Charity assessment is the process of analysis of the ''goodness'' of a non-profit organization in financial terms.
Historically, charity evaluators have focused on the question of how much of contributed funds are used for the purpose(s) claimed by the charity, while more recently some evaluators have placed an emphasis on the cost effectiveness (or impact) of charities.
Charity watchdog
A charity watchdog is a type of
nonprofit organization
A nonprofit organization (NPO) or non-profit organisation, also known as a non-business entity, not-for-profit organization, or nonprofit institution, is a legal entity organized and operated for a collective, public or social benefit, in co ...
that provides ratings of
charitable groups based on how an individual charity's money is spent, how it
govern
A government is the system or group of people governing an organized community, generally a state.
In the case of its broad associative definition, government normally consists of legislature, executive, and judiciary. Government is a ...
s itself, and how the charity protects its
donor
A donor in general is a person, organization or government which donates something voluntarily. The term is usually used to represent a form of pure altruism, but is sometimes used when the payment for a service is recognized by all parties as rep ...
s'
privacy
Privacy (, ) is the ability of an individual or group to seclude themselves or information about themselves, and thereby express themselves selectively.
The domain of privacy partially overlaps with security, which can include the concepts of a ...
, among other criteria.
["Understanding Charity Ratings".](_blank)
''Consumer Reports''. Retrieved November 2015. Charity evaluation from these organizations has typically focused on measuring administrative and fundraising costs, salaries, and assessing how large of a proportion of a charity's budget is directly spent on impactful activities.
In 2000,
Ministry Watch
Ministry Watch is an independent American evangelical
Evangelicalism (), also called evangelical Christianity or evangelical Protestantism, is a worldwide interdenominational movement within Protestant Christianity that affirms the cent ...
, an
evangelical
Evangelicalism (), also called evangelical Christianity or evangelical Protestantism, is a worldwide Interdenominationalism, interdenominational movement within Protestantism, Protestant Christianity that affirms the centrality of being "bor ...
Christian
Christians () are people who follow or adhere to Christianity, a monotheistic Abrahamic religion based on the life and teachings of Jesus Christ. The words ''Christ'' and ''Christian'' derive from the Koine Greek title ''Christós'' (Χρι ...
organization that reviews Protestant ministries for financial accountability and transparency, was founded.
Charity Navigator
Charity Navigator is a charity assessment organization that evaluates hundreds of thousands of charitable organizations based in the United States, operating as a free 501(c)(3) organization. It provides insights into a nonprofit’s financial s ...
was launched in 2001 by John P. Dugan, a wealthy pharmaceutical executive and philanthropist. Initially, Charity Navigator provided financial ratings for 1,100 charities, and has data on 8,000 as of mid-2016.
[Ann Carrns]
Charity Navigator Tweaks Its Rating System
''New York Times''. 27 May 2016.
The ''
Toronto Star
The ''Toronto Star'' is a Canadian English-language broadsheet daily newspaper. The newspaper is the country's largest daily newspaper by circulation. It is owned by Toronto Star Newspapers Limited, a subsidiary of Torstar Corporation and part ...
'' has reported on some of the difficulties and revelations of auditing charities as described by
Charity Intelligence Canada
Charity Intelligence Canada (Ci) is a registered charity that does charity assessments of over 750 Canadian charitable organizations, to allow donors be informed when they donate to charities, and to promote transparency, accountability, and re ...
(Ci). The authors call it "concerning", for example, that one in five of "Canada's top 100 charities" refused to release their full audited financial statements to Ci. Moreover, one-quarter of the "top 100 charities" store at least three years worth of funding (that is, they have three times their annual budget in savings) and some store as much as eight years worth. Of the "top 100 charities", 14% exceed the guidelines set by the Canada Revenue Agency by spending more than 35% of donations on fundraising – with some spending as much as 50% of donations on fundraising.
["Audit of charities encounters resistance", in The Star, by Raveena Aulakh and Amy Dempsey, published Tuesday Nov 15 2011]
/ref>
In 2015 the British government announced the creation of a new government-run watchdog to regulate large charities.
