Charities vary greatly

While many charities do strong work with the moneys entrusted to them, others lack focus or management and produce little impact.

CharityNavigator.org (CN) provides “star” ratings (0 to 4 stars) on about 5,500 larger charities.

• Roughly one-third receive a 4-star (exceptional) rating.
• Conversely, roughly one-third receive 0, 1 or 2 stars (exceptionally poor, poor and needs improvement, respectively) – we call them “clunkers.”

The American Institute of Philanthropy (see its charitywatch.org website) publishes a list of about 550 rated charities – with a similar proportion of clunkers.

It’s clear from the published ratings that while many charities do strong work with the moneys entrusted to them, others do not. A dollar given to a clunker charity would have done more good in the hands of a top-notch organization.

Billions of dollars a year go to clunker charities

CN (see above) gives “No Stars” to charities whose performance CN rates as “exceptionally poor” — describing each with “Performs far below industry standards and below nearly all charities in its Cause.” At May 1, 2011, we added up the reported annual revenues (donations, grants, charges, etc.) of the 85 “No Stars” charities at CN — just that small group of “exceptionally poor” charities took in more than $318 million in one year!

For every “No Star” charity, CN rates another 15 charities as “1 Star” or “2 Stars.” Based on CN’s ratings, they’re all performing below par (we call them “clunkers”). As a rough approximation of the magnitude, multiplying $318 million by 15 equals more than $4.7 billion — that’s more than $4.7 billion just for the clunkers on CN’s list. And CN is only able to rate a small number of charities (about 5,500 total) out of the hundreds of thousands operating in the U.S. The challenge involves many billions of dollars each year.

Each month more than $6 billion is donated to clunker charities — how much of that is yours?

Think of the good $6 billion could do in the hand of charities that were doing strong work with it.

How did we calculate this shocking dollar amount?

• $250 billion is donated by individuals and families in a year to charities.
• By CharityNavigator’s evaluations, 32% of those charities are doing less than satisfactory work (we call them “clunkers”).
• $250 billion times 32% equals $80 billion of annual giving to clunkers.
• $80 billion divided by 12 equals $6.67 of monthly giving to clunkers.