Welcome to Charity Navigator's Blog!

The team from Charity Navigator, the nation's largest independent charity evaluator and leading donor advocate, shares their thoughts on emerging nonprofit-sector issues and offers tips to better inform your intelligent giving decisions.

Tuesday, September 30, 2008

New Chairwoman for the Smithsonian

Last Monday, the Smithsonian Institution announced the appointment of Patricia Stonesifer as chairwoman of the organization. Formerly chief executive of the Bill & Melinda Gates Foundation, Ms. Stonesifer will be the second person to hold this newly created position. Ms. Stonesifer will work to make the organization more stable and transparent following some well-publicized oversight issues, including concerns about the personal spending of its former secretary. While the Smithsonian continues to be in good financial health, this step indicates the organization’s additional commitment to accountability and transparency, and will hopefully help restore donors’ faith in this great American institution.

4-Star Rating Helps Illinois Charities Bring In Donations

In a recent article, several 4-star charities, including Conservation Foundation and Northern Illinois Food Bank, discuss how their Charity Navigator rating has influenced donations.

Monday, September 29, 2008

Paul Newman, 1925 - 2008

On Friday, September 26, legendary actor, car racer and philanthropist Paul Newman lost his battle with cancer. As we have mentioned in this blog before, we admire Paul Newman for his philanthropic endeavors. We are hopeful that people wanting to commemorate Newman’s passing will do so by donating either to The Hole in the Wall Gang Fund, by following the directions on the organization's website, or one of the cancer charities rated highly by Charity Navigator.

Saturday, September 27, 2008

Charity News Roundup

Here are some charity headlines from the past week:

  • Recent financial failures continue to have mixed results on the nonprofit world. Many charitable groups relying on donations from large financial services firms find themselves in a state of limbo as it remains to be seen whether large pledges will be honored by tanking financial institutions. At the same time, new findings suggest that economic downturns have not historically had a major negative impact on charitable giving, according to a report from the Giving USA Foundation.
  • Given the high rate at which natural disasters strike, some responders fear how "disaster fatigue" by donors will affect their ability to raise needed funds. These fears are warranted as hurricane-related giving has reached $50 million yet more is needed in the aftermath of the most recent storms. Former Presidents George H.W. Bush and Bill Clinton are again joining forces to provide relief to those affected by hurricanes Gustav and Ike. You can research highly-rated charities responding to Hurricane Ike here.
  • Charities continue to make strides in addressing health-related issues. The Gates Foundation has joined the mission to eradicate malaria within this century. Meanwhile, plans for the world's largest Ronald McDonald House are in the works in Chicago. Other highly-rated Ronald McDonald House charities can be found here.
  • The importance of politics on charities was reinforced this week, when the Senate passed legislation including provisions that will increase incentives for seniors to donate to charities through their IRAs. On the opposite end of the spectrum, the tie between charities and politicians was tightened when a group of ministers decided to disregard a 1954 tax law and endorse a presidential candidate.
  • A new software program may make it possible for venture philanthropists to measure the social impact of their contributions.

Friday, September 26, 2008

Give until it hurts

As all of us observe one financial disaster after another and as we worry about how the suffering US economy will impact each of us and our loved ones, the question that keeps getting asked of Charity Navigator is - What does all of this mean for the charities we care about? As noted in earlier Charity Navigator blog entries, the future is not looking good for most charities for quite some time to come. Certain sectors, such as food banks, health care, housing providers and community development agencies are expected to be especially hard hit. Unless an agency has socked away a rainy day fund of working capital, layoffs, acquisitions and closures are expected to rise.

Public charities are critical to service provision and knowledge generation in this country. For us to grow the economy up and out of its doldrums, charities will be needed to play a critical role. They will be needed to provide a net to catch those who suffer as a result of job loss and associated miseries, as well as provide a voice to help educate the public and policy makers regarding the best directions for us take to resolve our problems as quickly as possible.

When adjusted for inflation individual charitable giving fell slightly last year. Imagine what this year is going to be like. You might think that charities will do fine without your giving as much as in the past. That is not the case! I know from 30 years of providing human and health care services that private dollars are the most important part of agency funding, because those dollars can be used for the unexpected surges in demand for services as we are seeing now. As government and corporate giving continues to decline, when services are needed more desperately than ever, it is individual donors that can make the difference to save the day.

