To ensure that charity ratings are high aid agencies feel pressured to implement projects that have inherently low percentage spent on administration – such as construction projects or handing out student scholarships – regardless of whether or not these projects are really the greatest need. Aid agencies also are more likely to skimp on hiring qualified staff and to spent too little time in the field learning about the local realities before implementing a project.

I understand that charity watchdogs are in a difficult position as the only reporting required by the federal government is the IRS I-90 form, and that’s not even required for religious charities. And as Ken Berger pointed out, far too few aid agencies really evaluate their work, and if the evaluation is not positive then they are often deep sixed or kept for “internal us only”.

Unfortunately, the average donor does not understand all of this. With so many charity watchdogs – not just Charity Navigator – focusing on administration costs, and with no other readily accessible way to judge an aid agency, many people I speak with really do think low administration costs are a key indicator of the quality of an aid agency.

Ideally, aid agencies would be evaluated on the quality and appropriateness of their work. However, barring that, I would much rather see aid agencies rated on their financial transparency – do they make their expenditures available to both donors and aid recipients, are recent audit findings available on request.

Saundra
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