Is Charity Navigator legit? Yes, Charity Navigator is legit as a charity assessment organization. Note that this is not a charity organization, but rather an organization that evaluates hundreds of thousands of charitable organizations in the United States. If you make donations a lot, you would want to check if a charity has a “Four Star Charity” rating. Charity Navigator is the kind of place for this evaluation before you make a donation.
But, have we really thought about what it means for a charity to have a “Four Star” rating? Are the methodology they evaluate and arrive at these ratings really the best way to judge a charity? This is the main concern. Charity Navigator is legit but their rating systems can sometimes be misleading. We need to understand how these ratings work. Let’s talk about some of the ways these charities are evaluated and why these methods might not be the best way to determine legit charity organizations.
How Does Charity Navigator Rate Charities?
Charity Navigator is a guide for people who want to give money to charities. It rates charities on how good they are, with a scale from 0 stars (negative) to 4 stars (really good). To figure out these ratings, Charity Navigator looks at several things. They check if the charity is approved by the IRS and how it handles its money, such as the following:
- How much it spends on running the charity;
- How much it uses for the actual cause, and
- How efficiently it raises and uses money.
- They also determine how long the charity has been working and where it’s located.
Charity Navigator breaks down their rating into two main parts, including “Financial Health” and “Accountability & Transparency.”
Financial Health is about how the charity manages and reports its money, using details they provide in their tax returns. They use seven specific measures to understand a charity’s financial health, like what percentage of money goes directly to the cause, how much they spend on management, and how they grow their funds.
So, when you first look at it, Charity Navigator seems to show which organizations are good at using their money for their causes. But it’s not always straightforward. Just because a charity has a good rating doesn’t always mean it is the best choice. It’s one way to understand more about a charity, but it’s not the only thing to consider before making donations.
Is Charity Navigator Legit?
Yes, Charity Navigator is legit, in fact, 100% legit, but you should not make it your primary benchmark when considering a charity to donate to. Usually, you want to consider the methodology and focus of a charity evaluator such as Charity Navigator.
On their homepage, Charity Navigator says the following:
According to them, they use data from the IRS, partners, and charities themselves to evaluate a charity organization. One question you might ask is, “What if the evaluated charity’s claim is untrue, wouldn’t Charity Navigator unknowingly stick to it?”
Take, for example, GiveWell and Giving What We Can, which prioritize charities that deliver the most impact per donated dollar. This approach contrasts with that of Charity Navigator, which doesn’t emphasize this aspect as much. For a more concrete understanding, consider the different approaches to addressing blindness. Training a seeing-eye dog can cost about $40,000 and benefits one individual. In contrast, curing glaucoma—a condition leading to blindness if untreated—in the developing world might cost only $20-50 per person.
If you were to compare charities based on these two strategies, the one focusing on glaucoma treatments in the developing world would arguably provide more impact per dollar. This difference in approach highlights the limitations of Charity Navigator’s rating system. So, their system does not adequately reflect a charity in terms of its impact per dollar spent.
Charity Navigator’s Fundraising Expense Ratings
Charity Navigator has a system where they give scores to charities based on how much they spend on fundraising. For most charities, if they spend more than 25% of their budget on fundraising, they get the lowest score, which is 0 out of 10. This is especially true for general charities and those that give grants. To get the best score, a 10 out of 10, a charity should only spend between 0% and 10% of their money on fundraising.
But there are some exceptions. For example, organizations that work in public broadcasting and media are allowed to spend up to 35% of their revenue on fundraising and still avoid getting a 0 score. This is because they often use expensive TV or radio time to raise money, which costs more.
Then there are food banks, food pantries, and organizations that provide humanitarian relief supplies. These groups get a 0 score if they spend more than 20% of their revenue on fundraising.
Charity Navigator thinks they shouldn’t need to spend much on overhead costs. They say this because, on average, these types of charities usually spend less than others on fundraising.
Charity Navigator bases its standards on what charities currently spend. This means if a type of charity, like food banks, typically spends less on fundraising, then the expectation is set that they should continue to spend less. This kind of reasoning is a bit controversial and can be seen as an example of the “is-ought fallacy,” a concept from philosophy. This fallacy occurs when you assume that just because something is a certain way, it should always be that way.
