All charities are not above average (unlike all the children at Lake Wobegon1). While many charities do strong work with the moneys entrusted to them, others lack focus or management and produce little impact.
To boost the impact of your giving, find and support excellent charities that work on the causes you care most about.
Who evaluates and monitors charities?
Private businesses and their activities, finances and impact are evaluated and monitored by customers and investors.
This is not the case with charities. Although most charities must register with the IRS and file annual information returns on Form 990, the IRS is not set up to evaluate or monitor charities.
A sampling of charity evaluation
CharityNavigator.org is the best-known charity evaluation website. It evaluates charities and assigns “star” ratings to 8,971 of them. The majority of the rated charities are larger, with more than $3.5 million in annual expenses.
8,971 is than 1% of the 1.7 million+ nonprofits listed by the IRS. Here’s how the CharityNavigator.org ratings stacked up2
- 41.6% (3,728) rated charities received 4-star ratings (Exceptional: Exceeds industry standards . . . ). So 41.6% of rated charities could be considered excellent under the CharityNavigator.org system.
- 44.4% (3,986) received 3-star ratings (Good: Exceeds or meets industry standards . . . ). And 44.4% of rated charities are considered to meet industry standards or exceed them. Meeting standards suggests diligence and competence, but not necessarily excellence.
- 14.0% (1,257) received 0, 1 or 2 star ratings (Exceptionally Poor, Poor and Needs Improvement, respectively). And 14.0% of rated charities are not meeting standards.
- CharityNavigator has also issued advisories indicating reported or confirmed misconduct at an additional 445 nonprofits not included in the above ratings.
Conclusion: charities vary greatly, they’re a “mixed bag” — the star ratings categories go from Exceptionally Poor to Exceptional. And then there’s another 445 nonprofits with advisories.
Doing our own evaluating and monitoring – it’s up to us
CharityNavigator.org says “The truth is that we’ve already evaluated the majority of the organizations that meet our criteria, but we do realize there are many worthy organizations that we do not currently evaluate.” We can’t expect CharityNavigator.org to step in and evaluate or monitor the other 99%+ of nonprofits — it’s up to us.
CharityNavigator.org urges us donors to do our own due diligence on the charities we seek to support, and look at the financial health of the organization, its accountability and transparency and its results. CharityNavigator.org provides a quick guide to help get us started.
It’s up to donors and volunteers to do the monitoring and evaluation, to find and support excellent charities doing solid work, and to avoid ineffective charities.
- See Garrison Keillor monologues about Lake Wobegon, “where all the women are strong, all the men are good-looking, and all the children are above average.”
- CharityNavigator.org data as of November 8, 2021.