December 01, 2009

Five Charity-Evaluation Groups Mount Effort to Educate Americans About Smarter Giving

Charity Navigator, poking holes in the value of overhead ratio? Actually, yes.

The watchdog group, which gives charities good scores for spending little on overhead in comparison to their program expenses, is one of five organizations trying to get Americans to pay less attention to administrative and fund-raising costs when they think about which groups to support. (See this press release from the five groups.)

Along with the nonprofit groups GuideStar, GiveWell, GreatNonprofits, and Philanthropedia, Charity Navigator is pressing bloggers and journalists to write this holiday season about why low overhead isn’t a good indicator of charity success.

They say the administration-to-program ratio tells donors nothing about the impact of a charity’s programs. A preoccupation with keeping down administrative costs also prevents charities from spending money on tools that would help them be more effective, the groups say.

Ken Berger, Charity Navigator’s president, writes on his blog today that he signed on to the effort because he agrees with its overall message, though he differs on the details.

“We think overhead does have a place in rating charities, yet agree it should not be primary or overly emphasized,” he says. “We do concur with the fundamental truth that the most critical dimension in evaluating a charity has to do with achieving meaningful results.”

Mr. Berger’s group is overhauling how it rates charities, with the goal of including accountability and “results” among its criteria.

GiveWell, GreatNonprofits, and Philanthropedia were each founded in the past few years by young people frustrated with how little information exists for identifying good charities — and weeding out bad ones. The organizations are working on new ways to evaluate charities. GreatNonprofits, for example, enables charity volunteers and supporters to write Zagat-style reviews of nonprofit groups, while Philanthropedia polls experts for their opinion on the top charities in various fields. All are supported by the William and Flora Hewlett Foundation.

The three groups were brought together for the media blitz by Timothy Ogden, editor in chief of Philanthropy Action, a journal for donors. The groups then asked GuideStar and Charity Navigator to join.

What do you think of the effort? Does it have a chance of influencing the way Americans vet charities?

To hear Mr. Berger discuss his new charity rating strategy, listen to his recent interview on the topic for the Chronicle‘s Philanthropy This Week podcast series.

Caroline Preston