend so little effort to examine the appropriate usefulness of these ratios.
One interesting note is that the single favorite non profit of Givewell, Population Services International, has a low administrative expense ratio of well under 10%, and a remarkably low fundraising ratio. In a few years, when Givewell has slogged through an exhaustive analysis of a few other non profits and has chosen more favorites, my guess is they will be in similar shape, because the ratios do provide valuable insight. In the same way they have concluded saving a life in Africa costs less than job training in New York. Common sense.
Sean, just wanted to note that I inadvertantly posted this under my nme (I’m no credit analyst, that’s for sure.) The correct author, now duly noted, is Robert Thalhimer, who heads giving at the Community Foundation Serving Richmond and Central Virginia. Thx