So as we enter the fall giving season, which is when the largest share of individual contributions are made to charities, you as a donor are needed more than ever to step up to the plate. As scary as these times are and as much inclined as you are to cut back on your giving, I implore you to be as generous as you possibly can. American generosity, which is far greater than that of any other country in the world, needs to continue to shine in these dark financial times.

Wednesday, September 24, 2008

Food Banks Facing Tough Times

The current economic crisis is beginning to affect charities that offer the most basic human necessities by forcing these organizations to make tough decisions in regards to their program offerings. The nation’s food banks are being particularly hard hit as the need for their services increase at the same time as donations decrease. In addition, food inflation is hitting all-time highs as the U.S. Department of Labor recently reported that food prices rose 6.5% over the past year. Add to that the needs of those affected by the recent hurricane and you have some serious issues that food banks are facing.

Recently, the largest hunger relief agency in Philadelphia, Philabundance, has decided to cut off their supply of milk to over a dozen after school and day care agencies. These agencies serve more than 1,000 children, for which some, this is the only milk they receive. In New York, $1.27 million of government funds that aid food banks and emergency feeding programs has been cut in order to reduce the budget deficit. This is coming at the same time as all the New York food banks have reported increases in demand for food assistance. Issues similar to these are beginning to pop up across the country.

We here at Charity Navigator have been warning about this crisis and how it will affect the country's local food banks for some time now. Please consider supporting your local food bank or emergency food assistance program. As always, we stress the importance of researching a charity by using our site before you make a donation. You can use our Advanced Search to find a charity in your local area to support or you can view our list of 4 star rated food banks here.

Grim Forecast for Holiday Retail Sales

Experts predict that holiday retail sales will be the weakest since the 1991 recession. Can we expect the same for end-of-year charitable giving? Or will donors be able to dig deep enough to support their favorite charities even if they can't afford to buy a gift for everyone on their holiday list? Or will they make an effort to incorporate philanthropy into their gift giving?

Tuesday, September 23, 2008

Twisted Sister - Charity Navigator's Celebrity Fans

While out promoting their upcoming holiday concert, Twisted Sister is encouraging their fans to begin their charity gift giving with a visit to Charity Navigator.

Lead singer Dee Snider says “I know it sounds cynical, but the first thing I want to know when I'm asked to donate money is, ‘How much of my contribution will actually reach those it's intended for?’ It's sad, but with all the corruption in the world today, we can't just assume that our hard earned dollars will get to the people most in need. Charity Navigator sets my mind at ease. With their incredible website, I can give knowing the money I've pledged is actually helping."

Lead guitarist Jay Jay French agrees. “Considering the state of the economy, it is imperative for individuals who want to spend their hard earned dollars to make the most informed choices they can. Thanks to Charity Navigator, those choices have never been easier and one can feel better that the money they are donating goes to the most legitimate and neediest of charities.”

Monday, September 22, 2008

VP Giving

Back in April, we shared how much some of the potential presidential candidates have given to charity. Recently, we've come to learn how much (or how little) senator and Democratic vice-presidential nominee Joe Biden gives. It is unknown how much governor and Republican vice-presidential nominee Sarah Palin gives to charity since she hasn't yet made her tax returns public.

Friday, September 19, 2008

Charity News Roundup

Here's a digest of charity news in the headlines this past week:
  • The recent big financial failures - Lehman Brothers, Fannie Mae, Freddie Mac, and AIG - figured prominently in the news articles about charities this week. There is widespread concern over the negative impact that these events may have on the nonprofit sector: see some examples here, here and here.
  • While the American Red Cross is working hard to help the victims of hurricanes Gustav and Ike, they are also working to restore their own image, tarnished by their recent problems with Katrina relief and leadership scandals. Their new CEO, Gail McGovern, is optimistic about the organization's current work and future prospects.
  • There is somewhat less optimism in the Government Accountability Office, which recently reported that the Red Cross and other disaster-relief private charities may not be able to handle disasters of the magnitude of Katrina in the future.
  • Politics is taking a back seat to philanthropy as Americans are reaching out to help their neighbors in Cuba recover from the devastating effects of this season's hurricanes.
  • As noted in a previous entry on this blog, celebrities are very much involved in charitable efforts these days. This week saw a generous donation from Brad Pitt and Angelina Jolie to an AIDS clinic in Ethiopia, and generous contributions to hurricane relief from two sports franchises in Houston, the Rockets and the Astros.