Charity Navigator Makes Fundraising Look Evil
The main issue with these calculations is that they wrongly think spending money on fundraising isn’t a good use of funds. But no one really explains why that would be true.
Yes, it’s correct that if you spend money on fundraising, it’s not going directly to activities like feeding people at food banks or spreading your message. However, spending on fundraising is important because it helps to bring in even more money. And having more money means you can do more good things.
Spending more on fundraising isn’t just throwing money away; it’s actually a smart move to help you achieve your goals better. Whether your goal is to save more lives, feed more people, or educate more children, you need money for that. This growth or “more money” requires more fundraising and, thus, more expenses for fundraising.
It’s important to clarify that the real issue isn’t the different levels used by Charity Navigator to rate organizations, or how these levels vary among different types of organizations. The real question is whether an organization is reaching its goals year after year. An organization isn’t effective just because it spends a little or a lot on fundraising.
Just looking at percentages in a budget doesn’t give you the full picture. To really understand if an organization is doing well, you need to get to know the leaders, read their messages, observe their growth, and ask them questions. That’s how you can tell if they’re truly making a difference.
Bigger Isn’t Always Better in Charitable Growth
Charity Navigator says that charities that keep growing their program expenses every year are doing well. They beat inflation and can keep their programs going. Also, people trust these charities more because they have a lot of public support. This idea sounds straightforward, right? If a charity’s mission is important, it should keep growing.
But let’s think about a specific example. Imagine a charity that runs a year-long program for a small group of recent college grads. This program focuses a lot on intense study and building a strong community among the participants. For a program like this, getting bigger and bigger might not be the best idea. If the whole point is to have a close-knit community, adding too many students could ruin that. Once they have enough students, pouring in more money doesn’t really help much. They can only use a certain amount of money each year. They could save extra money, but is that really what effective charities do? Shouldn’t they be spending it on their programs?
So, there’s a point where it’s actually better for them not to keep growing. Of course, they need enough money to keep up with rising costs, but they don’t have to expand just for the sake of it. Growing just because isn’t a sign of a good charity. Growing to better fulfill their mission is what matters.
My issue isn’t with how Charity Navigator measures things, but with the idea that bigger is always better. Charity Navigator tends to favor charities that keep expanding and doesn’t look kindly on smaller charities that have a clear plan to stay a certain size for good reasons.
Best Way to Tell if a Nonprofit is Reputable on Your Own
However, when we talk about giving to charities, it’s not just about numbers and how much money is spent. It’s really about supporting causes that matter to you. Charity Navigator can’t really tell you if a charity is doing a good job with the things you care about. Sometimes, these ratings might even be unfair to the charities that you really like.
Examine IRS Form 990
This form, available on the IRS website, lists key employees’ salaries. Bear in mind that the data might be a few years old due to IRS processing times.
When assessing salaries, compare them to those in similar-sized private sector organizations. Be cautious, though, as tools like Charity Navigator and Guidestar mainly assess based on this form, which doesn’t fully capture an organization’s impact.
Assess Their Impact and Financial Practices
Look at their achievements in relation to their goals. This information should be on their website or in their annual reports. If not, request it.
Consider visiting the organization and asking questions directly. Inquire about their fundraising efficiency, like the cost to raise $1, and the return on investment of their development department. Remember, high salaries alone don’t indicate low effectiveness, as operational costs vary and fundraising has its own expenses.
Evaluate Employee Compensation
Nonprofit employees deserve fair, competitive wages. Organizations that underpay, barring new startups, might be concerning. Adequate compensation leads to longer employee tenure and potentially greater impact. However, excessive pay is a warning sign.
Request Financial Reports
Contact the nonprofit and express your interest in donating. Ask for detailed financial reports such as the Statement of Activity, Cash Flow, and Statement of Financial Position. Some organizations, like small to medium animal rescues, often receive requests for financial information and are willing to provide them promptly, sometimes accompanied by explanatory narratives.
Charity Navigator is 100% legit. However, until there’s a big change in how charities are rated, you should donate to the organizations that you are familiar with, trust, and have a strong liking for. This way, you know your support is going to the right place.
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