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Two Years of Navigating Charities

Lessons Learned Along the Way

By Trent Stamp, Executive Director

April 1, 2004

 
 
This month, we celebrate our second anniversary by evaluating our 3,000th charity, and we have much of which to be proud. We feel that donors are better off than they were before we were created, and that the philanthropic marketplace has been advanced. In the year ahead, we know we have a ton of work to do, as Charity Navigator is far from a finished product. We hope to add individual charity input, user feedback from those served by the charities, and some programmatic measurements. But before we move on to those tasks, it seemed like a good time to reflect on what we have learned so far.

1. Numbers Are Our Friends:
A prominent leader of a Washington, DC charity is currently making the national rounds, promoting his new book, and making the argument that charities cannot be evaluated using financial ratios. As his example, he cites Habitat for Humanity and The Girl Scouts, and says that because these two organizations have fundamentally different business models, no one should try to compare them. This is probably true; at Charity Navigator, we don't compare the two, because they do operate differently and are on different playing fields. But he then makes the leap that since one can't compare these two organizations, one shouldn't try to compare any. This is a clear case of throwing the baby out with the bath water. While Habitat and The Girl Scouts may not be comparable, why can't we use tried and true financial measures to compare a Washington, DC food bank that serves 5,000 citizens and a Baltimore food bank that serves 5,000 citizens? Shouldn't we expect them to operate relatively similarly? Wouldn't the numbers have value?

Be wary of people that find anomalies in the data and therefore want to throw out the entire concept of data analysis. At Charity Navigator, we believe more data is better. If you disagree, and think that having access to numbers you didn't previously have is a bad thing, we're the wrong source for you.

2. The IRS is Not the Answer:
The new IRS budget calls for a 5% increase over last year. This increase would pay for salary increases, administrative costs, and a few new investigators to focus on high-net-worth individuals and corporations. No new money is earmarked for the charity investigation branch, despite the fact that charity auditors have actually declined by 25% over the last 10 years, while the number of applications for non-profit status has increased by tenfold.

Tell me again that we don't need a watchdog like Charity Navigator, because the IRS has everything under control. Go ahead, tell me. I'm listening.

3. Too Many Charities Exist in America:
There are one million non-profits in America. Of those, about 1,000 exist to protect the California coastline. 672 current organizations were founded to combat breast cancer. Over 50 organizations, already, are weighing in on gay marriage. How on earth is a donor supposed to distinguish between them all? Can they all be doing great work? Isn't much of it duplicative? From a donor's standpoint, and a taxpayer's perspective, too many charities exist in this country. The marketplace is too crowded. The overworked government has made it too easy to get non-profit status.

The math is simple. If we had fewer charities, we'd spend less as a nation on fundraising and administrative costs, and more on the programs and services the high-performing charities seek to deliver. Women with breast cancer would be better off with 100 highly-performing breast cancer charities, or even 10, than 672--some of which are great and some of which are truly lousy. But with this many, even the great ones have to waste precious dollars distinguishing themselves from the charlatans. For the good of the affected and the afflicted, many charities should just go away.

4. Not Every Non-Profit is Different:
If you listen to some of the charities who don't want to be evaluated by us, their argument is usually thus: "I love what you do, keep it up, but you can't evaluate us, because we're unlike every other organization in America. We're different."

Two things here: 1) you are not that different. You have 501(c)(3) status. You file the same federal tax forms. You raised more than $500,000 from individuals last year. You provide much-needed public services, and as a result, you don't have to pay federal income taxes. You are at least on the same playing field as your peers. 2) If you are indeed fundamentally different from all others, you are either much better or much worse than anyone else, and we feel we have an obligation to let your prospective donors know about that. So, we'll be here.

5. Media Relations Can Be Very Silly:
In the past year, I have been asked by national media for comment on specific charities, the sector as a whole, the giving habits of particular segments of the population, and trends we have seen in the charitable world. We have learned a great deal about the sector, and I'm always happy to do what we can to inform and educate the general public. In addition, however, I have also been quoted on why Angelina Jolie won't appear on Bill O'Reilly's television show, why a Detroit mother would shave her daughter's head and pretend she had cancer, why people would want to fish with basketball legend John Havlicek, and whether a charity being seen on "The West Wing" could lead to more people buying more goats for the organization. Hopefully, by weighing in on these topics, without yelling and screaming, we have indeed contributed to a higher level of national debate and discourse. Hopefully.