Thursday, September 18, 2008

Celebrity Donations

With the ever present media intruding on celebrities’ personal lives, we are more aware of their actions, and more often than not, stories about celebrities focus on the negative things going on in their lives. Therefore, we would like to point out some celebrities that are using their status and wealth to change things for the better. The Giving Back Fund has published a list of the 30 most generous celebrities of 2007, according to public records.

Several celebrities supported organizations rated by Charity Navigator. Among them are Oprah Winfrey (Oprah’s Angel Network), Paul Newman (Kenyon College), Lance Armstrong (Lance Armstrong Foundation), Jerry Seinfeld (American Red Cross), Hugh Hefner (University of Southern California) and Dwayne ‘The Rock’ Johnson (University of Miami).

Wednesday, September 17, 2008

What do you do when the CEO is only in it for the money?

As I noted in last week's blog entry, I believe the problem of self interested CEOs is significant. However, for many I suggest that this is kept in check by their commitment to the mission. Today I want to talk about that minority who do not have any real compunction to hold back their greed. They are the ones you end up hearing about on the news. Invariably, when CEO personal gain becomes central, unethical abuses of power go hand in hand with it. In those cases, personal greed has risen to such heights that their agency or government regulators are forced to take action to get rid of them. What can you do if you observe such a CEO?

If you are a staff person, I refer you to the advice I gave in my suggested rules for public charity work (part 1 and part 2). The bottom line is this: unless there is a whistle blower policy at the agency that you think can truly protect you (have an attorney check it out), find a new job! The reason I recommend an attorney is because the laws in each state vary as to what is covered and federal whistle blower laws are quite narrow in focus. If you can not afford an attorney to do the review of the policy, find a new job! Once you get that new job, I urge you to report the abuses of authority.

I also noted last week that the CEO has tremendous influence. Unless you are truly protected while you are working at an agency, a self centered CEO can squash you like a bug! The Board may be taken in by the lies of the CEO and will rally around him or her, rather than dealing with the problem. However, a whistle blower policy may force even a reticent Board to consider the allegations you bring forward.

Assuming the agency does have a good whistle blower policy; write up the facts of what you have observed. If possible, have that same attorney who reviewed the policy review your document before you send it in. Also, if you have others who can corroborate your facts, encourage them to come forward as well. Submit the information to the designated person, per the agency policy. Then wait. If the agency is good to its word and you have identified real abuses by the CEO, the results should be positive. However, it is quite likely that the process will be long, expensive and painful to all involved. You may have to endure multiple interviews covering the same ground and shunning or harassment (report this immediately too!) by those who are allied to the CEO. On the other hand, if the CEO is truly bad, it is likely that you will have opened the floodgates and others will soon follow your lead. Hopefully they can be your support group as you go through the ravages of the process. Have your attorney get involved if the policy is not being followed.

If you are a donor or a person who receives services from the agency, you should follow the same procedure that the staff follows. Write up the facts and forward them to the person responsible for investigating the matter. If you are a donor, you usually do not have to worry about the kind of problems I described above. However, if you are a client of the agency, such worries may be even greater. You may not have the luxury of being able to find another place to receive services. Furthermore, the smaller the agency, the scarier this process can be as it is often easy to figure out who made the allegation. So proceed with great caution. Perhaps you can find a staff person you trust to take the matter to the next level.

If you are a Board member of the agency and you receive reports of unethical CEO behavior, you have a responsibility to act. It is likely that you will be shocked and find the allegations hard to believe. A CEO like this can often give the appearance of being a caring, super star. However, you need to take the allegations seriously and follow your whistle blower policy to the letter. If you do, the facts will usually come out quickly and you will find out if the super star is a giver or a taker.

In conclusion, I have seen this kind of situation in action up close. I think the analogy of a serious illness fits well with what an agency goes through in this process. You are the antidote to the disease. However, wrenching pain and suffering occur as the healing process begins. Exhaustion follows as the disease (bad CEO) finally leaves and rebuilding begins. Hopefully the agency can return to full health quickly, but sometimes the healing process can take years. Regardless, in the long run it is critical for the charity to go through all of this if it is going to truly meet its mission once again. You have my deepest respect, if you act to address the problem.

Consistently Great Charities

In our continued effort to guide intelligent giving, Charity Navigator evaluates the financial health of over 5,300 charities on our website. In the six years that we have been rating organizations, there are a select few that have managed to receive our highest 4 star rating seven consecutive times. These organizations have shown that they consistently improve and/or expand their services, fulfill their exempt purpose as efficiently as possible, and can face economic downturns or adverse situations without those circumstances impacting the services they exist to provide.

