CharityWatch
Formation1992; 29 years ago (1992)
FounderDaniel Borochoff
TypeNonprofit corporation
Legal statusActive
PurposeCharity Ratings
HeadquartersChicago, Illinois, U.S.
Official language
English
President
Laurie Styron
Main organ
charitywatch.org
Revenue
$605,768
Staff
5
Websitewww.charitywatch.org
Formerly called
American Institute of Philanthropy

The American Institute of Philanthropy (AIP), dba CharityWatch, formerly known as the American Institute of Philanthropy (AIP), is a 501(c)(3) nonprofit organization in Chicago,[1] created in the United States by Daniel Borochoff in 1992,[2] to provide information about charities' financial efficiency, accountability, governance, and fundraising.

Overview

CharityWatch is a nonprofit charity watchdog and rating organization that works to uncover and report on wrongdoing in the nonprofit sector by conducting in-depth analyses of the audited financial statements, tax forms, fundraising contracts, and other reporting of nonprofit. They only review 600 charities out of 1.5 million in the US.[3] CharityWatch encourages donors to give to charities that will allocate most of their contributions to program services that benefit the people and causes that donors wish to support. CharityWatch also promotes charity accountability and transparency through its research on the rapidly changing nonprofit field[4] and through its work with investigative journalists uncovering wrongdoing within the nonprofit sector.[5] CharityWatch rates nonprofits on an A+ (best) to F (worst) scale and provides data on charity executive salaries, governance, public transparency, donor privacy, asset reserves, and other information uncovered by its analysts during their evaluation.[6] It publishes this information on its website[7] and in its biannual Charity Rating Guide & Watchdog Report. CharityWatch also publishes lists of Top-Rated Charities,[8] charities with high assets,[9] and a report of top compensation packages paid to charity executives.[10]

CharityWatch states that it is independently funded by small donations from the general public and that it receives over 95% of its support this way.[11] The majority of CharityWatch's content is free to the public, including its library of articles, giving tips, resources for donors and journalists, top charity compensation packages, and its full reports on all of its top-rated charities. Membership to access CharityWatch's full content is currently $50 per year.[12]

CharityWatch sets itself apart as a charity watchdog organization that performs individualized analyses of charities' financial reporting. It has been critical of other sources of charity information that produce automated ratings based solely or primarily on computer algorithms whose rating systems can easily be gamed by charities.[13] CharityWatch assigns low ratings to charities that have high fundraising costs and low program spending in cases where other charity raters have assigned the same charities perfect scores.[14] CharityWatch has also assigned high ratings to nonprofits with more complex accounting cases where the simplistic systems of other raters produced unfairly low scored for the same charity.[15]

CharityWatch also investigates ethical issues surrounding charity spending, including salaries and payouts, financial reporting, telemarketing and direct-mail solicitation campaigns, and governance. It 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. CharityWatch founder Daniel Borochoff has testified before Congress about veterans charities,[16][17][18] the aftermath of Hurricanes Katrina and Rita,[19] and the philanthropic response to the 9/11 attacks.[20]

CharityWatch's ratings have received exposure from Congress and the media; including an appearance on the front page of The Washington Post.[21][22][17][23]

Governance and operations

CharityWatch founder, Daniel Borochoff, retired from his role as president in 2020, but remains on the charity's Board of Directors. Laurie Styron, a former CharityWatch analyst, was appointed Executive Director in his place in February 2020.[24] In 2019, CharityWatch spent $615,950, of which 83% ($510,140) was spent on programs.[25]

CharityWatch'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 CharityWatch 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."[26]

Reception

In 2005, prior to making all of its rating available on its website, AIP was criticized in a study on rating nonprofits for having a "gotcha" mentality and limited explanation for their ratings.[27] 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 and thus develops its financial health ratios by analyzing a charity's audited financial statements"[27]

CharityWatch does not take charities' financial reporting at face value even when Generally Accepted Accounting Principles (GAAP) allow charities to include in-kind goods of questionable value in their financial reporting, or allow charities to include telemarketing or direct mail costs in their reported program spending.[28] Many in the nonprofit space have taken issue with this approach.[29][30][31]

