How to Understand Charity Ratings

While most of us expect each and every charity to be fully dedicated to philanthropic giving and common welfare, not all charities are created equal.

Charity assessment, the process by which a third party analyzes the efficacy of a given charity, is an effective tool to help consumers make informed decisions when it comes to giving. Assessments in the form of charity ratings offer set guidelines that rank the reliability of organizations to ensure that money is spent on the issues that matter most.

Two of the most popular evaluation tools are the BBB Wise Giving Alliance and Charity Navigator. Each of these tools promotes high standards of conduct among organizations that solicit contributions from the public.

BBB Wise Giving Alliance (“the alliance”) is affiliated with the Council of Better Business Bureaus. It produces reports about national charities, evaluating them on 20 standards in governance and oversight, effectiveness, finances, fund raising and informational materials. While the site does not rank charities, it assigns one of three standards to each charity: “standard is met,” “standard is not met,” or “unable to verify.”

According to John F. Wasik of the New York Times, approximately 40 percent of charities listed on BBB’s site meet all 20 benchmarks, earning a “BBB Accredited Charity” title and are eligible to pay a sliding-scale fee based on their size to obtain a BBB Charity Seal that can be used for fund-raising material and advertisements.

Wasik deems the alliance “a pragmatic way to view a charity’s operations” and suggests using Charity Navigator for customized searches and charity-specific ratings.

With the ability to log into the Charity Navigator site, visitors are able to ‘save’ their favorite charities and donate with a single click. Using objective rating systems and professional analysis of non-profit financial documents that portray financial health and accountability and transparency, Charity Navigator has assessed over 9,000 American charities.

Charity Navigator offers information on a given charity’s overall score and rating, mission, financial performance metrics, accountability and transparency metrics, income statement, financial charts, compensation of leaders, and charities performing similar types of work.

Case Study:

The International Fellowship of Christians and Jews (IFCJ) has a rating of “meets standards” with the BBB. Issued in January 2018, the website lists a website, address and phone number for the organization. Its stated purpose is to “to promote understanding and cooperation between Christians and Jews, build broad support for Israel, and replace our history of discord with a relationship marked by dialogue, respect and cooperation.”

The website lists Rabbi Yechiel Eckstein as the President, CEO and Founder with a compensation of $891,182 and Honorable Stockwell Day as the Chair of the Board, a legal Strategic Advisor.

Towards these ends, it is states on the website that programs include: helping Jews escape poverty and anti-Semitism; helping Jews to return to Israel; humanitarian assistance in Israel and around the world; aid to victims of war and terror; providing hot meals, medicine and clothing to children and elderly; aid to Israeli soldiers; and job training and resettlement help for Israeli immigrants.

The charity meets all standards of governance, including a board of directors of 11 people who meet at least three times a year with a majority in attendance, whose job is to provide oversight of the charity’s operations and staff. No more than one or 10% of the board (whichever is greater) is compensated, the treasurer and board’s chair are unpaid and board members have no conflicts of interest.

No less than every two years, the board meets to discuss the organization’s performance and effectiveness in achieving its mission. The board approves a written report on the charity’s effectiveness, including recommendations for future actions and an annual budget for its current fiscal year.

IFCJ spends at least 65% of its total expenses on program activities, spends less than 35% on fundraising, does not accumulate funds (less than three times the size of the past year’s expenses or current year’s budget) that could be used for current program activates, and has an available and accurate annual financial statement with a detailed functional breakdown of expenses.

Its materials are listed as truthful, with no misleading appeals. The organization provides an annual report including mission statement, summary of programs, roster of board of directors and financial information. Their recent IRS Form 990 is available on their website. The organizations gives donors an option for anonymity, discloses how they benefit from the sale of products and services and act on complaints brought to its attention by the BBB.

Charity Navigator gives IFCJ a rating of 81.45/100, with 2/4 stars for its financial data and 4/4 stars for its accountability and transparency.

Whichever rating or analysis site one uses to source information about a charity, taking a further look into a charitable organization empowers the philanthropist to ensure that his or her donation makes the largest impact possible.