A charity evaluator is an organization, normally non-profit, that focuses on assessing charities. They attempt to bring concepts such as skepticism and business best practices to the field of philanthropy.
The Toronto Star reports on some of the difficulties and revelations of auditing charities as described by Charity Intelligence Canada (CIC). The authors call it "concerning", for example, that one in five of "Canada's top 100 charities" refused to release their full audited financial statements to CIC. Moreover, one quarter of the "top 100 charities" store at least 3 years worth of funding (that is, they have three times their annual budget in savings) and some store as much as 8 years worth. Of the "top 100 charities", 14% exceed the guidelines set by the Canada Revenue Agency by spending more than 35% of donations on fundraising – with some spending as much as 50% of donations on fundraising.
Charity evaluators have a range of different philosophies. For example, GiveWell challenged evaluators Charity Navigator and GreatNonprofits for their high ratings of the Central Asia Institute (CAI) after the CAI was involved in a scandal. GiveWell says its model was superior in this case because it recommends only a few charities most supported by evidence, and avoids commenting on charities that provide as little information as did CAI. GiveWell also contends that the most valuable charities are often those that work overseas, and do not work in disaster relief or microfinance. On the other hand, Charity Navigator CEO Ken Berger and a consultant to Charity Navigator, Robert M. Penna, harshly criticized the effective altruism movement, of which GiveWell is an organization, for being moralistic and elitist "by weighing causes and beneficiaries against one another". Philosopher and effective altruist William MacAskill defended the movement by comparing the choice to donate to an art gallery with the choice to save a painting rather than people from a burning building. GiveWell performs cost-utility analyses with the commensurable disability-adjusted life years (DALYs), allowing the comparison of the benefits of a marginal donation to charities working on very different causes and with very different outcomes. Another charity evaluator, ImpactMatters, founded by economist Dean Karlan and Elijah Goldberg and incubated at Innovations for Poverty Action, uses cost-effectiveness analyses which again calculate marginal costs, but with outcomes measured in the number of individuals reached in the currently released impact audits.
A joint press release by Givewell, Great Nonprofits, and Philanthropedia discusses why measuring charities' spending on administrative costs is a poor way to evaluate effectiveness. For example, ranking charities that way motivates them to minimize costs billed as "administrative", even when more administration would save money overall. In 2013 and 2014, GuideStar, BBB Wise Giving Alliance, and Charity Navigator wrote open letters urging nonprofits and donors to end the use of the overhead ratio, the percentage of total expenditure on administrative and fundraising costs, as the sole or main indicator of a nonprofit's performance.
Charity Navigator has been working to expand its criteria to include results reporting. See Charity Navigator#Evaluation_method.
List of notable charity evaluators
- American Institute of Philanthropy
- Animal Charity Evaluators
- Charity Navigator
- Giving What We Can
- Great Nonprofits
- Philanthropedia, a division of GuideStar
- Venture philanthropy
- Effective altruism
- Cost-effectiveness analysis
- Cost–utility analysis
- Timeline of nonprofit evaluation
- "Audit of charities encounters resistance", in The Star, by Raveena Aulakh and Amy Dempsey, published Tuesday Nov 15 2011
- Givewell.org, "Three Cups of Tea scandal: why we had the right bottom line on the Central Asia Institute", Holden Karnofsky , April 25, 2011, Accessed January 13, 2013.
- GiveWell.org, "Giving 101: the basics", accessed January 13 2013
- Berger, Ken; Penna, Robert. "The Elitist Philanthropy of So-Called Effective Altruism".
- MacAskill, William. "What Charity Navigator Gets Wrong About Effective Altruism".
- "Process for Identifying Top Charities".
- "Impact Audits".
- Karnofsky, Holden (2009-12-01). "The worst way to pick a charity". GiveWell blog post on joint press release with Great Nonprofits and Philanthropedia.
- Goodintents.org, "Charity ratings based on administrative costs can do more harm than good", Saundra Schimmelpfennig, May 20 2009, accessed January 13 2013
- "The Overhead Myth : Moving Toward an Overhead Solution".
- Brandt, Julie. "Overhead Costs: The Obsession Must Stop". Stanford Social Innovation Review. Retrieved July 15, 2014.