See also

References

  1. ^ "Charity Ratings | America's Most Independent, Assertive Charity Watchdog". CharityWatch. Retrieved 2016-01-25.
  2. ^ Daniel Borochoff. "Mission Statement, Goals and More". Charitywatch.org. Archived from the original on 2010-12-07. Retrieved 2012-08-13.
  3. ^ FNP Interactive – http://www.fnpInteractive.com (2007-12-21). "The Frederick News-Post Online – Frederick County Maryland Daily Newspaper". Fredericknewspost.com. Archived from the original on 2012-02-17. Retrieved 2012-08-13.
  4. ^ "How to tell a good charity from a bad one". MSM Money. Archived from the original on 2011-07-14. Retrieved 2012-08-13.
  5. ^ "In the News". www.charitywatch.org. Retrieved 2021-03-11.
  6. ^ "Charity Rating Process". www.charitywatch.org. Retrieved 2021-03-11.
  7. ^ "Charity Ratings | America's Most Independent, Assertive Charity Watchdog | CharityWatch". www.charitywatch.org. Retrieved 2021-03-11.
  8. ^ "Top Rated Charities". www.charitywatch.org. Retrieved 2021-03-11.
  9. ^ "High Asset Charities". www.charitywatch.org. Retrieved 2021-03-11.
  10. ^ "Top Charity Compensation Packages". www.charitywatch.org. Retrieved 2021-03-11.
  11. ^ "CharityWatch Difference". www.charitywatch.org. Retrieved 2021-03-11.
  12. ^ "Become a Member". www.charitywatch.org. Retrieved 2021-03-11.
  13. ^ www.guidestar.org https://www.guidestar.org/profile/33-0491030. Retrieved 2021-03-11. Missing or empty |title= (help)
  14. ^ Weiss, Gary. "Spotting Nonprofit Accounting Tricks". www.barrons.com. Retrieved 2021-03-11.
  15. ^ "Outstanding Veterans Charity Wrongly Given Low Marks by Others". www.charitywatch.org. Retrieved 2021-03-11.
  16. ^ Charity Alert: Committee on Oversight and Government Reform. United States House of Representatives Archived January 31, 2008, at the Wayback Machine
  17. ^ a b "Failing to Serve America's Heroes on the Home Front". ABC News. 2007-11-09. Archived from the original on 2011-07-23. Retrieved 2012-08-13.
  18. ^ [1] Archived January 31, 2008, at the Wayback Machine
  19. ^ Hearing Archives: Committee on Ways & Means. U.S. House of Representatives Archived January 31, 2008, at the Wayback Machine
  20. ^ "Committee on Ways and Means, Oversight Subcommittee, 107-47, Response to the Recent Terrorist Attacks". Waysandmeans.house.gov. Archived from the original on 2012-12-16. Retrieved 2012-08-13.
  21. ^ "Study Faults Charities for Veterans". The Washington Post. 2007-12-13. Retrieved 2012-08-13.
  22. ^ "An Intolerable Fraud". The New York Times. 8 February 2008. Retrieved 25 January 2016.
  23. ^ "Vet's Charities Pocket Money". CBS News. 2007-12-13. Retrieved 2012-08-13.
  24. ^ "Staff & Board". www.charitywatch.org. Retrieved 2021-03-11.
  25. ^ "2018 Charity Watch Audited Financial Statement" (PDF). 2019-05-22.
  26. ^ "Mission & Goals". www.charitywatch.org. Retrieved 2021-03-11.
  27. ^ a b "The Ratings Game". Stanford Social Innovation Review. Summer 2005.
  28. ^ "CharityWatch Ratings Bridge the Knowledge Gap between Donors and GAAP Reporting". www.charitywatch.org. Retrieved 2021-03-11.
  29. ^ https://www.perlmanandperlman.com/charity-navigator-dismisses-use-of-joint-cost-allocations/
  30. ^ https://blueavocado.org/finance/charity-raters-part-i-charting-the-bad-and-the-bad/
  31. ^ https://nonprofitquarterly.org/2016/06/02/is-charity-navigators-revised-rating-system-an-improvement/