As a donor, I know you are eager to ensure that the dollars you invest in causes near and dear to your heart are used efficiently and effectively. As president, CEO and board member of Defenders of Wildlife, I too want to make sure that every dollar invested in our organization is used to maximize the impact of our wildlife conservation efforts.
That’s why I was alarmed to recently learn that we had been downgraded on Charity Navigator’s site. The lower rating occurred despite the fact that there had been no change in our financial or operating status. We are proud to receive clean audits and financial reports every year, and we had achieved a three star Charity Navigator (CN) rating based on our most recent audit.
Donations to Defenders of Wildlife are put to good use, with 73 cents of every dollar going directly into our core mission to conserve wildlife and habitat, 18 cents going to management and general expenses and 9 cents going to fundraising.
Upon investigation of this unexpected downgrade, we learned that CN had unilaterally changed its rating methodology to a system that, we believe, unfairly penalizes membership organizations like Defenders. As a membership non-profit, individuals who care deeply about wildlife can join Defenders and become part of our strong voice for wildlife. We are effective in large part because our 440,000 members and donors, as well as an additional 700,000 on-line supporters, serve as advocates for wildlife throughout North America.
To educate our members about timely and important wildlife issues and call on them to take action, such as writing to Congress, contacting federal agencies, or submitting opinion pieces to newspapers, we send frequent email and print mail outreach materials. Part of the purpose of these mailings is fundraising, but a much larger part is education and/or advocacy. Under SOP 98-2, a well established accounting standard set forth by the independent Financial Accounting Standards Board, non-profit organizations are permitted to allocate part of the costs for these mailings to core program expenses and part to fundraising expenses. These standards, which have stringent criterion, have been in place and supported by the accounting profession and the Internal Revenue Service for the past 15 years. Despite this history, CN has now unilaterally decided to disallow these “joint allocations,” and has made adjustments to Defenders’ audited numbers. We strongly disagree. Organizations that are not member-based are not affected by this change as they are not conducting mailings to their members or the public and therefore do not have these types of costs.
Their adjustment puts all of the costs for member outreach into the fundraising category. Because of this change in CN’s rating system, they now have inflated our overall fundraising costs to 30%, rather than the 9% that had been properly recognized under the federally accepted joint allocation standards. This has subsequently created a misconception that Defenders is spending an inordinate amount of donor funds on fundraising compared with other organizations and a corresponding low amount on our mission-driven programs.
Charity Navigator told us that they are implementing the changes resulting from their new methodology on a rolling basis, and therefore there are quite a few non-profit ratings on their site that have not yet been changed. This may result in inconsistencies when donors utilize a feature on the site to compare what they consider to be similar organizations.
Defenders of Wildlife is a voice for imperiled wildlife in the halls of Congress, in the administration, in the courts and on-the-ground in vital ecosystems around the nation. Wildlife has a powerful voice when I can stand up and advocate with more than one million members and supporters behind me. The reality of having a powerful advocacy voice is that we must spend money to continue to grow, educate and engage that constituency.
Charity Navigator is now applying a one-size-fits-all yardstick for evaluating all charities, regardless of the wide differences on how they are organized, whether they operate on a membership model, how effective they are in achieving results, and whether they engage in public advocacy. Dan Pallotta laid out quite well the downside to this rigid approach in his post on HarvardBusiness.org (http://blogs.hbr.org/pallotta/2009/06/efficiency-measures-miss-the-p.html). He notes that in 1997, Physicians for Human Rights had a 2 star rating from Charity Navigator, yet their effectiveness was such that they received the Nobel Peace Prize that same year.
I am deeply concerned about this situation. Effective and necessary membership or advocacy organizations should not be unfairly penalized by an arbitrary star rating system that discards years of well established accounting standards. We believe that donors are not being well served by this rating system, and the charities that help our environment, wildlife, children, the elderly and others in need will be hurt as well.
Thank you for considering a donation to Defenders of Wildlife. I hope this explanation provides you with confidence that we value every dollar that donors like you give us and will use these funds effectively to conserve wildlife. If you have further questions on this issue, please don’t hesitate to call as at 1-800-385-9712 or firstname.lastname@example.org. Jamie Rappaport Clark