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A New Online Service For Ranking Charities

NJ Biz

July 22, 2002

By Scott Goldstein

Before you buy a car, you take a test drive.  Before you invest in a stock, you research the company.  So it's natural to pause and do a little investigation before you send a check to your favorite charity.

But how?

One way is Trent Stamp's Charity Navigator, a Mahwah nonprofit that rates the financial efficiency of more than 1,110 charitable organizations nationwide.  Its ratings are free and available on the web at www.charitynavigator.org.

Using the figures from the charities' annual tax forms, Charity Navigator analyzes spending efficiency and long-term sustainability to rank charities on a scale of zero to four stars.

"The SEC regulates the private sector and Consumer Reports ranks virtually every consumer product," says Stamp a former aide to Congressman Robert Matsui (D-California) and vice-president and communications director for the nonprofit Teach For America until last year.  "But no one is telling you whether it's a good idea to give $50 to the Humane Society of Bergen County."

Other ratings organizations include the Better Business Bureau and the American Institute of Philanthropy, which use factors such as annual reports and frequency of board meetings to evaluate major charities.  Charity Navigator hopes to become the first service to assess virtually every nonprofit that accepts significant contributions.

The US GAO reported in April that the IRS has been unable to effectively oversee the practices of nonprofit organizations.  That's partly because the staff of the IRS division that monitors exempt organizations has been cut by 15% while the number of charities has grown by 9%.

But Charity Navigator faces obstacles, too.  The GAO says the tax disclosure Form 990, required of all nonprofits and used by Charity Navigator to assess charities, is not always reliable.

Nonetheless, Stamp says, it's the only univeral document produced by all charities.  Around 70% of the nonprofits he ranks have received three or four stars.

Stamp launched Charity Navigator last year with a $1-million grant from John Dugan, founder of PDI, a pharmaceutical sales company in Upper Saddle River.  Stamp says Charity Navigator seeks contributions from foundations and corporations and refuses money from charities.  The rating service went online in April.

Stamp vows to rate Charity Navigator when it turns three, the minimum age requirement for nonprofits in its data base.  It has rated 1,116 U.S. charities and plans to have more than 2,000 rated by next year.

Reprinted courtesy of NJ Biz, www.njbiz.com.
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