Charity Watchdogs – What are they and how do they impact your organization?
What are Charity Watchdogs?
With all the interest in impact and information, “Charity watchdogs” have been gathering data, assessing external information and reviewing your Form 990, website, financial statements, and other documents to determine your effectiveness.
- Who are these watchdogs, and why are they watching?
- What specifically are they looking at and looking for?
- How do they calculate their ratings, and what do they do with them?
- And most important, what can your nonprofit do to put its best foot forward to avoid misinterpretation and address what some consider flawed evaluation processes?
These are just a few of the questions that your chief executive knows the answers to. This resource is designed to help provide an overview for board members.
Why do Charity Watchdogs exist?
Charity watchdogs gather information about nonprofits and their practices, analyze the information, rate or rank nonprofits based on their criteria, and share their findings with the public, either for free or for a fee. Donors may review the information, ratings, and rankings shared by charity watchdogs when deciding which organization(s) to support. The media, as well as some grantmakers, also review the information provided by charity watchdogs to determine if an organization is operating in a “responsible” manner.
What can Nonprofits do to put their best foot forward?
Nonprofit board leaders should know their organization’s rating by the charity watchdogs. If you’re happy with the scores, perhaps they can be used to publicize your work. If they are low, consider why, and how you could put your best foot forward.
Here are some things that impact how every organization is reviewed and rated by the charity watchdogs as well as perceived by the public:
Form 990
Form 990 has a series of governance questions that must be answered yes or no. If at all possible, nonprofits want to answer these questions in the affirmative; negative answers can lead to lower watchdog ratings. To answer affirmatively, nonprofits must have the following policies and procedures in place:
Policies:
- Conflict-of-interest
- Whistle-blower
- Record retention and destruction
- Donor privacy
- Board minutes documentation
- Providing Form 990 to the board in advance of filing
- Auditing of financial statements and establishment of audit committee
Processes for:
- Determining chief executive’s and other key officers’ compensation
- Reviewing Form 990
It also is important to ensure that the required salary disclosures are provided. Regardless of the amount, the chief executive’s salary must be disclosed as well as others’ over a certain threshold.
It is important to note it is very difficult to assess nonprofit impact at the subsector level and even harder at the sector level. There has been some pushback from sector leaders as to how their organizations are assessed and if those assessments are the right assessments.
Website
Watchdogs and the public also review organizational websites for transparency. All nonprofits should consider posting their audited financial statements, Form 990, donor privacy policy, and a list of their current board members and key staff.
GuideStar Nonprofit Profile
GuideStar offers a nonprofit profile and publishes all IRS filed nonprofit 990s, a year or two after submission. GuideStar collects, organizes, and neutrally presents raw information — mission, legitimacy, impact, reputation, finances, programs, transparency, and governance — on more than 1.8 million IRS-recognized organizations.
GuideStar encourages nonprofits to share organizational information openly and completely by regularly updating their GuideStar Nonprofit Profile. It combines the information supplied by nonprofits with data from other sources. It is up to each individual to conduct their own analysis of the information provided on the GuideStar website. Nonprofits can update their profiles to put their best foot forward with potential donors, grantmakers, and the public. This includes answering questions related to impact and governance.
Who are the main Charity Watchdogs?
Over time, watchdog groups may change, but these are some of the main watchdog groups.
Charity Ratings – what are watchdogs looking for and how do they evaluate nonprofits?
While few if any nonprofit leaders would argue against accountability and transparency, many consider the evaluation processes used by the charity watchdogs flawed, saying they focus on the wrong metrics and criteria, and oversimplify the complicated inner workings of nonprofits.
The biggest issue is the use of and focus on overhead and fundraising ratios — how much of an organization’s budget is spent on programs as opposed to overhead and staff and how much money is spent on fundraising relative to the amount brought in — as indicators of an organization’s effectiveness.
This issue led to the 2013 release of an open letter to the donors of American and the launch of a campaign designed to end the “Overhead Myth”— the false conception that financial ratios are the sole indicator of nonprofit performance — by GuideStar and two of the largest charity watchdogs, Charity Navigator and BBB Wise Giving Alliance.
And in 2017, BoardSource, in partnership with the Association of Fundraising Professionals, BBB Wise Giving Alliance, and GuideStar, introduced Measuring Fundraising Effectiveness — Why Cost of Fundraising Alone Isn’t Enough. It features a new framework for evaluating fundraising effectiveness — one that provides a balanced approach that emphasizes how important it is to invest in strong and sustainable fundraising programs.
To provide nonprofits with the opportunity to tell their own stories about the impact their work is having, GuideStar, BBB Wise Giving Alliance, and Independent Sector developed Charting Impact — five simple, yet telling, questions related to an organization’s goals, strategies, capacity, and progress.
- What is your organization aiming to accomplish?
- What are your strategies for making this happen?
- What are your organization’s capabilities for doing this?
- How will your organization know if you are making progress?
- What have and haven’t you accomplished so far?
Nonprofits can complete their Charting Impact reports when they update their GuideStar Nonprofit Profile. The public can access this information simply by searching for a specific nonprofit on the GuideStar website.
Nonprofits also have the opportunity to share information about their board leadership practices on their GuideStar Nonprofit Profile by answering five yes/no questions developed by BoardSource and GuideStar. The questions relate to board orientation and education, CEO oversight, ethics and transparency, board composition, and board performance.
101 Resource | Last updated: March 25, 2025