Catalyst, Leadership, Philanthropy, Resources

Grading Charities

MoneySense magazine recently published The Charity 100, a series of ratings of Canadian charities based on several factors with the intent “to be a tool for potential donors researching which charities to give money to”. In the nonprofit world this is the kind of thing that fires up the blogosphere and even earns a twitter hashtag. A lot of the commentary is valid critique. These kinds of articles are fundamentally flawed due to the near impossibility of finding consistent comparables and the dependance on responsive and accurate reporting from the charities themselves. (Mark Petersen offers a legitimate argument for why some charities made a mistake in not sharing their information freely). One of many difficulties of this type of article is that things like “administrative costs” that are trumpeted as critical evidence of charity performance are lacking useful industry standards and far too easy to manipulate to present a relevant depiction of what is really happening. Reading the comments below the original article reveals some of the weakness. In addition, there is a common misconception that high program costs and low fundraising and administrative costs equate with effective charity. This is a wild and inaccurate oversimplification. A significant part of my role at Catalyst is to provide analysis of the effectiveness of nonprofit organizations. Numbers out of context are not helpful to me. What is required is a much more thorough understanding of not only the financials but the programs delivered, all the people involved, and the philosophy and systems of the organization. Like anything else, good philanthropy is difficult. One of the most beneficial aspects of the recently announced Stronger Together 2010 granting was the process of both statistical and narrative discernment involved. Coupled with sharing of varying personal perspectives, the result was a higher degree of confidence that we were making informed decisions. Just as the MoneySense effort is acknowledged as imperfect, much of the criticism is equally incomplete. MoneySense makes no claim of absolute authority in the article and repeatedly self-identifies the limitations of the process. Careful reading of the entire material provides a lot of helpful perspective. Kudos to MoneySense and Sarah Efron for pulling back the curtain on some aspects of what is happening in the Canadian nonprofit field. May it be treated as another useful (not right or wrong) tool and spur us to increasingly high standards of transparency and performance. A final thought: the greatest value I see in this matter is that it may cause many donors of all sizes to become more aware of what their gifts are actually supporting. Smart charity leaders will see this as an opportunity for deeper engagement and education with their funders, seeing it as an attack reveals a disappointing level of insecurity.