December 27, 2007 | Read Time: 1 minute
Measuring how well charities use the donations they receive is no easy task, as Robert Thalhimer writes on the PhilanthroMedia blog.
Mr. Thalhimer writes that a colleague asked him how best to determine whether donations are mostly going to help a charity carry out its mission, rather than for administrative costs. For religious groups, which do not file public information, Mr. Thalhimer writes, “the answer to the efficiency question is, ‘Do you trust them?’”
For those groups that do file financial data with the Internal Revenue Service, he writes, the matter is more complex. As an example, he discusses the watchdog Web site Charity Navigator, which ranks organizations from one to four stars based on their level of non-program expenses. “This is useful information, but it would be a mistake to view it as definitive,” Mr. Thalhimer writes.
He reports the Charity Navigator rankings of several Richmond-area charities, noting that the Virginia Performing Arts Foundation, which is earned a lowly one star from the watchdog, is devoting much of its funds these days to a renovation and construction project.
“To this point, it has only spent money, and it is fair to ask how wisely that money has been spent,” he writes. “However, it will not have any program-related expenditures until these projects are completed and open to the public. So, what does it tell us that this nonprofit is so poorly rated compared with The Pittsburgh Cultural Trust (4) and Jazz at Lincoln Center(4)? Not much.”
What is the best way for donors to decide which charities are worth support? Join the discussion by clicking on the “comments” link below.
