No Decline in Donations to Heifer Since Downgrade

by Jan Cottingham  on Monday, Jun. 16, 2014 12:00 am  

Only extremely conscientious donors and people inside the nonprofit world likely noticed that Charity Navigator, a charities rating organization, downgraded Heifer International’s three-star (out of four) rating to two as of July 1, 2013.

Heifer rated an overall numerical score of 46.94 out of 70 with 37.53 (one star) on “financial” measures and 67 (four stars) on “accountability and transparency.” That resulted in the two-star composite rating.

A nonprofit’s rating is based primarily on how much of its revenue goes toward the programs and services that are its reason for being and how much goes to overhead, which includes the cost of fundraising. Charity Navigator obtains this information from a nonprofit’s report to the IRS, called a Form 990.

Heifer responded on its website with a statement noting that the ratings organization doesn’t value investments made to “scale up program impact, diversify fundraising, or build global systems,” the three strategies that CEO Pierre Ferrari has been working to implement since his arrival at Heifer in 2010.

Heifer also noted that Charity Navigator ignores “joint support costs,” or expenses that can be considered both fundraising and program costs. An example of these would be Heifer’s World Ark magazine and its gift catalog, which the nonprofit maintains are also educational and so a part of its mission.

In addition, even Charity Navigator, along with ratings organizations GuideStar and BBB Wise Giving Alliance, acknowledged in an “open letter to donors” issued a year ago that “The percent of charity expenses that go to administrative and fundraising costs — commonly referred to as ‘overhead’ — is a poor measure of a charity’s performance.”

The letter says that “overhead costs include important investments charities make to improve their work: investments in training, planning, evaluation, and internal systems — as well as their efforts to raise money so they can operate their programs. When we focus solely or predominantly on overhead ... we starve charities of the freedom they need to best help the people and communities they are trying to serve.”

Ferrari said Heifer had received a few inquiries about the rating downgrade but had not noticed a decline in donations.



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