Charity assessment is the process of analysis of the ''goodness'' of a non-profit organization in financial terms. Historically, charity evaluators have focused on the question of how much of contributed funds are used for the purpose(s) claimed by the charity, while more recently some evaluators have placed an emphasis on the cost effectiveness (or impact) of charities.
Charity watchdogs
A charity watchdog is a type of
nonprofit organization
A nonprofit organization (NPO), also known as a nonbusiness entity, nonprofit institution, not-for-profit organization, or simply a nonprofit, is a non-governmental (private) legal entity organized and operated for a collective, public, or so ...
that provides ratings of charitable groups based on how an individual charity's money is spent, how it governs itself, and how the charity protects its
donor
A donor in general is a person, organization or government which donates something voluntarily. The term is usually used to represent a form of pure altruism, but is sometimes used when the payment for a service is recognized by all parties as re ...
s'
privacy
Privacy (, ) is the ability of an individual or group to seclude themselves or information about themselves, and thereby express themselves selectively.
The domain of privacy partially overlaps with security, which can include the concepts of a ...
, among other criteria."Understanding Charity Ratings". ''Consumer Reports''. Retrieved November 2015. Charity evaluation from these organizations has typically focused on measuring administrative and fundraising costs, salaries, and assessing how large of a proportion of a charity's budget is directly spent on impactful activities.
In 2000, Ministry Watch, an
evangelical
Evangelicalism (), also called evangelical Christianity or evangelical Protestantism, is a worldwide, interdenominational movement within Protestantism, Protestant Christianity that emphasizes evangelism, or the preaching and spreading of th ...
Christian
A Christian () is a person who follows or adheres to Christianity, a Monotheism, monotheistic Abrahamic religion based on the life and teachings of Jesus in Christianity, Jesus Christ. Christians form the largest religious community in the wo ...
organization that reviews Protestant ministries for financial accountability and transparency, was founded.
Charity Navigator
Charity Navigator is a charity assessment organization that evaluates more than 230,000 charitable organizations based in the United States, operating as a 501(c)(3) organization. It provides insights into a nonprofit's financial stability, adh ...
was launched in 2001 by John P. Dugan, a wealthy pharmaceutical executive and philanthropist. Initially, Charity Navigator provided financial ratings for 1,100 charities, and has data on 8,000 as of mid-2016.Ann Carrns Charity Navigator Tweaks Its Rating System ''New York Times''. 27 May 2016.
The ''
Toronto Star
The ''Toronto Star'' is a Canadian English-language broadsheet daily newspaper. It is owned by Toronto Star Newspapers Limited, a subsidiary of Torstar Corporation and part of Torstar's Daily News Brands (Torstar), Daily News Brands division.
...
'' has reported on some of the difficulties and revelations of auditing charities in Canada as described by
Charity Intelligence Canada
Charity Intelligence Canada is a Toronto-based nonprofit organization which posts assessments of the finances and impacts of Canadian charities on its website. Founded in 2007 by former equity analyst Kate Bahen, using unconventional methodolo ...
(Ci). The authors call it "concerning", for example, that one in five of "Canada's top 100 charities" refused to release their full audited financial statements to Ci. Moreover, one-quarter of the "top 100 charities" hold at least three years' worth of funding (that is, they have three times their annual budget in savings) and some store as much as eight years' worth. Of the "top 100 charities", 14% exceed the guidelines set by the
Canada Revenue Agency
The Canada Revenue Agency (CRA; ; ) is the revenue service of the Government of Canada, Canadian federal government, and most Provinces and territories of Canada, provincial and territorial governments. The CRA collects Taxation in Canada, taxes, ...
United Kingdom government
His Majesty's Government, abbreviated to HM Government or otherwise UK Government, is the central executive authority of the United Kingdom of Great Britain and Northern Ireland.
announced the creation of a new government-run watchdog to regulate large charities.
