Money & Policy

How to Find Charities That Are Making an Impact

Charity raters generally haven't evaluated this key measure — until now

One frustrating thing for people eager to give wisely to charities: finding ones that truly make an impact. The big charity raters have done a great job sizing up nonprofits for overhead costs, transparency and executive pay. Impact, however, wasn’t part of their scoring — it was too hard to assess.

Recently, though, a new charity rater known as ImpactMatters has stepped into the breach for prospective donors by rating nonprofits on the amount of good achieved per dollar spent. It doesn’t review all charities or even all types of charities, as I’ll explain, but does an impressive job for the ones it does analyze, with star ratings.

And the nonprofit Open990.org is making it easier to compare charities head-to-head for things like their salaries and expenses and revenue.

Both sites are free and I think could be quite useful when choosing where to make your charitable contributions before the end of 2019.

How ImpactMatters Rates Charities

ImpactMatters, which is funded by several foundations and private donors, rates nonprofits that directly deliver services. Specifically, it focuses on these eight areas: homelessness, health, clean water, veterans, poverty, hunger, climate change and education.

Of the 1,077 nonprofits ImpactMatters has rated, 59% have 5 stars, 28% have 4 stars and 13% have lower scores.

It doesn’t rate nonprofits that operate through advocacy or by trying to change people’s minds (too hard to measure, though some in the nonprofit sector criticize ImpactMatters for not rating these types). Nor does ImpactMatters rate what are called “donor-use” membership-based charities, such as religious organizations, community associations or institutions like museums.

“We have three principles when rating charities for impact,” says ImpactMatters co-founder and executive director Elijah Goldberg. “Outcomes — what changes as a result of their work have been meaningful? What would have happened without the program? And, the most neglected principle in some ways: comparing the outcomes to the costs.”

Most nonprofits are doing something good and improving lives in some way, Goldberg says. “The question is: Do you give money to one of them or to another that is doing something similarly, but more efficiently?”

Of the 1,077 nonprofits ImpactMatters has rated on its scale of five stars (best) to 1 star (worst), 59% have 5 stars, 28% have 4 stars and 13% have lower scores. That’s a far smaller group than the estimated 1.9 million nonprofits, but it’s a decent number for direct-service ones of all sizes.

So how exactly does this rater determine whether a charity is making an impact?

“In our first iteration, we did impact audits. That meant a lot of contact with the nonprofits,” says Goldberg. “We discovered that took a lot of time.” Now, the rater does its exhaustive analysis without direct interactions, but  gives the charity an opportunity to review the rating.

4 Ways to Use ImpactMatters

There are four ways you can use ImpactMatters.

  • You can search for a particular charity you’re interested in to see if there’s a rating.
  • You can review the site’s Toplists, which show all the ratings for a particular type of charity.
  • You can look at the 5-Star Nonprofits list, which includes Veterans of Foreign Wars of the United States; Sightsavers (helping cure blindness) and Fellowship Deliverance Ministries (providing homeless shelters).
  • You can look at any of its 44 local giving guides  which shows the best-rated groups in particular metro areas, from Atlanta to Washington, D.C.

The Charity Navigator website, which has traditionally rated charities on financial measures, now also offers information about impact. It does this by including ratings from places like ImpactMatters and GlobalGiving, a crowdfunding platform for grassroots charitable projects.

How Open990.org Can Help You Research Charities

If you’d like to research charities based on how well they’re run and enjoy perusing data, check out Open990.org. Heather Kugelmass says she co-founded it with David Borenstein, Charity Navigator’s former director of data science, to “democratize access to nonprofit data.”

The site pulls together in one place data the financial information forms charities file with the Internal Revenue Service, known as Form 990. Then, Open990.org turns the forms into profiles for laypeople. “We highlight what people are most interested in,” Kugelmass says.

So, if you want to bore down into how a particular charity is run and not get bored doing it, you can see how its programs have changed over time as well as how its expenses and revenues have evolved.

You can search by the organization’s name or geographic location or cause area (such as: Education). You can search based on size, if you especially want to donate to either a large charity or a smaller one. And you can search by things like expenses or highest-paid individual at the nonprofit.

If You Want to Donate to Local Charities

Some people prefer donating to small nonprofits where they live because they like to see the effects of their contributions in person. If you’re one of them, you’ll want to do your own impact assessment by visiting local charities and asking their executives questions whose answers satisfy you.

Danielle Holly, CEO of Common Impact (a group that connects corporate employees to community nonprofits), says donations to small, local nonprofits are “especially meaningful” to those organizations. That’s because these types of charities, Holly says, are less likely than national and global ones to get large corporate or foundation sponsorship.

Charity-rating sites like Guidestar and Charity Navigator may be able to help you ensure that these groups are well-managed and efficient.

RIchard Eisenberg, editor at Next Avenue wearing a suit jacket in front of a teal background.
By Richard Eisenberg
Richard Eisenberg is the Senior Web Editor of the Money & Security and Work & Purpose channels of Next Avenue and Managing Editor for the site. He is the author of How to Avoid a Mid-Life Financial Crisis and has been a personal finance editor at Money, Yahoo, Good Housekeeping, and CBS MoneyWatch. Follow him on Twitter.

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