Impact-based evaluation
In 2006, hedge fund
A hedge fund is a pooled investment fund that trades in relatively liquid assets and is able to make extensive use of more complex trading, portfolio-construction, and risk management techniques in an attempt to improve performance, such as sho ...
employees Holden Karnofsky
Holden Karnofsky is an American nonprofit executive. He is a co-founder and co-chief executive officer of the research and grantmaking organization Open Philanthropy. Karnofsky co-founded the charity evaluator GiveWell with Elie Hassenfeld in 200 ...
and Elie Hassenfeld
GiveWell is an American non-profit charity assessment and effective altruism-focused organization. GiveWell focuses primarily on the cost-effectiveness of the organizations that it evaluates, rather than traditional metrics such as the percentag ...
formed an informal group with colleagues to evaluate charities based on data and performance metric
A performance indicator or key performance indicator (KPI) is a type of performance measurement. KPIs evaluate the success of an organization or of a particular activity (such as projects, programs, products and other initiatives) in which it en ...
s similar to those they used at the fund. The group was surprised to find the data often did not exist. The next year, Karnofsky and Hassenfeld formed GiveWell
GiveWell is an American non-profit charity assessment and effective altruism-focused organization. GiveWell focuses primarily on the cost-effectiveness of the organizations that it evaluates, rather than traditional metrics such as the percent ...
as a nonprofit to provide financial analyst
A financial analyst is a professional, undertaking financial analysis for external or internal clients as a core feature of the job.
The role may specifically be titled securities analyst, research analyst, equity analyst, investment analyst, ...
services to donors. They eventually decided to rate charities based on the metric of how much money it cost to save a life.[Patricia Illingworth, Thomas Pogge, Leif Wenar. ''Giving Well: The Ethics of Philanthropy'', Oxford University Press US, 2011]
p. 124
/ref>
GiveWell has focused primarily on the cost-effectiveness
Cost-effectiveness analysis (CEA) is a form of economic analysis that compares the relative costs and outcomes (effects) of different courses of action. Cost-effectiveness analysis is distinct from cost–benefit analysis, which assigns a monetar ...
of the organizations that it evaluates, rather than traditional metrics such as the percentage of the organization's budget that is spent on overhead.[ In the first year, Karnofsky and Hassenfeld advocated that charities should generally spend more money on overhead, so that they could pay for staff and record keeping to track how effective their efforts were. This ran counter to standard ways of evaluating charities based on the ratio of overhead to funds deployed for the charity work itself.]
Giving What We Can
Giving What We Can (GWWC) is an effective altruism-associated organisation whose members pledge to give at least 10% of their income to effective charities. It was founded at Oxford University in 2009 by the philosopher Toby Ord, physician-in- ...
(GWWC), founded in 2009 by Toby Ord
Toby David Godfrey Ord (born July 1979) is an Australian philosopher. He founded Giving What We Can in 2009, an international society whose members pledge to donate at least 10% of their income to effective charities, and is a key figure in the ...
, also differed from other charity evaluators in terms of the importance given to metrics of charity performance, solely focusing on the cost-effectiveness of the charity's work. It has argued that the variance in cost-effectiveness of charities arises largely due to the variance in the nature of the causes that the charities operate in, and therefore has made evaluations across broad areas of work such as health, education, and emergency aid before comparing specific organizations. In practice, it recommends a selected few charities in the area of global health
Global health is the health of the populations in the worldwide context; it has been defined as "the area of study, research and practice that places a priority on improving health and achieving equity in health for all people worldwide". Problem ...
. Its work is similar to that of GiveWell. GWWC no longer evaluates charities but, like the National Philanthropic Trust
National Philanthropic Trust (NPT) is an American independent public charity that provides philanthropic expertise to donors, foundations and financial institutions. NPT ranks among the largest grantmaking institutions in the United States.
NPT sp ...
, it accepts philanthropic members and helps them to donate to charities.
Charity Navigator
Charity Navigator is a charity assessment organization that evaluates hundreds of thousands of charitable organizations based in the United States, operating as a free 501(c)(3) organization. It provides insights into a nonprofit’s financial s ...
's former CEO Ken Berger and consultant Robert M. Penna harshly criticized the idea of discriminating among cause areas for being moralistic and elitist "by weighing causes and beneficiaries against one another". Philosopher and effective altruism
Effective altruism is a philosophical and social movement that advocates "using evidence and reason to figure out how to benefit others as much as possible, and taking action on that basis". People who pursue the goals of effective altruism, c ...
advocate William MacAskill
William David MacAskill (; born 24 March 1987) is a Scottish philosopher and author, as well as one of the originators of the effective altruism movement. He is an Associate Professor in Philosophy and Research Fellow at the Global Priorities ...
defended the concept by comparing the choice to donate to an art gallery with the choice of saving a painting rather than saving people from a burning building.
