Rocky Mountain News
June 22, 2002
by John Accola
A newly launched charity rating service is drawing praise - and raising a few hackles - from 15 Denver-based nonprofits.
Charity Navigator, which studies charities' finances for would-be donors and posts the results free over the Internet(charitynavigator.org), gives five
But another five received below-the-grade ratings that could give loyal donors' pause.
Ratings are based on each charity's efficiency in raising funds, managing assets and distributing aid.
"It's a really great Web site," said Suzette Brewer at the American Indian College Fund, a four-star performer that received an overall rating of 63.28 points, short of a perfect score of 70.
Charity Navigator notes the national college fund, which gave out 6,000 scholarships last year, spends just 3.1 percent of its $18.5 million annual budget on administration and staff. Roughly $15 million - 84 percent of the the group's total expenses - went to scholarships.
Brewer said that's the kind of financial information potential donors should know before they start writing checks to her charity.
But a fiscal report card on a charity's financial health can work both ways. Of the 15 nonprofits Charity Navigator has surveyed so far in
The two worst performers:
Both received an uncharitable one-star rating, in part because of high fund-raising expenses - about 25 cents for every dollar raised, or more than double the national average.
The three charities that received Charity Navigator's two-star "needs improvement" rating: the Morris Animal Foundation, the American Humane Association and the Education Commission of the States.
"I don't know where they're getting their information because we're one of the top rated Native American groups in the country," said Native American Rights Fund's development director MaryLu Prosser about her group's one-star rating.
Prosser said the $7.5 million a year
"It costs money getting new donors and keeping the old ones on board," she said.
Promise Keepers, nationally known for its hymn and prayer conferences, spends 65 percent of its $28 million annual budget on program expenses, according to Charity Navigator's report, which relied on 2000 data.
With administration costs of nearly $4 million and fund-raising expenses just short of $6 million, the charity received an overall score of 26.38, the lowest of the 15 Denver-area charities.
"Not to pile it on, but they are spending a ton of money on fund-raising," said Charity Navigator President Trent Stamp. "This is an organization with a mission to promote Christ through men in
Promise Keepers, started in 1990 by former
Stamp said his group uses information gleaned from federal tax statements to evaluate an charity's financial health. To assess a charity's ability to survive long term, the rating service looks at average annual growth of operating revenue, average annual growth of programs and working capital ratio.
"Our data is totally transparent," Stamp said. "You can disagree with the methodology, but you can't argue with our motive. And that's providing a service to the givers. It's no different than Consumer Reports."
The New Jersey-based service, which launched April 15, has examined more than 1,100 charities nationwide and plans to add another 1,000 to its database by year-end.
Generally, two thirds of the charities examined received excellent or good ratings, Stamp said. The average charity in the database reported 81 percent of total annual expenses going to the charity's programs, 7 percent for fund-raising and 12 percent for administrative costs.
Stamp said the average charity spent 10 cents to raise $1 in contributions.
He cited the The Denver Dumb Friends League, which received four stars and spends 7 cents to raise $1, as one of the best managed charities in the country.
At the Morris Animal Foundation, Charity Navigator found 69 percent of the group's $4.1 million '01 budget went to programs and 19 percent to expenses.
Stamp said the foundation would have received three stars instead of just two had it spent a little more on programs. Three out of four charities examined by the rating service spend at least 75 percent on programs and services, he said.
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