|Headquarters||Chicago, Illinois, U.S.|
|American Institute of Philanthropy|
CharityWatch, formerly known as the American Institute of Philanthropy (AIP), is a 501(c)(3) nonprofit organization in Chicago, created in the United States by Daniel Borochoff in 1992, to provide information about charities' financial efficiency, accountability, governance, and fundraising.
AIP analyzes charity financial documents to identify whether charities meet AIP's standards of financial efficiency, and publishes its findings. AIP encourages donors to give to charities that will allocate most of their contributions to program services that benefit the people and to causes that donors wish to support. AIP also promotes charity accountability and transparency through its research on the rapidly changing nonprofit field.
AIP publishes the Charity Rating Guide & Watchdog Report, containing ratings of the financial efficiency of over 500 United States charities and charges an annual membership fee of $50 to access it. Non-members are able to access this information only for top-rated charities. The ratings are grades ranging from A+ (best) to F (worst) and are based on analysis of charities' financial documents. The ratings include the percentage of a charity's budget that is spent on program services, how much it costs a charity to raise $100, an accountability measure, and the salaries of the charity's three highest-paid employees. The Guide also features articles about problems in the nonprofit field and tips to help donors make wise giving decisions and avoid charity scams. AIP posts its top-rated charities on its website.
AIP also investigates ethical issues surrounding charity spending, including salaries and payouts, financial reporting, telemarketing and direct-mail solicitation campaigns, and governance. AIP shares the results of its research with the media and government agencies and works closely with these parties to educate the public about informed giving. AIP President Daniel Borochoff has testified before Congress about veterans charities, the aftermath of Hurricanes Katrina and Rita, and the philanthropic response to the 9/11 attacks.
Governance and operations
Charity Watch is governed by a five-person Board of Directors which includes its founder and president, Daniel Borochoff, who was paid $198,548 in 2017. In 2018, Charity Watch spent $584,887, of which 54% ($316,695) was spent on salaries. Charity Watch employs one analyst in addition to Mr. Borochoff.
Charity Watch's stated goals are "To research and evaluate the efficiency, accountability and governance of nonprofit organizations; to educate the public about the importance of wise giving; to inform the public of wasteful or unethical practices of nonprofits and provide recognition to highly effective and ethical charities; to advise AIP members and conduct special investigations and evaluations of nonprofits; to expand and re-define our programs periodically to meet the continuing challenge of keeping the contributor informed."
AIP was criticized in a study on rating nonprofits for having a "gotcha" mentality and limited explanation for their ratings. The study criticized nonprofit watchdog organizations for relying heavily on financial data that is not adequate for evaluating a nonprofit organization and may misguide the public, although the study noted that AIP "recognizes the limitations of the [IRS Form] 990."
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