In 2013 and 2014, GuideStar
Candid is an information service specializing in reporting on U.S. nonprofit companies. In 2016, its database provided information on 2.5 million organizations.Wyland, Michael. "GuideStar Introduces Program Metrics Section for Nonprofit Profile ...
, BBB Wise Giving Alliance
The BBB Wise Giving Alliance (WGA) is an American charity monitoring organization. Under previous names, it has been reporting on nationally-soliciting charities since the 1920s. BBB's Give.org evaluates charities, at no charge, using the 20 BBB St ...
, and Charity Navigator wrote open letters urging nonprofits and donors to end the use of the overhead ratio as the sole or main indicator of a nonprofit's performance. Charity Navigator has also been working to expand its criteria to include results reporting. See Charity Navigator § Evaluation method.
Searchable databases of United States Internal Revenue Service Form 990
* ProPublica
ProPublica (), legally Pro Publica, Inc., is a nonprofit organization based in New York City. In 2010, it became the first online news source to win a Pulitzer Prize, for a piece written by one of its journalists''The Guardian'', April 13, 2010P ...
* Candid
Candid may refer to:
* Candid (app), a mobile app for anonymous discussions
* Candid (organization), providing information on US nonprofit companies
* Candid Records, a record label
* Ilyushin Il-76, NATO reporting name ''Candid'', a Soviet aircraf ...
Searchable databases of charities with scores, information and/or analysis
* Animal Charity Evaluators
Animal Charity Evaluators (ACE), formerly known as Effective Animal Activism (EAA), is a US-based charity evaluator and effective altruism-focused nonprofit founded in 2012. ACE evaluates animal charities and compares the effectiveness of their ...
* BBB Wise Giving Alliance
The BBB Wise Giving Alliance (WGA) is an American charity monitoring organization. Under previous names, it has been reporting on nationally-soliciting charities since the 1920s. BBB's Give.org evaluates charities, at no charge, using the 20 BBB St ...
* Candid
Candid may refer to:
* Candid (app), a mobile app for anonymous discussions
* Candid (organization), providing information on US nonprofit companies
* Candid Records, a record label
* Ilyushin Il-76, NATO reporting name ''Candid'', a Soviet aircraf ...
* Charity Intelligence Canada
Charity Intelligence Canada (Ci) is a registered charity that does charity assessments of over 750 Canadian charitable organizations, to allow donors be informed when they donate to charities, and to promote transparency, accountability, and re ...
* Charity Navigator
Charity Navigator is a charity assessment organization that evaluates hundreds of thousands of charitable organizations based in the United States, operating as a free 501(c)(3) organization. It provides insights into a nonprofit’s financial s ...
* CharityWatch
CharityWatch, formerly known as the American Institute of Philanthropy (AIP), is a 501(c)(3) nonprofit organization in Chicago, created in the United States by Daniel Borochoff in 1992, to provide information about charities' financial efficiency ...
, formerly known as the American Institute of Philanthropy
* GiveWell
GiveWell is an American non-profit charity assessment and effective altruism-focused organization. GiveWell focuses primarily on the cost-effectiveness of the organizations that it evaluates, rather than traditional metrics such as the percent ...
* GreatNonprofits GreatNonprofits is a 501(c)(3) registered non-profit organization based in the United States with a website where donors, volunteers, and clients to review and share their personal experiences with charitable organizations, essentially providing cro ...
* ImpactMatters
ImpactMatters was an American charity assessment organization that evaluates the impact of charitable organizations.
History
ImpactMatters was founded in 2015 by Dean Karlan and Elijah Goldberg at Yale University and launched its charity assess ...
* Ministry Watch
Ministry Watch is an independent American evangelical
Evangelicalism (), also called evangelical Christianity or evangelical Protestantism, is a worldwide interdenominational movement within Protestant Christianity that affirms the cent ...
See also
* Ethics of philanthropy Philanthropy poses a number of ethical issues:
* How donors should choose beneficiaries and ensure that their donations are effective.
* Acceptable marketing practices for grant seekers.
* A recipient may violate the donor's intent in spirit or i ...
References
External links
WikiCharities
growing global database for the nonprofit sector.
UK Charity Commission
Nonprofit search (Propublica)
US Internal Revenue Service lookup for nonprofits
{{Effective altruism
Charity in the United Kingdom
Charity in the United States
Charity review websites