What Is CharityWatch?

CharityWatch is an independent charity watchdog organization founded in 1992. We work for the public interest, giving donors the information and analysis they need to make informed giving decisions and holding charities accountable for how they raise and spend public dollars.

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Journalistic Approach

Our work functions much like financial journalism. CharityWatch’s analysts are degreed accountants who dig deeply into the finances and operations of nonprofit organizations, examining audited financial statements, IRS tax filings, fundraising agreements, and other reporting to uncover what the numbers really mean.

We don’t simply accept charities’ self-reported information at face value or run it through automated formulas. We scrutinize the underlying financial reporting, organizational structures, accounting practices, and fundraising activities, and make our own independent assessments, adjusting for information that is inaccurate, incomplete, inconsistent, and incomparable.

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What We Publish

CharityWatch’s published work takes the form of charity ratings as well as original reporting on nonprofit finances, fundraising, governance, transparency, lawsuits, regulatory actions, and other issues important to donors. We also work with investigative journalists, providing financial analysis and nonprofit expertise that helps bring important stories to the public.

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Who We Serve

We exist to serve the public interest. Full stop. CharityWatch is not a trade association, charity promotional platform, or consulting service. We work for donors and the public, not the organizations we evaluate. That independence allows us to ask difficult questions, challenge charity reporting when the numbers don’t tell the whole story, and publish our findings without being beholden to the organizations or special interests we scrutinize.

CharityWatch helps donors identify financially efficient and accountable charities worthy of their support through our independent ratings and research. We also assist journalists with investigations into nonprofit financial practices and governance, and publish articles that alert the public to charities engaging in questionable or irresponsible practices. By helping donors distinguish between charities that use their resources responsibly and those that do not, our work encourages more charitable dollars to flow toward organizations that put donations to good use, rather than wasting resources that could otherwise support important charitable missions.

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A Watchdog, Not A Charity Database

CharityWatch is a watchdog organization, not a nonprofit trade association or data aggregator. Our work functions more like investigative journalism than automated data processing. Just as a newspaper cannot investigate and publish an in-depth article about every organization in the country, CharityWatch cannot conduct a deep financial analysis of every nonprofit.

Each CharityWatch rating represents substantial analyst time spent manually examining a charity’s audited financial statements, IRS tax filings, and other reporting; understanding its organizational structure and accounting; identifying issues that may distort its reported financial efficiency; and making analytical adjustments when appropriate. Our ratings are deep dives, not quick, automated calculations performed using the self-reported, unaudited data found in charity tax filings or marketing materials.

This approach necessarily limits the number of charities we can evaluate. CharityWatch currently rates about 700 charities and other nonprofit organizations. We generally focus on larger organizations that receive $1 million or more in annual public support, are of interest to donors nationally, and have at least 3 years of financial operations.

Tangle Podcast Interview: CharityWatch CEO Warns Against Automated Charity Ratings

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How Does CharityWatch Decide Which Organizations to Rate?

Our selection process is donor-driven. We strive to cover the charities members of the public are most interested in and organizations for which independent analysis may be particularly valuable. We therefore give priority to charities that spend a significant portion of their budgets on fundraising and other overhead, as well as organizations that conduct substantial direct-mail or telemarketing fundraising, since these are among the charities donors most frequently ask us about.

CharityWatch does not accept requests from charities asking to be rated. We also do not charge charities to be evaluated, listed on our website or in our publications, or to publicize a CharityWatch rating. These policies help preserve our independence and ensure that the charities we select for review are determined by donor interest and our watchdog priorities, not by the organizations seeking favorable exposure.

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How Is CharityWatch Different From Other Raters?

CharityWatch is an independent watchdog that works for donors, not the charities asking for their money. That distinction sets us apart from raters such as Candid and Charity Navigator, which operate under fundamentally different models.

Candid functions much like a nonprofit trade association, providing research, educational resources, and services primarily designed to help charities raise donations and otherwise support the nonprofit sector. Candid encourages charities to claim their online profiles and upload information about themselves to Candid’s site (at guidestar.org), including program descriptions, demographic data, financial documents, and self-reported accomplishments. Its Bronze, Silver, Gold, and Platinum Seals of Transparency are assigned based on the types and quantity of information that charities upload about themselves, not an independent assessment of whether they spend donations efficiently and responsibly or are well-governed.

Charity Navigator is substantially a data aggregator that uses automated formulas to generate ratings based on information from charities’ unaudited IRS tax Forms 990 and other sources, including self-reported data. Its standardized approach allows it to rate thousands of charities without independently scrutinizing the underlying financial data or accounting practices of each organization. Charity Navigator also encourages charities to use their favorable ratings as fundraising tools, providing promotional badges and other resources to help them attract donations. The problem is that nonprofit financial reporting is frequently inaccurate, inconsistent, incomparable, and incomplete. When the underlying financial data is flawed, those flaws inevitably carry through to the automated ratings built upon it.

CharityWatch has assigned F ratings to numerous charities that display Candid’s highest Platinum Seal or that receive perfect 4-star ratings from Charity Navigator, including charities with serious governance problems or that spend more than 90% of donations on overhead rather than charitable programs.

Update: F-Rated Charities Receive Top Ratings & Seals

CharityWatch does the work that crowdsourced and automated rating systems cannot. Our analysts scrutinize audited financial statements and the tax filings of the legal entities included in those statements, examine related-party transactions, identify misleading accounting practices, and make adjustments to reported figures when necessary to determine how efficiently charities actually use donations. We also investigate questionable financial practices and governance failures, publishing articles that warn donors about charities that may not deserve their support. We don’t crowdsource charity marketing materials and call it accountability, and we don’t mistake a charity’s self-reported numbers for independently verified facts.

Our job isn’t to help charities market themselves or raise more money. It’s to give donors the truth about how their contributions are actually being spent so they can make informed decisions and make the greatest impact with what they have to give.

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How Is CharityWatch Funded?

CharityWatch is not directly or indirectly funded by the sector we oversee. Nearly 90% of CharityWatch’s annual contributed support comes from relatively small donations from individual donors. Most of our remaining charitable support comes from small family foundation donors. CharityWatch also earns a modest amount of income from investments and other sources.

Who funds a watchdog matters. CharityWatch does not charge charities to be rated and does not accept payments from charities in exchange for favorable ratings or reviews or for the right to publicize their CharityWatch ratings. We carefully avoid funding relationships that could compromise, or appear to compromise, our independence, including funding from charity trade associations, nonprofit consulting companies, and businesses whose financial interests depend substantially on the nonprofit organizations we scrutinize.

This funding model allows us to work for donors and the public, follow the facts wherever they lead, ask difficult questions, and publish our findings without being beholden to the organizations or special interests affected by our reporting. However, it also means that we rely on donations from the general public to support our work.

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Donate to CharityWatch

With additional resources, CharityWatch can continue this important work and expand the number of organizations we are able to investigate and rate. We hope you will consider making a donation to CharityWatch. Thank you for giving wisely!