So How Do I Rate?
By: Jenn Thompson, 09/24/04

At a time when business, government, and even educational institutions face tough questions about accountability, nonprofits are also pressured to demonstrate tighter control on programs, results, and budgets. Bob Ottenhoff, President and CEO of GuideStar, the national database of nonprofits, summarizes this trend best when he says that "the era of assumed virtue is over." Nonprofits, under increasing pressure to ensure their good works are good works at a low cost, find themselves under the microscope of rating systems available online. And believe it or not, they often want the exposure.

But ratings systems themselves spark questions such as:  How do you benchmark a charity's good works? Is it fair to rate only the financials? Should charities be required to undergo a rating? If an organization is rated by one system, should it be rated by all systems? And so on…

The answers to these questions are equally complex.

The Better Business Bureau's Wise Giving Alliance, a longtime charity evaluator, announced a new initiative in July 2004. In a move to make charities more accountable and to increase the volume of charities rated, the Wise Giving Alliance launched an online tool that allows organizations to submit their information quickly over the Internet. The system evaluates the 20 voluntary Standards for Charity Accountability that the BBB believes "assists donors in making sound giving decisions and fosters public confidence in charitable organizations." The tool automatically generates a rating and flags questionable information for review, if needed. The BBB believes this is a first-of-its kind product, has filed a patent, and plans to share the technology with local BBBs across the country. The Wise Giving Alliance currently rates 500 charities.

While the BBB system is based on charities willingly submitting themselves for review, Charity Navigator uses an involuntary system based on an organization's financial picture. With 3,000 charity ratings, Charity Navigator uses a 1-4 star rating system based on financial information and compares the financial performance to similar organizations. Sandra Miniutti, Director of External Relations for Charity Navigator, reported that ratings are "impacting the behavior of donors." Charity Navigator found that 84% of their visitors feel more assured about their giving after reviewing charity ratings. Based on growing donor concerns, Charity Navigator is implementing plans to review donor privacy protection. Beginning December 1, Charity Navigator ratings will include information about an organization's privacy policy by indicating which charities do not sell or trade the donor's personal information without the written permission of the donor.

The Standards for Excellence Institute, recently created by the Maryland Association for Nonprofits, developed a program to raise the level of ethics and accountability in nonprofit organizations. Organizations that prove they are adhering to 55 performance standards are awarded the Seal of Excellence. The standards are grouped into 8 major topics that include Mission & Programs, Governance, Human Resources, Fundraising, Public Policy, Conflicts of Interest, Financial & Legal Accountability, and Openness & Disclosure. The Institute's program is a daunting application process. Amy Coates Madsen, Program Director at the Institute, said that the application can take 3-6 months for an organization making internal changes to meet the standards. However, once proving that the standards are met through a staff-assisted peer review, an organization can use the Seal of Excellence logo for 3 years. Performance is reviewed every 5 years after that. The Institute has branched out to 5 states outside of Maryland and implemented education and certification programs, although the Standards for Excellence is not yet offering certification on a national level.

GuideStar provides charity financials, access to 990 forms, and encourages organizations to highlight their missions, programs, goals, and results. While not a rating system, GuideStar provides a broad base of information to empower donors to make giving decisions based on personal values and preferences, not solely on financials or third-party evaluations. The GuideStar database contains basic listings for 1 million 501(c)3 organizations, with detailed listings for 85,000 organizations.

Regardless of how their ratings are derived, all of these organizations report that donors have an increasing appetite for information. GuideStar is on track for a record year in online visits. With nearly 20,000 users a day, they hope to top 4.5 million users in 2004. Bennett Weiner, Chief Operating Officer of the BBB Wise Giving Alliance, reported that in 2003, 2 million people viewed their charity reports. Charity Navigator sees 1 million visitors annually and expects traffic to climb. And all of these organizations report an increase in visits during the holiday giving season.

Whether you're a donor, a grant maker, or a member of the media looking for a third-party opinion, these sources provide a variety of information at the click of a button.  As for charities, these sources provide a means of demonstrating transparency, sharing information, and ultimately, separating themselves from the competition.