More tools aid donors in choosing charities

Published: Sunday, December 1, 2002 at 6:01 a.m.
Last Modified: Saturday, November 30, 2002 at 11:37 p.m.
NEW YORK - Donors trying to distinguish between worthy and dubious charities have ever-expanding sources of advice, ranging from a watchdog group with a Top 10 list to a company that charges $1,000 to scrutinize details of a charity's operations.
The extra help comes at a time when the array of federally recognized nonprofit groups is dizzying - doubling since the mid-1980s to more than 800,000.
"With those increased numbers, donors are much less clear about how to distinguish organizations from each other," said Art Taylor, president of Better Business Bureau's Wise Giving Alliance. "They aren't clear about what all these organizations are set up to do, and they're asking a lot more questions."
Taylor's alliance compiles reports on more than 500 major charities, assessing the extent to which they meet basic accountability standards. One key barometer is whether a charity devotes at least 65 percent of its expenditures to programs rather than to fund raising and administration.
Another veteran watchdog group is the American Institute of Philanthropy, which gives A-through-F grades to about 450 charities. Its highest ratings go to charities spending at least 75 percent of their revenue on programs.
A few new organizations are trying to provide information on a larger pool of charities.
Charity Navigator of Mahwah, N.J., founded in April, lists financial information for 1,750 charities and nonprofits on its Internet site. The site includes a Top 10 list, and gives rankings of zero to four stars to each charity.
In the latest rankings, 67 percent of the charities earned three or four stars; about 11 percent earned one or no stars.
GuideStar, based in Williamsburg, Va., offers an even bigger database, with information about 850,000 nonprofit organizations.
GuideStar - which does not rate the charities - provides its basic financial data for free. It also offers in-depth reports at $59 apiece that show how a given charity performs compared to other charities with similar missions.
Suzanne Coffman, GuideStar's communications director, says donors have become more interested in charity accountability since the Sept. 11 terrorist attacks, which produced an outpouring of generosity followed by questions about how funds were being used.
"Since 9-11, I've seen many more people asking, 'How can I tell if they're using my contribution wisely?' " Coffman said.
The American Red Cross was criticized for directing some Sept. 11 donations to other purposes, and subsequently overhauled its disaster fund-raising policies.
Since then, questions unrelated to Sept. 11 have been raised about the accounting practices at some United Way organizations, and a high-profile organizer of bike-a-thons and walk-a-thons, Pallotta TeamWorks, suspended operations following complaints that it overspent on marketing. Though many charities welcome outside scrutiny, some feel that formulaic evaluations can be unfair.
Coffman said some nonprofit officials were shocked when GuideStar began posting their organizations' tax data on its Internet site.
"Seeing it on a computer screen, knowing everyone could look at it was really unnerving," she said. "But we were able to convince most of the people who were upset that in the long run they would benefit, that donors would have more confidence giving to them."
Complaints by charities also have been directed at Wall Watchers, a 4-year-old nonprofit group that analyzes and rates about 475 Christian-affiliated charities.
"We do have our share of detractors," the group says on its Internet site. "This is only natural given the sensitive nature of Wall Watchers' mission."
A new entry in the field, distinctive because it operates for profit, is the Philanthropy Group, a Chicago-based service founded last year to serve foundations and individual donors who can afford $1,000 for an in-depth report on a specific charity. The aim, the company says, is to provide donors with the same caliber of information that an investor might seek.
The Philanthropy Group's founder, Tim King, predicts more companies like his will surface in the coming decade as aging baby boomers seek professional advice on bequests of their assets.
In addition to the various watchdog groups, many states offer data about registered charities. Some secretaries of state publish annual lists of the charities that do the best and worst at earmarking revenues for their programs.
Washington state also reports on commercial fund-raisers who solicit on behalf of charities. The latest report, issued Nov. 19, praised some fund-raisers for giving more than 90 percent of their proceeds to the charities that hired them, while noting that 17 fund-raisers passed along 15 percent or less of the money they collected.

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