Each of the three organizations, sometimes called charity “watchdogs,” has its strengths but I personally tend to utilize GuideStar most frequently because I can find a complete IRS Form 990 tax information return for virtually every charity that files one and I understand how to read them. Charity Navigator and Wise Giving Alliance use these returns as a major basis for their reports. 

Charity Navigator says it rates about 8000 charities, while the Wise Giving Alliance says it has reports on about 11,000.  Those reports are a small portion of the 1 million public charities registered with the IRS or the 375,000 or more that file a detailed tax return each year.  They cover many of the larger charities, however, and particularly for those who are not familiar with the Form 990, these reviews can be helpful.

Charity Navigator has developed an incredibly detailed methodology for measuring and rating financial statistics provided on the Form 990.  They turn these numbers into numerical ratings, that in my view, like many computer printouts, take on a sense of precision that isn’t fully warranted.  Wise Giving Alliance focuses more on other criteria and considers a charity’s response to complaints by it or others. But both rely heavily on ratios from the 990s for program service expenses, fundraising costs, and general administrative overhead, however, and reduce the ratings of charities that fail to meet their criteria. 

Despite the significance of the ratios in their rating systems, they joined with GuideStar a few years ago to urge the donating public to disregard the “overhead myth” that a low percentage of expenses for administration or fundraising is necessary for a good performance.  In fact, they all said, many charities should be spending more on overhead to give themselves a greater capacity to pursue their missions.

One significant advantage of Charity Navigator and Wise Giving Alliance is that they can warn donors about questionable issues with a specific organization.  GuideStar generally doesn’t rate charities, and state charitable solicitation regulators almost never say anything more about a charity than the numbers they received from the charities themselves.

Both Charity Navigator and the Wise Giving Alliance give ratings that, if bad, could seriously undercut the credibility of your prospective clients.  But if I were prospecting for your type of business, or for a place to make a donation, I wouldn’t use any one of them alone as a litmus test.  I would carefully review the charities’ websites, review their 990s personally, and do a computer search on the publicity they have generated and received.  I would also try to find people who had direct personal experience with them.  You can learn a lot this way that the national “watchdogs” can’t possibly duplicate.

I would love to hear what our readers think on these issues.  Your experience may be different from mine.