Are Nonprofit Evaluation Ratings Important?

I love when the college football season winds down. With respect to Division I football, the big debate is usually based upon ratings. Which four teams will end up playing for the national championship? These ratings are based upon win-loss records, strength of schedule, when losses occur in the season, etc. In the world of statistics a lot of numbers are in play. At the end of the season, there will only be one champion. In the world of nonprofits, potential donors have to view organizations in somewhat the same way. Donors ultimately give to successful and winning organizations. The question is: Who rates nonprofits, and how do they rate them?

A number of organizations exist to rate charities. For example, Charity Watch is a nonprofit charity watchdog and information service. The mission of the organization is to maximize the effectiveness of every dollar contributed to charity by providing donors with the information they need to make more informed giving decisions. Analysts perform in-depth evaluations of complex charity reporting, such as program percent—the percent of total expenses a charity spends on its programs annually—and cost to raise $100—which denotes how much it costs a charity to bring in each $100 of cash donations annually. The financial analysis is in-depth and complex.

Charity Navigator is the nation’s largest and most-utilized evaluator of charities. Employees from this firm examine tens of thousands of documents from charities to develop an unbiased, objective, numbers-based rating system that assesses more than 8,000 of America’s best and lesser-known charities. Specifically, Charity Navigator’s rating system examines two broad areas of a charity’s performance: its financial health and its accountability and transparency. Its mission seeks to provide a guide to intelligent giving. It is a 501(c)(3) nonprofit organization. In the last year alone, 7 million donors visited the Charity Navigator site.

Give.org, BBB Wise Giving Alliance, is another entity that reviews charitable performance. It provides research on a variety of standards for charity accountability. Some examples of standards include governance, board oversight and size, measures for effectiveness, policies and reports, finance reviews, program and fundraising expenses and budget, plus fundraising information, materials, annual report and complaints.

All of these organizations play an important role in educating prospects and donors on the organizations they are considering to support. These organizations need to be transparent, honest and ethical.