Evaluating Charities Not Currently Rated by Charity Navigator
From the start, we have welcomed feedback from both our users and from charities. One message that we have consistently received, is "please rate charity X." Charities beg us to rate their organizations so that they can demonstrate their commitment to transparency and accountability to their current and potential donors. And donors want access to the unbiased data we provide so that they can conduct due diligence before making a contribution.
We've responded by growing the number of charities featured on our site from 1,100 when we launched in 2002 to over 5,000. Our evaluations have helped millions of donors pursue effective philanthropy and influenced billions of dollars in charitable donations. Although we now rate ten times more organizations than anyone else in America has ever attempted, representing around 85% of giving in the US , we still receive requests to rate additional charities. The truth is that we've already evaluated the majority of the organizations that meet our criteria. And with the IRS continuing to hand out nonprofit status like candy, there are thousands of small, local organizations that we may never be able to review.
The absence of a particular charity from our list should not be interpreted to mean that the group is unworthy of public support. Many of these groups provide programs and services that the less fortunate in our communities depend upon. On the other hand, no matter how noble the charity's cause --- whether that be feeding the poor, sheltering the homeless or caring for the elderly ---it doesn't mean that we should automatically open our wallets wide. To help donors do their homework and make an informed giving decision about groups that Charity Navigator does not currently rate, we offer the following advice.
- Is it legit?
People always ask us, "is charity X that sent me an appeal legit"? Often folks confuse "legit" with effective or efficient. But before we get to that, an important first step in reviewing an organization is to determine if it is a bona fide nonprofit. Specifically, you need to confirm that the organization is granted tax-exempt status under section 501(c) (3) of the Internal Revenue Code. This means that the group is registered in the US and that your contribution to the organization is tax deductible. You can either ask the organization directly for a copy of their letter certifying their nonprofit status or you can do your own research by searching Publication 78 on the IRS website, www.irs.gov.
- Is it efficient?
Make sure you take a look at the organization's spending habits. The majority of the charities rated by Charity Navigator spend less than 10% of their budget on fundraising costs, less than 15% on administrative costs, and at least 75% on the programs and services they exist to provide. If the organization files a Form 990 (many religious organizations, like the Salvation Army, are exempt from filing this annual informational tax return) you can get a sense of its expenditures by reviewing that document. Charities are required by law to provide copies of their three most recent filings to anyone making a request in person or in writing.
- Is it well positioned to sustain its programs over time?
Yes, charities are not in the business to make money. But they aren't exempt from the pressures of inflation. It simply costs more money each year to provide the same level of programs and services. Therefore it is important to check if a charity is growing its revenue over time, spending more money from year to year on its programs and if it has a rainy day fund. Of the organizations rated by Charity Navigator, half demonstrate at least 5% growth in their primary revenue and program expenses over the last three to five years, and 60% have accumulated at least six months' worth of working capital to fall back on during economic downturns. Remember, by showing growth and stability, charities demonstrate greater fiscal responsibility, not less.
- Is it effective?
Contact the charity directly to assess its goals, accomplishments and challenges. Your attempt to communicate with the charity can reveal a lot about the organization. It's a big red flag when an organization refuses to answer your questions or to provide financial data at your request. To help you start a dialogue, we offer 6 Questions To Ask Charities Before Donating.
- Is it committed to the rights of donors?
Selling and trading donor's personal information isn't just common practice among large, national charities. Oftentimes, local organizations will swap lists in an effort to expand their donor base and increase awareness of their group. Unless you want to wind up with a mailbox full of appeals, find out if the charity you are considering supporting has a donor privacy policy. Ask to see it in writing and make sure you "opt-out" if it is required.
