Nonprofit Chronicles

Journalism about nonprofit organizations and their impact

All+Three+Levels+of+ConcernIf, like me, you want to donate to the very best nonprofits–those that do the most good, at the lowest cost–Charity Navigator, the US’s most popular source of charity ratings, offers little help. Charity Navigator gives four stars, its top score, to 2,889 of the 7,971 charities that it evaluates. Nearly 4,000 more charities are awarded three stars. Like the children of Lake Wobegon, most charities in the world of Charity Navigator are above average.

But not all of them. Some 371 charities carry what are called CN Advisories, which are Charity Navigator’s efforts to protect donors from charity scams and alleged misconduct. Last week, Charity Navigator unveiled a new version of its advisory system that includes color-coded alerts that classify the level of concern about charities as low, moderate or high. They replaced a system with a confusing mix of advisories and a “watchlist.”

Charities and donors “wanted more clarity around the system,” says Katie Rusnock, who led the revamp for Charity Navigator. The new advisory system is designed to be “as objective as possible”  as well as “easily accessible and timely and relevant,” she told me, while giving nonprofits the opportunity to reply to allegations lodged against them and to get advisories removed by taking corrective action. The Charity Navigator website was visited more than seven million times last year.

The new advisory system brings Charity Navigator a bit closer to fulfilling its bold and important missionto guide intelligent giving [and thus] advance a more efficient and responsive philanthropic marketplace. But, like the rest of the site, the advisory system is of limited use.

To be sure, Charity Navigator’s advisories help steer donors away from nonprofits that are fraudulent, or face serious questions about their operations or transparency. That’s all to the good.

Most charities are tagged with advisories are small, local and little-known. But some well-known nonprofits also get called out for bad behavior. The Cancer Fund of America, for example, has been given with a red advisory (high concern) since May 2015, after the FTC charged the charity and several related funds with bilking donors out of $187 million. The Central Asia Institute got an advisory after its founder, Greg Mortenson, was exposed by author Jon Krakauer on 60 Minutes as a liar and a fraud. The New York City branch of Habitat for Humanity was given a yellow advisory (low concern) in April after a story by Pro Publica found that low-income people in Brooklyn were pushed out of their apartments to make way for a Habitat project.

Of course, a Google search would have turned up all that information, and more.

See the problem? Charity Navigator’s advisories aren’t the result of independent research. They are typically triggered by media reports or the failure of charities to register with the IRS. So they amplify concerns raised elsewhere, but they ordinarily don’t appear until after a nonprofit has run into trouble.

As Charity Navigator explains:

The Charity Navigator Advisory Issuance Committee (which runs the program) does not have the capability to independently assess the accuracy of the information, nor does it attempt to do so. The committee views its role solely to determine whether a donor might find such information helpful when considering whether to make a contribution to the organization.

Charity Navigator makes no representation nor takes any position about the accuracy or completeness of the reports referred to in the CN Advisory or information in the external links to which donors are directed.

A bigger problem is that the advisories don’t take into account questions of impact or effectiveness. A charity can maintain a three- or four-star rating so long as it meets Charity Navigator’s standards for financial health, efficiency, transparency and accountability. Results aren’t taken into account.

This isn’t the fault of the people at Charity Navigator, which operates on a limited budget. It has less than $2 million a year to spend, which is not nearly enough to do in-depth research into 8,000 nonprofits. It’s mostly collecting and analyzing IRS Form-990s.

Michael Thatcher, a former Microsoft executive who has been CEO of Charity Navigator for a little more than a year, understands all this. Thatcher and his predecessor, Ken Berger, have tried to come up with a way to evaluate nonprofits’ reporting of results–if not the results themselves–but doing so in a way that is useful and responsible is likely to be expensive and time-consuming task.

In the meantime, Thatcher has made incremental improvements to Charity Navigator. This new advisory system is an example, as is an updated methodology for measuring the financial health of nonprofits that was introduced last spring. Perhaps most important, Charity Navigator just hired a new chief development officer who starts this month. The organization’s website badly needs an overhaul.

But there’s so much more important work for Charity Navigator to do. Here’s hoping that Thatcher and his colleagues can raise the money to do it.

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