Nancy Lawton, a retired federal government auditor who lives in Bradenton, Fla., has a system for deciding which charities get her money.
Big national charities? Forget it. They spend “hundreds of thousands of dollars” on salaries and “so much money on fundraising,” she says. She likes local nonprofits that work on her favorite causes, including animal rights and help for older people.
But before deciding whether to give, she seeks a critical piece of information: the group’s rating from Charity Navigator, the watchdog that awards charities from zero to four stars based on their finances and governance policies. If it got four stars, it’s in.
Reducing Donations
Last year Ms. Lawton donated about $3,800 to groups including Meals on Wheels Plus of Manatee, Big Cat Rescue, and the Sea Turtle Conservancy — all Florida charities that got four stars. She also gave to Charity Navigator.
She has been consulting Charity Navigator since 2008, when she learned about the group through friends. Ms. Lawton sends cover letters with her donations telling charities why she selected them, mentioning their Charity Navigator ratings.
“It’s not just the number of stars,” she says. “I actually go in and read what the program is about.” Once when a favorite charity fell to three stars, she noted the demotion in her letter and added: “I’m still going to give you something but not as much as last year.”
Ms. Lawton says she looks at how charities are spending their money, especially how much goes to administrative expenses, something that Charity Navigator measures. “If they have less than 10 percent, that’s pretty good,” she says, “but less than 6 percent is even better.”
She is not sympathetic to the argument that groups might need to invest more in overhead so they can operate more effectively.
“Oh, boohoohoo,” she says, noting that when she audited federal grants, she witnessed “cascading administrative costs” as the recipients reallocated money to others. “I’ve heard that before. I don’t buy it.”
And don’t ask her to pay for a charity’s fundraising expenses: “I know they need donations to do that, but that’s not important to me.”
Widespread Concern
Critics of Charity Navigator’s ratings system, especially the weight it gives to low overhead costs, are probably shuddering right now. But Ms. Lawton’s concerns about charity finances, including salaries, fundraising, and administrative costs, are widely shared among people who give.
A 2010 study conducted by Hope Consulting and GuideStar found that when individual donors were asked what details about charities were important to them, the biggest share, 74 percent, gave high marks to “financials” (compared with 71 percent for “effectiveness”). The study, Money for Good II, which surveyed over 5,000 donors with household incomes greater than $50,000, also found that those who gave the most priority to finances named “percentage spent on overhead” as their top concern.
But like many other donors, Ms. Lawton sometimes gives for personal reasons — for example, to the Muscarelle Museum of Art at the College of William and Mary.
“My friend Barbara is a docent there,” she explains.