Evaluation
Impact-based evaluation
In 2006,
hedge fund
A hedge fund is a Pooling (resource management), pooled investment fund that holds Market liquidity, liquid assets and that makes use of complex trader (finance), trading and risk management techniques to aim to improve investment performance and ...
employees
Holden Karnofsky
Holden Karnofsky is an American nonprofit executive. Karnofsky co-founded the charity evaluator GiveWell with Elie Hassenfeld in 2007. He co-founded the grantmaking organization Open Philanthropy (organization), Open Philanthropy in 2014, and was ...
and Elie Hassenfeld formed an informal group with colleagues to evaluate charities based on data and
performance metric
A performance indicator or key performance indicator (KPI) is a type of performance measurement. KPIs evaluate the success of an organization or of a particular activity (such as projects, programs, products and other initiatives) in which it e ...
s similar to those they used at the fund. The group was surprised to find the data often did not exist. The next year, Karnofsky and Hassenfeld formed
GiveWell
GiveWell is an American non-profit charity assessment and effective altruism-focused organization. GiveWell focuses primarily on the cost-effectiveness of the organizations that it evaluates, rather than traditional metrics such as the percenta ...
as a nonprofit to provide
financial analyst
A financial analyst is a professional undertaking financial analysis for external or internal clients as a core feature of the job.
They eventually decided to rate charities based on the metric of how much money it cost to save a life.Patricia Illingworth, Thomas Pogge, Leif Wenar. ''Giving Well: The Ethics of Philanthropy'', Oxford University Press US, 2011 p. 124 /ref>
GiveWell has focused primarily on the
cost-effectiveness
Cost-effectiveness analysis (CEA) is a form of economic analysis that compares the relative costs and outcomes (effects) of different courses of action. Cost-effectiveness analysis is distinct from cost–benefit analysis, which assigns a moneta ...
of the organizations that it evaluates, rather than traditional metrics such as the percentage of the organization's budget that is spent on overhead. In the first year, Karnofsky and Hassenfeld advocated that charities should generally spend more money on overhead, so that they could pay for staff and record keeping to track how effective their efforts were. This ran counter to standard ways of evaluating charities based on the ratio of overhead to funds deployed for the charity work itself.
Giving What We Can
Giving What We Can (GWWC) is an effective altruism nonprofit that promotes effective giving through education, outreach, and advocacy around the 10% Pledge, which encourages members to donate at least 10% of their income to effective charities. ...
(GWWC), founded in 2009 by Toby Ord, also differed from other charity evaluators in terms of the importance given to metrics of charity performance, solely focusing on the cost-effectiveness of the charity's work. It has argued that the variance in cost-effectiveness of charities arises largely due to the variance in the nature of the causes that the charities operate in, and therefore has made evaluations across broad areas of work such as health, education, and emergency aid before comparing specific organizations. In practice, it recommends a selected few charities in the area of
global health
Global health is the health of populations in a worldwide context; it has been defined as "the area of study, research, and practice that places a priority on improving health and achieving equity in health for all people worldwide". Problems th ...
. Its work is similar to that of GiveWell. GWWC no longer evaluates charities but, like the National Philanthropic Trust, it accepts philanthropic members and helps them to donate to charities.
Charity Navigator
Charity Navigator is a charity assessment organization that evaluates more than 230,000 charitable organizations based in the United States, operating as a 501(c)(3) organization. It provides insights into a nonprofit's financial stability, adh ...
's former CEO Ken Berger and consultant Robert M. Penna harshly criticized the idea of discriminating among cause areas for being moralistic and elitist "by weighing causes and beneficiaries against one another". Philosopher and
effective altruism
Effective altruism (EA) is a 21st-century philosophical and social movement that advocates impartially calculating benefits and prioritizing causes to provide the greatest good. It is motivated by "using evidence and reason to figure out how to b ...
advocate William MacAskill defended the concept by comparing the choice to donate to an art gallery with the choice of saving a painting rather than saving people from a burning building.
