February 11, 2021 | Read Time: 5 minutes
Savvy donors often research charities before making a first-time gift. Many rely on Charity Navigator, GuideStar, or the BBB Wise Giving Alliance to help them decide. The Chronicle gathered executives from these three third-party accreditation groups for a free one-hour briefing to help nonprofit professionals understand the differences among them.
BBB Wise Giving Alliance
To begin the conversation, Herman “Art” Taylor, president of the BBB Wise Giving Alliance, explained that the Alliance uses 20 criteria to evaluate a charity. These standards fall into four categories:
- Governance
- Finance
- Fundraising and information
- Measuring effectiveness
If a nonprofit meets all of the criteria, it is eligible to use BBB’s “Accredited Charity” seal, Taylor said. “There is a cost associated with that based on a sliding scale of their revenues,” he explained. “About 75 percent of the charities that we evaluate who meet our standards — who meet all 20 — do get that accredited charity seal and find value in it,” says Taylor. Most nonprofits that have earned the seal, for example, pay to display it on their websites or include it on fundraising appeals.
A donor can visit BBB Wise Giving Alliance to see which charities have earned the seal and to find information on an organization’s mission, staff, governance, and fundraising as well as tax and financial data. Evaluation is generally prompted by inquiries from the public. Currently the site contains about 1,500 evaluated groups that operate nationally. Nonprofits not currently evaluated can log into the portal to request an evaluation. BBB will be happy to do it upon request, he said.
Earning the seal requires nonprofits to provide quite a bit of information, Taylor noted. Updates are required every two years, but an organization has the option to update its information more frequently. The BBB Wise Giving Alliance also publishes an annual donor survey that gauges donors’ perceptions of the trustworthiness of charities.
GuideStar
Jacob Harold oversees GuideStar, a charity information-sharing tool run by Candid, a nonprofit created two years ago when GuideStar merged with the Foundation Center. Harold described GuideStar as a “transparency platform,” not a ratings platform. “We ourselves are not evaluating nonprofit organizations; we’re not evaluating their performance. What we are trying to do is to make it as easy as possible for the information to flow and for other people to make good choices about their resources, whether that’s time or money or attention,” Harold explained.
GuideStar offers nonprofits the opportunity to share program information, which is of paramount importance, Harold said, as well as financial information. It has profiles for 1.8 million U.S. nonprofits, but the depth of information varies. As an incentive for nonprofits to share information, the site offers “seals of transparency” at four levels, ranging from bronze to platinum. About 80,000 nonprofits have achieved a seal. Research indicates that earning a transparency seal can boost fundraising results by as much as 53 percent, although Harold cautioned that most groups won’t see a jump that big.
About 12 million people visit the website each year, but GuideStar also feeds its information to about200 communication channels, including Facebook, AmazonSmile, the fundraising platform Crowdrise, and Fidelity Charitable, not to mention a variety of foundations that feed GuideStar’s data into their grant-management systems, Harold noted.
The goal of the site is to streamline data gathering and reporting for nonprofits and organize information about the nonprofit world to help donors and volunteers make decisions. Harold hopes that ultimately nonprofits will be able to avoid filling out multiple profiles, applications, and proposals each time a donor or grant maker requests information. He urged nonprofits to keep their GuideStar profiles up-to-date for the “many millions who may see their data.”
CharityNavigator
Michael Thatcher heads Charity Navigator, a 20-year-old organization that has a long-standing “star rating” for about 9,000 nonprofits. (Charity Navigator also offers information on an additional 1.6 million nonprofits by sharing a replica of the IRS “Exempt Organizations Business Master File,” which contains limited financial data on all nonprofits.)
The star ratings represent an evaluation of an organization’s finances and were conceived to foster accountability and transparency, Thatcher said. To receive a rating, nonprofits must:
- Have an annual revenue of $1 million or more
- Have filed the IRS Form 990 for seven years
- Have 40 percent of its revenue coming from individual donors
In the past year, Charity Navigator has unveiled changes that are designed to expand the number of groups evaluated and to broaden the scope of the review, Thatcher said. The “Encompass Rating System” went live in July 2020 and is a “parallel” rating system that covers more than 150,000 nonprofits. In addition to evaluating financials, the new system assesses organizational impact and results, culture and community, and leadership and adaptability.
The new rating is based on a scale from 1 to 100; groups scoring 75 or higher receive a “give with confidence” designation. Financial and impact data are available for many organizations, Thatcher said. The data is obtained electronically from IRS Forms 990 so only nonprofits that e-file their tax forms can be included.
The new approach is a work in progress. Charity Navigator plans to solicit ongoing feedback and make improvements periodically, Thatcher said. It will be adding assessments of culture and community — how an organization listens to the people it serves — and is collaborating with GuideStar and other groups to design this evaluation next. Charity Navigator is also close to unveiling a new portal for nonprofits to update incorrect information on their Forms 990.
Some Have Fees
- BBB WiseGiving Alliance: There is no cost to be evaluated, but there is a cost for nonprofits to use the seal on their materials. Those fees are charged on a sliding scale based on an organization’s annual revenue.
- GuideStar: It is free for a nonprofit to be listed and to update its information. The site also offers search and data tools for a fee.
- Charity Navigator: There is no charge for charities or donors.
All of the panelists, Taylor said, are working to shift perceptions about the importance of budget ratios — the percentages of a budget spent on programs that directly help people versus administrative expenses, such as salaries. “We still have a lot of work to do in terms of getting people to pay less attention to the financial ratios, but I think we are making some headway there,” said Taylor.
See the video above to watch the full session.
