A charity evaluator is an organization, normally non-profit, that focusses on assessing charities. They attempt to bring things like 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.
Givewell challenged evaluators Charity Navigator and Great Nonprofits for their high ratings of The Central Asia Institute (CAI) after the CAI was involved in a scandal. Givewell's says its model was superior in this case because Givewell 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.
Charity evaluators sometimes cooperate. A joint press release by Givewell, Great Nonprofits, and Philanthropedia discusses why the "overhead ratio" is a bad way to measure the effectiveness of charities. For example, ranking charities that way incentivises them to minimize costs billed as "administrative", even when more administration would be best value (i.e. when more administrative expenses would ultimately save the entire project money).
List of notable charity evaluators
- American Institute of Philanthropy
- Charity Navigator
- Giving What We Can
- Great Nonprofits
- Philanthropedia, a division of GuideStar
- "Audit of charities encounters resistance", in The Star, by Raveena Aulakh and Amy Dempsey, published Tuesday Nov 15 2011
- Accomplishing Nothing, Giving 101 section of GiveWell website
- 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
- 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