In 2013 and 2014,
GuideStar
Candid is an information service specializing in reporting on U.S. nonprofit companies. In 2016, its database provided information on 2.5 million organizations. It is the product of the February 2019 merger of GuideStar with Foundation Center.
...
,
BBB Wise Giving Alliance
The BBB Wise Giving Alliance (WGA) is an American charity monitoring organization. Under previous names, it has been reporting on nationally soliciting charities since the 1920s. BBB's Give.org evaluates charities, at no charge, using the 20 BBB S ...
, and Charity Navigator wrote open letters urging nonprofits and donors to end the use of the overhead ratio as the sole or main indicator of a nonprofit's performance. Charity Navigator has also been working to expand its criteria to include results reporting. See Charity Navigator § Evaluation method.
Outcomes
In the United Kingdom, Charities Evaluation Services (CES), itself a charity, was established in 1990 to support the improved effectiveness of the
voluntary sector
In relation to public services, the voluntary sector is the realm of social activity undertaken by non-governmental, not for profit organizations. This sector is also called the third sector (in contrast to the public sector and the private sec ...
. The services merged with the
National Council for Voluntary Organisations
The National Council for Voluntary Organisations (NCVO) is the umbrella body for the voluntary and community sector in England. It is a registered charity (no. 225922). It works to support the voluntary and community sector and to create an en ...
in 2014. CES had a history of supporting charities in identifying their aims and objectives and the outcomes they wanted to achieve, as well as mapping how successful they were at achieving those outcomes. The "National Outcomes Programme" was delivered and delivered by CES with funding from the
Big Lottery Fund
The National Lottery Community Fund, legally named the Big Lottery Fund, is a non-departmental public body responsible for distributing funds raised by the National Lottery for " good causes".
It is the largest community funder in the UK and ...
between 2003 and 2009, developing a network of "outcomes champions" and supporting around 1,500 voluntary and community organisations. The programme was independently evaluated in 2006 by the
Open University
The Open University (OU) is a Public university, public research university and the largest university in the United Kingdom by List of universities in the United Kingdom by enrolment, number of students. The majority of the OU's undergraduate ...
and in 2009 by Tribal Consulting. An "outcomes approach", focussing on the changes, benefits or other effects which happen as a result of an organisation's activities, was commended as an effective approach to performance measurement in the charity sector.Ellis, J. The case for an outcomes focus ''Charities Evaluation Services'', published September 2009, accessed 6 August 2023
Databases
Searchable databases of United States Internal Revenue Service Form 990
*
ProPublica
ProPublica (), legally Pro Publica, Inc., is a nonprofit investigative journalism organization based in New York City. ProPublica's investigations are conducted by its staff of full-time reporters, and the resulting stories are distributed to ne ...
BBB Wise Giving Alliance
The BBB Wise Giving Alliance (WGA) is an American charity monitoring organization. Under previous names, it has been reporting on nationally soliciting charities since the 1920s. BBB's Give.org evaluates charities, at no charge, using the 20 BBB S ...
Charity Intelligence Canada
Charity Intelligence Canada is a Toronto-based nonprofit organization which posts assessments of the finances and impacts of Canadian charities on its website. Founded in 2007 by former equity analyst Kate Bahen, using unconventional methodolo ...
*
Charity Navigator
Charity Navigator is a charity assessment organization that evaluates more than 230,000 charitable organizations based in the United States, operating as a 501(c)(3) organization. It provides insights into a nonprofit's financial stability, adh ...
*
CharityWatch
CharityWatch, known until 2012 as the American Institute of Philanthropy, is a 501(c)(3) nonprofit organization in Chicago, Illinois, created in the United States by Daniel Borochoff in 1992, to provide information about charities' financial effi ...
, formerly known as the American Institute of Philanthropy
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GiveWell
GiveWell is an American non-profit charity assessment and effective altruism-focused organization. GiveWell focuses primarily on the cost-effectiveness of the organizations that it evaluates, rather than traditional metrics such as the percenta ...