New Way To Rate Charities Sought

The Washington Post, who named Megan Greenwell to their “philanthropy beat” last week, has written a story in today’s paper about the Effective Social Investing working group that I attended last week:

New Way To Rate Charities Sought
An alliance of prominent philanthropists and entrepreneurs is developing a rating system that they hope will radically alter the way donors evaluate whether a charity is worth their money.

The Social Investing Rating Tool would assess not only how nonprofit groups spend their money but also whether their work is making a difference. The goal is to encourage donors to think more like investors — to consider their charitable donations social investments, complete with risks and responsibilities.

“There are commonly accepted metrics to be able to say this is a good corporation or a good restaurant or a good movie, but there are none of those metrics for the nonprofit sector, and there have to be,” said Robert Egger, president of D.C. Central Kitchen, who participated last week in the first meeting of the Working Group on Effective Social Investing.

Most people, when thinking of making donations, research charities on such Web sites as http://charitynavigator.org and http://charitywatch.org, if they check on them at all. But those sources limit ratings to financial considerations — the percentage of donations spent on overhead costs is one key criteria — which experts say fail to take into account the most important factor: whether the charity is doing any good…

…”The fact is that we’re in a massive financial crisis, so it’s more important than ever that people are giving their money to organizations that are successful,” said Sean Stannard-Stockton, a Working Group member who runs a capital management firm in California and writes a blog about philanthropy. “Donors have no good way to distinguish between an organization that does work they’re interested in and a great organization that accomplishes results they’re interested in.”…

…Members of the Working Group include heads of two of the nation’s largest philanthropic organizations — Brian Gallagher, chief executive of United Way of America, and Paul Brest, president of the William and Flora Hewlett Foundation — and leaders of direct-service organizations, academic institutions and corporations. All told, almost two dozen people from across the country met last week in Washington to begin discussing how to shape the new rating system…

…Ultimately, members of the working group hope that Charity Navigator or another independent group will analyze charities using the new rating tool and make results public through the Web. Information on which charities are underperforming, combined with the economic slump, is likely to result in the demise of many of those groups, members acknowledge — and some say that’s not a bad thing.

“America is still incredibly generous, but I see a saturated market with 2 million efforts all over the map,” Egger said. “The question is, how do we get to a point where we’re using all our assets with ingenuity and real purpose?”