In today’s economy, it is more important than ever to understand where your money goes, and how it is being used. Contributing money to a charitable organization is a great gesture, and donors deserve to know how the money they give is being used. Charity watchdog associations play a key role in not only keeping nonprofit organizations accountable, but in helping donors better understand how their donations are used. Three organizations that provide information on how donations are used are: Charity Guide (www.charityguide.org), Charity Navigator (www.charitynavigator.org), and the American Institute of Philanthropy (www. charitywatch.org). Each of these organizations provides resources for potential donors to determine whether they are donating to a well-run charity and not just a good cause.
The existence of these organizations can help to increase the accountability of nonprofits. Because much of the financial information is listed on these websites it gives a clear picture to a potential donor of where their money would be spent, and if it would likely go to administrative costs or programs and services. This information is helpful in determining if a nonprofit is providing the services or programs that correspond to its mission. Another incentive for nonprofits to be viewed positively by these organizations is the public image that arises from negative or positive press. A nonprofit could suffer substantially if a bad rating by one of these organizations resulted in reduced donations from donors, and it would most likely take a lot of time to recapture the good will of donors. Granted these organizations are not fool proof. There are many variables that affect a nonprofit organizations budget, and these watchdog groups offer only a “big picture” glimpse of the financials. Watchdog groups also don’t offer any insight into nonprofits from staff or volunteers. Financials don’t always tell the entire story of a nonprofit, and this is where many of these watchdog groups are lacking. Watchdog groups also focus mainly on large, national nonprofits, and do not provide information on small regional or local nonprofits.
Each watchdog group offers some of the same information about nonprofits, but they do differ in their approach:
Charity Guide’s main goal is to promote volunteerism. They offer ways that donors can get involved in as little as 15 minutes or by dedicating an entire vacation to volunteering. The organization also assigns letter grades to nonprofits in a variety of categories. The criteria for a nonprofit to receive a “B” or higher are: openly sharing financial information, spend less the twenty-five dollars to raise one hundred dollars, and allocate at least 75% of money raised towards charitable programs and not fundraising and general administration. These guidelines help to establish how much of a donors money is actually being spent on the mission of a nonprofit. These ratings and the information provided should...