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How to determine whether a charity is worthy of one's donation is a hotly contested topic.

Is efficiency the answer? Does depending on financials such as low overhead and fundraising costs represent the best way to sort out the good charities from the bad?

One charity executive discussed her disagreement with just measuring financials in a Fast Company article. Nancy Lublin, CEO of Do Something.org, says:

"...low overhead doesn't necessarily mean an organization is awesome at fighting poverty, or that its turnover is low and its people productive. And it certainly doesn't guarantee that the group is spending wisely."

Another critic of the typical measures of nonprofits, Dan Pallotta, author of Uncharitable: How Restraints on Nonprofits Undermine Their Potential, says on his blog that "efficiency" is unfair to causes that are less well known and those that are new:

"Since 'efficiency' ratios are based in large part on fundraising costs, they inherently discriminate against less popular causes, causes with a less affluent constituency, and new charities. At every level, it is more expensive for a less popular cause to raise money than it is for a popular cause."

Maybe user reviews are the answer to evaluating charities. That is what Great Nonprofits, a relatively new website, tries to do. It provides a platform where users can provide first hand stories about the nonprofits they support or benefit from.

How do you determine where to put your donor dollars? What information sources do you use? What factors do you weigh?

If you are a charity, how do you want donors to evaluate you? What is fair and what is not?

Let us know in the comments.


August 2, 2009 at 1:35 am
(1) NonprofitCEO says:

I was thrilled to see you mention GreatNonprofits and consumer rating. When I formed a national nonprofit years ago I was “rejected” by all the major so-called charity watchdog groups like GuideStar. The reason was we were too small potatoes to matter. Until we were taking in millions – and paid a fee to be rated – we simply do not exist to “biggie” charity raters.

But small charities need a leg up even more than the well-established ones. It can take 1-2 years to get into the IRS data base which is bad enough but we may never appear in public ratings.

Please keep us posted about other consumer sites like GreatNonprofits. I was happy to see us listed with a favorable review that we can now refer people to!

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