When we give to charities, we generally assume that all of the organizations are trustworthy and equally ran. Unless there is a giant flag, we believe that the nonprofit isn’t in trouble and uses all funds appropriately. Unfortunately, that’s not always the case. Just as businesses have various financial issues, so do some nonprofits. There are some organizations who spend 75% or more of their budget on salaries and operating costs, and the rest on everything else, including programs and services.
The problem with that is simple: people usually give money with the expectation that the majority of it will be used to help the targeted population, not the staff.
So, what do you do if you want to find out how a charity is making out financially? Sure, you could analyze their financial records yourself, or you could visit CharityNavigator.org. Started in 2001, Charity Navigator has been examining the financial health of the nation’s charities with the purpose of helping donors be more informed about their decisions. You can use the website to find out the ratio of spending (as discussed earlier), the salary of the CEO/Executive Director, any financial red flags (i.e. continual operation in a budget deficit), and much more.
Charity Navigator uses a four-star rating system and evaluates charities in two main areas:
Organizational Efficiency - How responsibly it functions on a day-to-day basis
Essentially, efficient charities don't spend a lot of money to raise funds. The majority of their spending is devoted to their programs and services, and administrative costs are within reasonable limits.
Organizational Capacity - How well positioned it is to sustain its programs over time
The continuing success of charities is determined by how well they have maintained their current programs and services, and whether or not they can continue to do so in the long-term, even in the face of economic challenges.
Charity Navigator is easy to use! When you visit the website, you can search by charity name, charity keywords or by location:
(click images for a larger view)
Comments