In light of that, we have published an article on our website celebrating the enormous achievements of these 45 organizations. Aside from providing you with a list of the consistently outstanding charities, we also list charities that can learn a thing or two from the high performers: those that have received our lowest rating in consecutive years. You can view the article by clicking here.

Tuesday, September 16, 2008

A Word Of Caution About Disaster Relief Giving

At Charity Navigator we’ve always recommended when giving in times of crisis – such as after Hurricane Katrina or the tsunami in South Asia - that you give to an established charity. The story about a 9/11 charity in today’s The News Tribune points out why this tip is so important and PC World is sharing our advice for those who want to help with Hurricane Gustav and Ike relief efforts.

Friday, September 12, 2008

Charity News Roundup

In case you missed it, here are some of the charity headlines making news this week:

  • The number of storms sweeping the United States has pushed the American Red Cross into debt.
  • Former President Clinton is in talks with the directors of a scholarship fund for families of Sept. 11th victims to address complaints that the program has given out too little money.
  • A historic multi-network cancer telethon brought in donations of over $100 million.
  • Columbia University will offer academic credit to students participating in volunteer projects.

Wednesday, September 10, 2008

Who profits from a non-profit?

Long ago and far away, when I was in business school, there was a professor who discussed the difference between for-profit and non-profit organizations. He said that the difference was, in many cases, slim to nil. To justify his position, he went on to describe how a number of organizations were making the transition from for-profit to non-profit as a strategic business move to gain access to more private dollars. In addition, they no longer had to account to shareholders, but the executive leadership could still make out quite well financially. He concluded his presentation by stating that, although non-profits call it a surplus when revenues exceed expenses, it is profit just the same in his book.

While I do not entirely agree with the good professor, he certainly did provoke a lot of discussion and thinking on my part about the engine that drives a non-profit. In theory, a non-profit is to be driven to do things based upon its mission. However, in the real world, that is often not the case. I have seen many people in charity leadership roles, who only care about their own self interest. They will mouth allegiance to their charity's mission, but in reality they could care less. They will spend all their time on self promotion and trying to carve out a bigger and bigger piece of the agency pie to go into their compensation package, while getting their ego stroked as they claim most of the responsibility for any and all organizational achievements.

I have also observed that, absent the profit motive in non-profits, the motive that usually replaces it is growth. This motive can align well with the mission of an organization in that, the more you grow your programs and services, the more you can do to fulfill your mission. In fact, as is evident from our rating system, we consider such growth vital to the ongoing financial health of a charity. However, as noted in the preceding paragraph, growth can be just another tool to be used for the underlying motive of providing more of a pie from which to draw CEO and other executive leadership compensation.

For better or worse, how this all plays out usually flows from the values and perspective of the CEO. That person invariably sets the tone for the organization and the parameters of what is important on a day-to-day basis. If they spend half their time in the office playing with their stock portfolio on the Internet or don't show up until noon or later each day, others will notice and morale will suffer. Staff who are truly committed to the mission will likely become disgusted and move on. Sometimes, the staff will remain and become cynical and eventually lose their passion for what they are doing. In other cases, staff will just quit the field entirely. The end result of all this is that over time the agency will invariably slide down the path of diminshed quality and service.

I have just given you the extreme case. I suspect that many more agencies fall into a gray area. They are in constant tension between the selfish ambitions of the leadership and the mission of the organization. It is often a never ending tug of war. Perhaps that is the best we can usually hope for, given human nature and the fact that most of us are not a Gandhi or Mother Theresa? We have stated in another blog entry and in our FAQ for Donors that we believe that most CEO's are well-meaning, dedicated and deserving of their compensation. In other words, in the tug of war between selfish ambition and mission, a majority of CEO's end up doing the right thing, but there are also a quite sizable number who do not!

This is one of the reasons why I believe Core Values must be more than a sign on the wall in order for a charity to thrive. As I have noted in an earlier blog, the CEO has to live and breathe the Core Values. Those values are supposed to capture the culture of the organization. The CEO must truly have a heart for the mission of the organization that outweighs his or her own self interest (the self interest may still be there, but the values are given greater value!). I am happy to say that I have seen CEOs who are like that. Yet, I am sad to say that I have seen many who are not.

