Donating To Charities? Check Their Ratings

by Quentin Wodon

The November-December period that starts tomorrow is the most crucial time of the year for charities. This is the time for appeals to donors – before the holiday break. For Rotary, November is Foundation month because clubs appeal to their members to support The Rotary Foundation of Rotary International which helps fund international Rotary projects as well as polio eradication.

We often give to charities we know personally. And we often give on the basis of events or stories that move us (some of those stories are reported on this blog). As Mother Theresa once said, “it’s not how much we give but how much love we put into giving.” But giving with love does not imply giving blindly. Americans gave $335 billion to charity in 2013 according to Giving USA – that’s more than $1,000 per person. Whether you are a Rotarian or not, it is good practice to check the rating of the charities you are considering donating to. This is very easy to do with tools available on the web.

In the United States, a widely used rating website is Charity Navigator. This organization provides three ratings for charities – a rating for financial performance, a rating for accountability and transparency, and an overall rating that is (a non-linear) function of the first two. Charities can get one to four stars depending on their combined performance on the two ratings.

This is visualized below for the Rotary Foundation of Rotary International which is located in the upper right quadrant with four stars, the highest possible rating. The yellow dot shows exactly where the foundation is located – it is doing great, but slightly less well on financial performance (rating of 89.76 out of a maximum of 100) than on accountability and transparency (rating of 97.00).

RI Foundation Graph

For financial performance, Charity Navigator considers seven main indicators: the share of the charity’s budget spent on programs and services, the share spent on administrative expenses, the share spent on fundraising expenses, the fundraising efficiency ratio, the primary revenue growth, the program expenses growth, and the working capital ratio. Details on each are available on the Charity Navigator website. For accountability and transparency, a total of 17 indicators are used. The Rotary Foundation could have scored even higher except for the fact that its donor privacy policy requires donors to opt out for their basic information not to be (potentially) shared with other charities.

Apart from Charity Navigator, different types of information on US charities are also available on a number of other websites including CharityWatchBBB Wise Giving Alliance (BBB stands for the Better Business Bureau), GuideStar, and the Foundation Center. For those requiring more information, several of these websites provide easy access to the Form 990 that US charities have to file with the Internal Revenue Service. In other countries as well, information is often available on national websites about the charities of a particular country.

Checking the rating of charities is now easy to do, just a click away. Not all charities are rated, but many of the larger ones are. While those ratings should not be the only factor in the decision to give, they can be one of the factors. For Rotarians, the good news is that the Rotary Foundation of Rotary International not only does good work on the ground, but is also well rated.

 

 

 

 

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