What Is The Watchdog Watching?
At issue is Charity Navigator’s decision to challenge a longstanding accounting practice to count some of the money nonprofits spend in the course of fundraising as ‘program costs’ rather than ‘fundraising costs’.
Charity Navigator claims this accounting practice allows some groups to mask high fundraising costs. The protesters say the watchdog group is ignoring long-accepted accounting principles and substituting its own arbitrary measures and wrongfully denying some groups a proper rating.
The Agitator’s view is that the idiotic ‘cost of fundraising’ metric favored by overly zealous watchdogs, media, some regulators, and ill-informed boards and fundraisers is, well, simply idiotic.
And frankly whether the so-called ‘joint cost allocation’ is used or not (used for example to assign parts of a mailing to ‘fundraising’ and parts to ‘education’), the fundamental metric is virtually meaningless, outmoded and should go the way of physicians’ leeches.
But I digress. I was really writing to say I wouldn’t waste too much time getting upset over Charity Navigator for the simple reason they really don’t matter. At least not when it comes to influencing donors’ behavior. Here’s why:
- A 2010 study 0f 4,000 plus donors by Hope Consulting titled Money for Good found that “few donors do research before they give, and those that do look to the nonprofit itself to provide simple information about efficiency and effectiveness. In short, ain’t many donors checking Charity Navigator.
- And for those donors who do some research, according to the Hope Consulting study, they look for “information on the efficiency and effectiveness of an organization … and donors typically look to the organization itself to collect information.” And this is true even among the givers of major gifts.
- These findings are very much in line with every study I’ve seen over the years about the influence of charity watchdogs both in the US and in Europe.
All bark. No bite.
And sure not worth losin’ much sleep over, especially if your program is based on small and mid-sized gifts.
Honestly, I’m not against Charity Navigator. They’re entitled to their hustle as much as anyone. Although they’re sure not entitled to disregard, substitute, or bend generally accepted accounting principles in a whimsical or capricious manner.
What I really oppose is the presumption or premise on which Charity Navigator and similar services are based: that donors should do more research or want to do more research.
Why? Why should they?
When you buy a pair of running shoes, purchase a mobile phone or choose a fancy restaurant do you first look at the financials of the manufacturer, phone company or restaurant owner? I sure don’t.
I suspect that you, like most consumers, rely on brand, past experience, word of mouth, referral and a dash of hope and trust. Why the hell should donors be expected to or feel obligated to check on charities?
In short, if there is to be a watchdog group, then it should be damn sure that what it’s watching matters. When a group like Charity Navigator offers up the banality of overhead or cost of fundraising as a key metric it provides donors the equivalent of the opportunity to watch a match burn while the forest fire rages forth.
Why not focus on lack of impact on program or mission? Or at least expand the silliness of the overhead metric just a smidgeon and look at the absolute dollars that are flowing to the nonprofit’s program?
Does a school bake sale with an incredibly low overhead raising $73 for charity deserve more stars than an organization that raises millions for charity and has a 45% overhead? Not in my book.
Where do you stand on all this?
P.S. I single out Charity Navigator only because right now it’s the subject of a good deal of concern and anger in the direct marketing community – the readership base of The Agitator.
P.P.S. With the one-year anniversary of CNN’s expose of the Disabled Veterans National Foundation fundraising practices and other charity misadventures approaching, we’re working on a follow-up of what actions have been taken by regulators and the industry, what practices have changed and lots more. Stay tuned.
P.P.S. RETENTION REMINDER: The Agitator/DonorVoice Retention Webinar is Tuesday, March 19th at 11:00 a.m. Eastern. Sign up here while seats are available.
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