So who profits from a non-profit? As noted above, sometimes the person who profits is the CEO. Those who SHOULD profit are the persons or cause that the charity's mission serves. The CEO is the linchpin around which way that "profit" revolves. In next week's blog entry I will suggest what to do if your CEO is "revolving" badly.

Friday, September 5, 2008

Charity News Roundup

In case you missed it, here are some of the charity headlines making news this week:

  • Myanmar has opened up to allow global relief efforts. Cyclone Nargis hit Myanmar in May and the country initially denied foreign help. A report by Relief International says that since June more than 1,000 visas have been issued to international aid workers.

  • Stand Up to Cancer telethon will take place this Friday airing on ABC, CBS, NBC, and E!. The Stand Up to Cancer aims to raise funds to encourage scientists to collaborate rather than compete for patient therapies.

  • Charities in South Florida have mobilized to ship money and supplies to Cuba , Haiti and other Caribbean islands in need of aid after the devastation of Hurricane Gustav. However, efforts to help Haiti after Hurricane Hannah have been thwarted by heavy flooding.

  • An international coalition of aid agencies is launching a program aimed at curbing carbon dioxide emissions and teaching vulnerable individuals how to cope with climate related problems. Some of the coalition’s partners are UNICEF, Greenpeace and CARE International.

  • In CEO news, the Smithsonian will be cutting pays of seventeen executives with six-figure salaries.

  • Islamic Relief, USA will be coordinating events for Day of Dignity events in eighteen US cities where Muslims will serve the hungry and homeless as they celebrate the holy month of Ramadan which began on Monday.

Wednesday, September 3, 2008

A CEO is not a Rainmaker

In times of economic downturn, many public charities are between a rock and a hard place. Donations tend to decrease from practically all sources while the demand for their services increase. Many agencies expect their CEO and/or Director of Development to do a magical fundraising dance that will open up the heavens and bring money raining down on the cash needy agency.

I am finding it more and more common to see job ads for CEOs that are almost entirely focused on this one thing - raising money. Furthermore, if I had a nickel for every agency strategic plan that calls for huge increases in raising private money, I would be a wealthy man. Such a one dimensional Board focus on their CEO recruitment and planning is dangerous, because all agencies have needs for CEO talent in other critical areas including:

1) Program/Service Quality, Development and Implementation
2) Public Relations
3) Financial Management
4) Board Administration and Support
5) Strategic Planning
6) Human Resources Management

When the CEO is tasked with raising an impossible amount of money, all of this other critical stuff can fall by the wayside. What happens then? The agency can deteriorate in all of the areas listed above and become an empty shell of its former self. If the CEO does happen to be one of the lucky few who succeed at this herculean task, the money ends up being shoveled into an agency more concerned with inputs than outputs. Financial margins reign supreme and program quality is trivialized. Of course the financial health of an agency is vitally important, but not to the exclusion of service quality!

At the same time, given that the task is nearly impossible, most will fail with a shrinking pie and ever increasing pressure to draw a greater amount from it. As a result, there is increasing turnover in the CEO and/or Director of Development positions as they do not fulfill the unrealistic expectations placed on them.

So what is our recommended solution to this problem? To begin with, one of the critical variables we consider in rating Organizational Capacity is an agency's working capital. Generally speaking we recommend that a charity have a year or more of liquid assets on hand for down times such as we are currently going through. This is a process that takes years of planning and hard work, not a Rainmaker a minute before the witching hour. Agencies must understand that they need to make strategic use of the good times to lay the foundation for withstanding and even thriving through the tough times.

The fundraising plan must be developed JOINTLY by the Board and staff. The staff must be willing to speak plainly and clearly about what is realistically achievable and the Board must be willing to LISTEN. The starting point for the plan should be the agency track record, followed by conservative projections for adding revenue based on a level headed SWOT (Strengths, Weaknesses, Opportunities and Threats) analysis. Furthermore, CEOs have a responsibility to make sure that their job descriptions include all of the functions noted above and that the Board understands that adequate time must be allocated to each of them. These realities need to be factored in when planning the amount of CEO involvement in fundraising efforts.

Sadly, most agencies are not that forward thinking or willing to face current realities. Therefore, the CEO or other executive staff becomes the fall guy/gal until the economy rebounds and more money for programs and services is available. At the point of rebound, Board expectations at least have some chance of once again being grounded in the "earth" of reality, rather than the "rains" of fantasy.