Wall Street Journal Evaluates Charity Evaluators

In today’s Wall Street Journal, The Numbers Guy columnist Carl Bialik tackles charity evaluators:

Call it a false sense of humanity.

It may make you feel better to know that your charitable donations are going to organizations that have been highly rated by any number of online charity rankings. But these sites fail to quantify the most-important and most elusive charity measurement: success in achieving its mission.

…donors giving a relatively modest amount may not want to invest the necessary time to evaluate charities thoroughly. Their quickest recourse is to search Charity Navigator, one of the most popular sites that assigns ratings from zreo to four stars to more than 5,000 nonprofit organizations…

Some critics of Charity Navigator said it can create backwards priorities, encouraging them to withhold funds instead of dispersing them. The ratings, for instance, encourage charities to keep assets in reserve that total as much as their annual budget — and more for certain types of charities with big ongoing expenses such as museums and schools….

Robert Egger, president of D.C. Central Kitchen, criticizes Charity Navigator even though it awards his group four stars. “The low-administrative-overhead standard is an intellectual albatross around our necks,” he said….

Guidestar, which collects financial data from nonprofits but doesn’t rate them, next month will incorporate anonymous user ratings of nonprofits. There will be a numerical component — like a CitySearch or Amazon rating for nonprofits, with the same risk of tampering by competitors or others with an axe to grind.

“We’re giving the nonprofit an opportunity to respond,” said Bob Ottenhoff, president and chief executive of GuideStar, which collects financial data from nonprofits but doesn’t rate them. However, he’s skeptical about finding a single measure. “It’s a fool’s errand to look for the perfect p/e ratio for nonprofits,” Mr. Ottenhoff said. “It doesn’t exist.”

In case he’s right, donors may do best by looking for charities that set specific numerical goals for themselves, and admit when they’ve fallen short. The American Cancer Society, for instance, gave itself a thumbs down last year for insufficiently reducing cancer mortality. In its Strategic Plan Progress Report, it admitted it was unlikely to meet its own goals for reducing mortality by 50% by 2015, since mortality wasn’t dropping fast enough from 1991 to 2004.

Said Catherine Mickle, the cancer group’s chief financial officer: “We are going to come up with our own metrics.”

Read the full article here.

The article continues on a Wall Street Journal blog where Bialik quotes Chronicle of Philanthropy editor Stacy Palmer and ends with this generous comment:

Sean Stannard-Stockton’s blog, Tactical Philanthropy, is a useful resource for information about how to run charities, and how to rate them.