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Tuesday, December 8, 2020

Donor Perspective: Leveraging Charity Navigator to find and support deserving nonprofits


My wife and I use Charity Navigator extensively to help us find the best nonprofits for our donations.  The website gives comprehensive ratings for more than 9,000 charities, as well as summary assessments under the Encompass system for an additional 150,000 nonprofits.  The important thing for us is to decide in advance on what we are really looking for in an organization and then learning how to use Charity Navigator to make it easier to find the right charity.

First, and foremost, accessing nonprofit profiles on their website is free.  You can utilize the Charity Search function, as well as the Advanced Search, from the homepage.  Second, the system is user-friendly, with a little practice.  We have learned how to start with 50-100 potential candidates and use a couple of steps to come up with a short list of worthwhile organizations that may be good fits for us.  We then perform more detailed evaluations of specific charities to decide which ones we want to donate to. We typically support about ten charities each year.



The Basics for Us


Mastering the basic attributes of Charity Navigator allows us to decide on which cause we want to support, as well as how to assess a specific nonprofit in a couple of minutes.  We use the website to jump from one feature to another quickly to form an overall picture of a charity.  Here are the features that we use to pull together basic assessments.


Category and Cause - let's say we are passionate about a particular type of charity but do not know which is the right one for us.  Charity Navigator enables us to select one of 11 broad categories (such as Education) and then drill into specific types of causes (such as Youth Education or Education Policy).  


Hot Topics - we reserve part of our annual giving for major events that impact people in need.  The Hot Topics button has proven very useful for us to quickly scan several dozen highly-rated nonprofits focused on responding to natural disasters, such as hurricanes, or for issues that concern us, such as support for veterans.


Charity Search - if we know the name of the charity, we can quickly find out basic information on them using the search feature at the top of the website.  There are frequently multiple charities with the same or similar name.   We are not often sure of the precise name, so it really helps to narrow the potential list by sorting by state or category.


Geography - sometimes we want to give locally or to a region of the country.  Charity Navigator has a feature which allows us to select by state or even by zip code.  In other cases, we target nonprofits that focus on a specific country or have broad international impact.  The website enables us to sort on charities whose mission is primarily performed outside of the United States.


Ratings - roughly 40% of rated nonprofits have 4 stars; in some cause areas it is more than 50%.  And that is where we focus.  We only donate to charities with lower ratings if there is a compelling reason, such as they have unique capabilities or are investing a lot of their administrative costs in building capability that will distinguish them from other nonprofits in the future. We're also excited to understand more charities utilizing the depth and breath of the new Encompass ratings.


Size and Focus - we prefer to donate to charities where our contribution is significant to them rather than us being a small fish in a big pond.  So, we tend to stay away from large organizations, especially if they have financial ratings less than 90 points. Charity Navigator's Size feature allows us to select nonprofits with large, medium and small Total Expenditures.  In addition, some charities have broad aspirations but limited resources.  The Program button enables us to quickly understand the major missions the organization is pursuing.  This helps us understand how focused they are.


Impact - charities are all about performing their mission, but it is difficult to find solid information to assess their impact.  Charity Navigator has partnered with GuideStar and other organizations to include impact information on many charities’ profile pages.   In September, Charity Navigator began presenting Impact & Results ratings, and there are currently over 1,100 charities rated.



Detailed Assessments of Specific Charities


After we are comfortable with the basics, we use additional features to do more complete assessments of nonprofits.  We generally have a discussion with a charity before donating to them so that we can ensure that our contributions are targeted to the right organization for the right purpose.  We have found that the better prepared we are for this conversation, the better the answers we get from nonprofits.  And the better the conversation, the better the results of our investment in the charity.  Here are several of the techniques we use utilizing Charity Navigator:


Ratings profile - the best single place to get a comprehensive overview of a nonprofit.  We use this profile extensively to help us understand the strengths and issues of nonprofits.  


It summarizes their rating score, mission and impact.  It also lists scores for all of the elements that make up the financial performance and accountability & transparency metrics, as well as specific financial data in tables, pie and bar charts.  Finally, it gives the compensation of the leaders and compares this charity with several peer organizations. 


Historical ratings - the current rating may not be typical of the performance of a nonprofit.  We use the summary on this tab to see whether their performance is improving or deteriorating over time.  You can also click on a more detailed spreadsheet - we use this to identify issues and opportunities with their financial performance.


Form 990s - these annual submissions to the Internal Revenue Service by the charities provide a wealth of information and form the basis of the Charity Navigator evaluations.  We focus on both the key financial schedules, as well as ones that describe their management, structure and issues.


Link to Website - there is an easy link to a charity's website.  We familiarize ourselves with their strategy, major initiatives and impact.  In addition to the description of what they do, they usually provide examples.  Many nonprofits have annual reports which pull their accomplishments and future plans together.



Other Helpful Features of Charity Navigator


There are several other features that we use frequently on the website.


  • My Charities - this bookmarks our favorite nonprofits so that we do not have to look them up.  This is very helpful when a charity's name is an acronym.  This feature also notifies you when a nonprofit's evaluation has been updated.


  • Tips for Donors - located on the top navigation of Charity Navigator’s homepage, this is a very useful section of the website that provides tips, guidelines and "how to" suggestions.  It also has a Sector Analyzer which aggregates the data for all of the charities in a specific Category and Cause, as well as by Region, State and Total Expenses.



Conclusion


Charity Navigator's website is extremely valuable for us as it pulls qualitative and quantitative information and assessments into a single place.  It has educated us on how to make better decisions donating to charities.  And it is expanding its coverage to provide more comprehensive evaluations of nonprofits.


About the author:

The author, who wishes to remain anonymous, is a long-time supporter of Charity Navigator at a leadership level. He and his wife do more than donate to the causes they care about--they invest in their future.  They dedicate their free time to closely working with the organizations they support to foster growth and innovation.

1 comment:

rcn said...

This is a great overview on getting the most out of Charity Navigator. I take almost exactly the same steps as the author, with maybe a greater emphasis on my list of Favorite Charities. Throughout the year I tweak the list, with the help of Charity Navigator's monthly updated ratings and listing of new organizations. Like the author, I also prefer to give to organizations with lower total expenditures - and am often rewarded with personal notes of thanks from high level staff. I'm endlessly amazed by how some of these smaller organizations can make such a huge impact in their fields. Although it's a challenge to determine how much to give to how many great charities, decision-making is far easier with Charity Navigator's tools. Thanks!