“I Asked a Simple Question Online” wrote Tom Ahern earlier this week.

Here’s the question the master donor communicator asked: .

“Which charity is doing the most for Syrian refugees?”

The answers were anything but simple.

Here’s what he found out and he’s given The Agitator permission to reprint the whole sorry story verbatim from his original post.

Revealed? Is there a fatal flaw in old-style charity rating systems? Are these systems one good reason giving to “the world’s greatest refugee crisis since WW2” remains underwhelming?

Are “dumb as nails” rating systems undermining trust in the high-performance charity sector?

Charity Navigator counted the “Syrian Crisis” among its Hot Topics in January 2017.

And in an accompanying sidebar it eagerly advised the philanthropically-inclined, with a special list of 22 vetted charities active and doing good in the Syrian crisis.

The list struck me as odd right away.

I happened to know that USA for UNHCR is a heavy player in the Syrian refugee crisis. Yet USA for UNHCR was not on this list of worthy charities.

Why in the world not?

———

Because it flunked some simple-minded math.

The list was highly exclusive: it included just those charities rated either 3-star or 4-star by Charity Navigator.

  • For the last two years, USA for UNHCR has been rated a “mere” 2-star charity, thanks to its below-80 “overall” Charity Navigator score.
  • USA for UNHCR wins plaudits for its TOP “100 out of 100” score, for “accountability and transparency.”
  • But a heavily-weighted “financial” (read: fundraising) score of 70.14 out of 100 drags USA for UNHCR’s overall rating down into 2-star territory.

That financial score includes a damning “fundraising efficiency” rating of 24 cents to raise $1. If you’re spending 24 cents to raise $1, then you’re not particularly efficient, in Charity Navigator’s view.

It has always liked parsimonious, Puritanical (to channel Dan Pallotta) “efficiency” ratings, sticking to its 2001 founding guns. We all recall the 20% ceiling rule beloved of fierce community watchdogs like the Better Business Bureau, right?

——

What’s undervalued in this “law and order” (certainly not marketing) formula is >>>>

… when USA for UNHCR last had a 4-star rating (2007), it raised about $6.5 million, spending $5.6 million of that on its program work in the field.

… whereas in 2017, USA for UNHCR, with its down-graded 2-star rating, raised more than $47 million — spending over $31 million of that in the field, which represents a smashing 550% increase in impact over one very troubled decade.

Surely, in an age when algorithms refine, define and mine our lives, there has to be a more sophisticated way to judge whether an investment in fundraising — one which has led to more mission year after year — is worthy of a decent rating.

Is a rating system that cannot accurately factor in results … just about where the science of medicine was … when blood-letting was best practice and sworn by?

——

In 2016, Charity Navigator tweaked its ratings system, after years of criticism. It was big news in the fundraising world.

In truth, though, not much changed. The old system — the one that rewards charities spending zero on overhead while stigmatizing those that invest in their fundraising — lumbers on, with some minor accounting adjustments.

Most important — for validity’s sake — like the old system, Charity Navigator’s new one continues to be utterly incapable of evaluating impact in the field, as it readily admits.

While Charity Navigator claims it is “Your guide to intelligent giving,” it really is more “Your guide to giving … assuming you’re content to base your decisions on shallow and unsophisticated measures that account for nothing worthwhile in the real world.”

Tweaks done, Michael Thatcher, CEO and president, dismissed further complaints. As he told the New York Times in May, 2016, “There’s always going to be someone who’s unhappy.”

——

Me. I’m unhappy.

We’re measuring the wrong thing. We’re measuring a shadow, not substance.

This is “numb nuts” proudly masquerading as “intelligent.” This is a clumsy bull in the charity reputation china shop.

And it’s hurting very good charities that have significantly INCREASED their impact in the field, as USA for UNHCR has.

Directly as a result of USA for UNHCR’s well-placed and -rewarded investment in growth, Charity Navigator downgraded the charity’s overall rating to 2 stars … which in turn meant one of the region’s most effective NGO’s no longer qualified for Charity Navigator’s list of recommended charities active in the Syrian refugee crisis.

You call that a “guide to intelligent giving”?

I’d call it dereliction of stated duty.

——

It raised a question: Would Charity Navigator — originally classed as a private foundation and now holding 501(c)(3) status — pass its own tests and earn a 4-star rating?

It has no rating currently.

It has a policy of only rating those “nonprofits that have filed at least 7 years of the full Form 990 with the IRS. Charity Navigator has yet to file 7 years of full Form 990s with the IRS due to the fact that prior to being a 501(c)(3) public charity it functioned as a Private Foundation.”

Still, there is data.

In its audited financials for the year ended Nov. 30, 2015, Charity Navigator reports $48,100 contributed by individuals other than founders and board members (there are 14 of those), while listing a “development and fundraising” expense of $303,016.

I’m sure I’m drawing the wrong conclusion.

Tom Ahern

A Postscript from Roger: 

The Agitator has a long history of disappointment and even derision concerning Charity Navigator (CN). Four years ago in our post When Sharks Become Vegans, we reported that the organization along with the Better Business Bureau and Guidestar had done an about face and would henceforth advise donors not to place too much attention on overhead costs when evaluating a nonprofit.

Two years later CN’s idiocy was back in our sights on a policy change that would penalize organizations who didn’t provide donors an opportunity to ‘opt-in’ on list exchanges. And then again on an inane pronouncement by CN’s CFO on nonprofit CEO compensation.

It’s important to understand the back story on Charity Navigator. It was founded and funded by two very well-meaning and concerned donors to Hale House who were appalled when it was discovered the CEO was taking donor funds out of the mouth of hungry, deprived kids to build a personal art collection and remodel her own home.

Of course, they were deservedly upset and they took action. For that I applaud them. However, the action they took has resulted in a watchdog organization that is both blind and ignorant when it comes giving donors a real insight into charities.

Why? Because the organization mostly looks at all the wrong indicia of a successful charity.  Idiotic metrics like ‘cost of fundraising’ … ‘overhead’… ‘CEO compensation. [It’s always good to have Dan Pallotta’s TED talk at hand for these sorts of indicia — The way we think about charity is dead wrong — that by now has  been viewed by millions. Dan effectively demolishes the overhead-is-more-important-than-results arguments and has put the charity watchdogs like CN on the defensive.]

Somewhere along the line someone at CN somehow figured there must be a cause and effect between high fundraising costs and corruption. Between high overhead and corruption. Between high CEO salaries and corruption. Indeed sometimes that is the case, but most of the time it absolutely is not.

Sadly, as Tom Ahern has so ably pointed out, the use of incorrect metrics and assuming them to equal cause and effect harms the innocent far more than it exposes the guilty.

And leads donors to draw the wrong conclusions over and over again.

So in a bit of back and forth Tom noted that the way Charity Navigator focuses on the wrong sort of charity makes about as much sense as blaming the cause of World War I on the assassination of Archduke Ferdinand.

So, please Charity Navigator, come to your senses. Get on top of nonprofit fundraising cause and effect. Then issue a new headline: ARCHDUKE FERDINAND FOUND ALIVE. WORLD WAR I A MISTAKE

Roger

 

 

 

This article was posted in: Board Meeting Swipe File, Communications, Fundraising analytics / data, Fundraising philosophy/profession.
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