6. Don't Shoot the Messenger:
At Charity Navigator, because we do work that few others have ever attempted, we are able to often identify trends in the charitable world before many others. In the early part of 2003, Charity Navigator predicted the following:

  • arts funding would be off for the year;
  • state and local governments would begin to red-line charitable funding from their budgets, causing many locally-based direct service organizations to suffer, while, conversely, the large national advocacy groups would blossom as their individual donors' financial fortunes improved;
  • individual giving would stay strong while foundation and corporate giving fell;
  • charities in some individual cities would have a much harder time raising money than other cities, because of the types of organizations in those cities, and more importantly, the types of donors;
  • telemarketers would, because of the Do-Not-Call legislation exempting charities from their restrictions, actively solicit new non-profit clients, and begin besieging people at dinner time at rates never seen before; and
  • alums would begin to turn away from donating to their alma maters, seeking organizations with higher psychic pay-offs, and more bang for their giving buck.

For all of these predictions, we were criticized by someone in the sector, saying we were causing harm. All turned out to be true. The truth is a good thing. We should all work toward finding it, and spend a little less time tearing each other down.

7. The Sector Needs to Work Together:
While we take some heat within our sector, Charity Navigator has actually spent a good deal of time defending the non-profit world in the mainstream media. As an example, when many conservative talk show hosts went insane with accusations about the Red Cross after 9/11, we went on their shows and defended the organization. In addition, we have advocated for higher pay for charity officials, in defense of funding operating support (and not just special projects) for organizations, in support of arts charities, and in favor of funding non-profits instead of political candidates. Why did we take these stands? Because no one else would do it.

I truly believe that non-profit officials at the highest level need to learn to work together to advocate on behalf of their sector. When a "scandal" breaks out, most leaders simply cut and run, making sure that their donors know that they don't operate like the accused party, no matter the merit of the charges. This scorched-earth protectionist policy may ensure that your charity survives another year, but it's bad for giving confidence over time.

When the Red Cross made several grievous PR mistakes after 9/11, but never stole any money or did anything remotely criminal despite charges to the contrary, none of the other large non-profits in this country stood up next to them, defended them, and advocated on their behalf. Instead, they stuck their heads in the sand, or worse, helped throw them to the wolves, hoping to consequently lure some of their substantial donor base. The Red Cross had made some painfully stupid decisions, for which people rightfully lost their jobs. But they weren't criminals, and next time there's a national crisis, we'll turn to them again, because they're the only institution in the land with the knowledge, resources, name recognition, and infrastructure to fight these kinds of battles. It's in our best interest, as a people, and as a sector, for them to survive and prosper. But when it got ugly, it was left to my tiny non-profit to defend them. This is irresponsible, and worse, dangerous. The non-profit sector needs to learn to work together better, to ensure its long-term viability, and stop attacking each other in the pursuit of a few more donor scraps.

8. The Charity Evaluation Horse Is Out of the Barn:
We get a lot of positive attention from the press and our users, and we indeed get a bit of criticism. On balance, reception has been truly positive, especially with donors, and it is they who we aim to serve. We try not to listen to the nonprofit advocates and middlemen who disparage us because we are a threat to their predatory livelihood.

One area of criticism drives me insane, however, because no rational response exists. These are the people who criticize us for what we do, not how we do it. Reasonable people can disagree on our metrics. Should charities have some money in the bank for a rainy day? Is 75% an appropriate amount to be spending on programs and services? Is it fair to only count the value of multi-year grants in the year in which they're received? We can debate these things all night, and I welcome that.

But if your argument is that charities are somehow exempt from evaluation, that they're too complicated, too sacred, too "outside the box" to be evaluated, we're done talking. We evaluate everything in this country, from toaster ovens to mutual funds, from works of art to Congressional candidates. America loves data. Americans love unbiased information that they can use to make choices with their discretionary income. Charities will be rated. We may be the first to do it on a wide-scale basis. But we will definitely not be the last. It's time to move past this kind of debate.

9. Helping Donors Is Why We're Here:
In the last 12 months, about one million people have visited www.charitynavigator.org, seeking unbiased data they can trust to assist them in their charitable giving. We love and treasure all of them, and have dedicated our professional lives to doing all we can to satisfy them. But I want to tell you briefly about two of them in particular.

Natalie and Audrey Benson are sisters who live in Lino Lakes, Minnesota and have only recently become interested in philanthropy and helping their fellow citizens. This year, Natalie and Audrey used our site to find two new highly-rated charities to support, settling on an international religious organization and a local Minnesota animal shelter. They donated good chunks of their hard-earned money and then let us know that they had used our site to find the two high-performing, efficient charities which were good stewards of their donations. Assured that they had found charities they could trust, the Benson sisters will continue to support smart charities, making the world a better place for years to come.

So what, you say? What's so special about that? Natalie and Audrey are 12 and 10 years old, respectively. They are truly the new face of philanthropy. And they use Charity Navigator. We thank them, and you.

I wish you all the best in your charitable endeavors.

   
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