A rollicking MUST READ for charities, fundraisers and regulators.

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Needless to say, we believe every word posted on the Hootville website is a gem to be read and treasured by our citizens. Then of course there are the genuine must-read items. This alarming piece of investigative journalism spotlighting America’s 50 worst charities is such an item and should be consumed by anyone who cares about fundraising and charities, those in the profession, serving on NFP boards or our new regulator the ACNC.

Rating Australian charities

Vital statistics, at donors' fingertips.

Sadly we didn’t write the article – the Tampa Bay Times in Florida did with the assistance of The Centre for Investigative Reporting. The paper has a pugnacious reputation and this multimedia extravaganza of data-driven journalism has award-winner written all over it.

Essentially America’s 50 worst charities have been named and shamed. These are ‘charities’ which raise much but donate little. They purport to represent all the right causes – sick kids, women with breast cancer and of course, this being America, police, fire and the military. Funds raised however, go mainly to the founders ands their kids, sons-in-law and best friends.

One note: when you read “solicitors” think fundraisers soliciting for donations by phone or mail not lawyersAnother note: this article is about downright corrupt, fraudulent charities – not merely the inept, lacklustre or meaningless.

It could never happen here – could it? Of course it could. And it does. The Australian Charities and Not-For-Profits Commission (ACNC) should read this to know how the bad guys operate.

Though this media project is laudable as hell and will have impact (mainly by giving prospective donors reasons to not give) America is already blessed with an ongoing non-profit organisation devoted to breaking down charities’ balance sheets and rating their effectiveness. It’s called Charity Navigator and it is astounding. We’ve raved about it here before.

America's worst charities

James T. Reynolds Sr does not come out of the article looking very good.

Six thousand charities are rated and compared against rigorous criteria: admin costs, debt levels, fundraising costs, CEO salaries. Solid apples-with-apples comparisons. The site trawls the financial returns and annual reports and breaks them down. The information is available quickly and simply 24 hours a day.

Charity Navigator does not just concentrate on weeding out totally dodgy operators – it’s mission is far broader and more valuable than that. It rates 6000 charities showing the mediocre as well as the mendacious. It is all about transparency and effectiveness.

For instance – imagine if we could compare every Australian charity in terms of the CEO’s salary as a percentage of total turnover. What an interesting reads that would make.

We desperately need something just like Charity Navigator here in Australia. Now. It would do more to educate and reassure the giving public and weed out the half-baked and ill-conceived than just about anything else, perhaps even the ACNC.

(Thanks to the ever on-line Roslyn Grundy for alerting us to the article.)


4 Responses to A rollicking MUST READ for charities, fundraisers and regulators.


    I think the fixation on admin costs is dangerous and rarely a fair comparison. People want good management but frown upon the “admin cost” to make that possible, not to mention the costs of delivering risk management, quality assurance, etc etc. If you want to contribute to the impact or outcome of a charity, you have to contribute to the total cost of achieving it. NFP CEO salaries included. I’m all for transparency as long as we get real about the cost of delivering charitable services at a time when the regulatory standard is rising. More disclosure, more laws, but no funding to achieve it.

    Off shopping now, shall I tell them I’ll pay for the dress minus the cost of the rent or wages please?

    • Brett says:

      We agree Melanie. The public are remarkably naive about business in general and NFPs specifically. They are shocked that NFPs would pay outsiders for any sort of service. (Presumably they all clean their own home, grind their own wheat for self-baked bread and renovate their own homes). A CEO-wage to revenue ratio may be misleading early on in an NFP’s lifespan though it becomes more relevant when the organisation matures. This is just one of dozens of legitimate metrics one could use. We have to be blunt – there are an awful lot of small orgs out there running fragile, specific programs. Do we really need each to be scratching around for board members, donors, volunteers and smarter ways to do things? This is where we’d like to see evolution.

  2. Gemma says:

    Most NFP industry peeps would suggest that Charity Navigator is the LAST thing we need here. The focus on overheads instead of results has already bred a dangerous giving culture in the states that is starting to replicate here…

    I’d encourage you to check our Dan Palotta’s thoughts on the subject. May provide some further insights into your arguments, if you’ve not already seen it: http://blog.ted.com/2013/03/01/a-new-way-to-judge-nonprofits-dan-pallotta-at-ted2013/

    I personally want the very best people working towards solving societies most desperate problems. Why shouldn’t charities pay for the best people, if the impact can be demonstrated to donors and supporters? Instead of letting the skilled people head off into commercial enterprise and sell anything and everything to our consumer driven lifestyles because charities cant afford to match salary in for-profit enterprise?

    • Brett says:

      Thanks Gemma. We agree that NFPs should pay to attract the best people but we also suspect that a lack of public data means that underperforming CEOs and organisations can keep underperforming under the radar. We shall check out and share your link.

      We also think that costs-to-revenue is just one aspect of measuring the effectiveness of NFPs. But it is an important one. Charity Navigator ranks many, many things beyond salaries.

      Increased scrutiny always makes industries uneasy but consumers are reassured by it. The ACNC told us today they are (slowly) working towards tables of financial reporting comparing charities. The devil of course is in the execution – will we be able to compare apples with apples? Perhaps less-known charities will benefit from the reporting. Will the site be well designed and promoted?

      Currently: How could any Australian donor easily find in one place, in a consumer-friendly format, a list of charities that are clearly fraudulent? Or ones that consistently take in but don’t give out? Or charities that are saddled with irresponsible debt. What’s currently stopping Hootville establishing a charity, meeting all legal and reporting obligations but essentially spending 90% of donations on itself? Hmmm…not a bad idea. Excuse us a moment…