Small Nonprofits Claim Charity Navigator Ignores Them

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November 14, 2013; Seattle Times

There has been a long-simmering argument about the use of metrics among donors to nonprofit organizations. Do donors really care about efficiency and, if they do, do they actually go about the research necessary? Articles abound on NPQ about this argument, and the website Charity Navigator is at the heart of many of the stories. Recently, an argument has been posited about whether resources such as Charity Navigator, which examines nonprofits and gives them a “seal of approval” for efficiency and impact, affect the habits of even those donors who are interested in metrics.

A new topic of discussion about Charity Navigator centers around the type and number of nonprofits the organization examines. Currently, there are about 7,000 nonprofits that are listed on the organization’s website, where donors can look over reports on financial and outcome efficiency. According to an article in the Seattle Times, there is a plan at Charity Navigator to expand by as many as 1,000 organizations per year and to move to a wiki-like approach, with volunteers around the country entering data about even more organizations. The article also cites some local Seattle nonprofits that are complaining that they cannot get listed because they are too small. Apparently, Charity Navigator is targeting nonprofit organizations with budgets well over $1 million.

According to the Urban Institute, there are well over 1,500,000 nonprofits currently operating in the United States. According to a study at the Urban Institute, 80.6 percent of nonprofit organizations in the United States report expenditures of less than $1 million, although cumulatively they account for a very small portion of the overall expenditures reported by nonprofit organizations.

If these statistics are correct, Charity Navigator currently reports about less than one percent of the nonprofit organizations. One nonprofit cited in the Seattle Times article suggests that the impact of not being listed is hard to measure; you may never know about a donor who chose not to give because they did not see the organization listed, let alone given a good report.

In many ways, Charity Navigator is promoting impact investment as the way donors should behave. A study from Hope Consulting that has been used to demonstrate the importance of impact investing states that even donors who say they value efficiency rarely do any research into nonprofits where they give. On the other hand, the majority of donations are given as repeat gifts.

The report suggests that almost 80 percent of all gifts made are 100 percent loyal; they are virtually guaranteed to be renewed. That means that 80 percent of all gifts are probably not based on research at sources like Charity Navigator. Under the circumstances, one might suggest that the best course for small nonprofits would be to worry less about Charity Navigator and more about finding and keeping their donors.—Rob Meiksins

  • Ken Berger


    Those 7,000 charities we rate garner 55% (about $110 billion) of the $200 billion of private contributions made each year (not including the additional $100 billion to houses of worship). So that 1% has a tremendous concentration of where the money flows from donors each year. We intend to get to 10,000 or even 20,000 charities in the coming years. Beyond that, we would like to do even to scale up to rate charities of all sizes and assess where all the contributions go.

    Furthermore, your citation from Hope Consulting ignores two critical factors:

    1. Roughly 90% of those same donors surveyed by Hope Consulting said that effectiveness was the most important factor to them.
    2. The reason we believe they do not act on that factor, is because currently the vast majority of nonprofits do not publicly report in a meaningful way on their results. So of course we all must fall back on proxies until we can change this reality.

    I agree with you that charities should not worry about Charity Navigator. But I do believe that “finding and keeping their donors” in the long term, they are going to need to provide evidence of results (or at least that they are adaptive and learning such that they improve over time) to all of their stakeholders.

    Ken Berger, President & CEO
    Charity Navigator

  • Daniel Mansoor

    Good report, though the ending paragraphs are not clear. The expression “virtually guaranteed” is so contrary to reality. With renewal rates in the nonprofit sector hovering around 40%, donors are less loyal (on an annual basis) than “consumers” in almost any other industry. While the loyalty rates espoused in this article might be true over the long run, annual renewal rates in the nonprofit industry are abysmal.