Understanding the Charity Navigator Watchlist

What is the Charity Navigator Watchlist?

That was my question sitting at a table of fundraisers during Day 2 of the DC Nonprofit Conference. Much of their guile centered on the Charity Navigator Watchlist and how it hindered fundraising and damaged charity reputations. Though Mr. Thatcher minimized its importance, (telling the audience the Donor Advisory could do much more potential damage) the Watchlist is still one nonprofits don’t want to find themselves on.

So what is it, how does it work and how can we avoid it?

In 2014 The Charity Navigator Watchlist was added as another tool to “help protect donors.” According to charitynavigator.org, a charity will appear on the Watchlist when “we become aware of conduct that may affect a donor’s decision to support that charity.” This conduct can include:

• Audits that contain a qualified opinion and/or an “Emphasis of Matter Regarding Going Concern”
• A media outlet, nonprofit expert, or other third party evaluation (typically other than a governmental or criminal justice system entity) reports on a charity’s improper conduct or operations after performing its own independent investigation.
• Any other conduct that may affect a donor’s decision to support a charity.

Several obvious reasons for fundraiser’s ire stand out, including: any other conduct that may affect a donor’s decision to support a charity. The subjectivity of that statement alone leaves the door uncomfortably open. For example, what determines a “nonprofit expert”? In some case religious belief could affect a donor’s decision to support a charity regardless of the work its doing, is that a factor as well? 

This information (audits, media stories, etc.) is reviewed by Charity Navigator’s Donor Advisory/Watchlist Committee, which I am going to assume is the same as the Donor Advisory Issuance Committee, since they are both composed of CN staff and/or members of the Board of Directors.

“The committee does not have the capability to independently assess the veracity or accuracy of the information, nor does it attempt to do so. The Committee views its role solely as determining whether a donor might find such information relevant in considering whether to make a contribution to the charity, or an alleged charity.

Sound familiar? (Why yes Danielle… that does sound familiar)

 To CNs credit, there are some distinct differences between the Watchlist and the Donor Advisory. (Even if the selection committee and their disclaimer about not investigating “accuracy and veracity” are the same)

For starters, being included on the Watchlist does not cause the suspension of your CN rating. (A Donor advisory supersedes the CN rating) Once the determination is made to add a charity to the Watchlist, the rating is not removed however “the report is posted prominently beside the charity rating.” 

Listing on the Watchlist lasts half as long as a Donor Advisory (6 months vs. 1 year) and Charity Navigator believes “the issues that led to a charity’s being added to the CN Watchlist do not rise to the level of a Donor Advisory, but are by definition, of a nature such that they may in the near future lead to either a diminished confidence in the data upon which the rating is based, or suggest that other factors beyond our current rating dimensions may eventually lead to significant concerns.”

So as I understand it, the Watchlist is a warning before a Donor Advisory is issued. But a pretty strong warning nonetheless. According to one Fundraiser in the room (whom I have agreed to keep anonymous) “[Charity Navigator] is the leader in rating charities so in a donor’s mind that could be all that matters. They may never investigate any further. And how can you have donate to this charity listed right next to watch out for this charity. It’s ridiculous.”

(A Donate to this Charity link lives on an organization’s CN page regardless of if they are listed on the Watchlist or have a Donor Advisory)

Though I applaud CN’s consistency in allowing donors to make their own donation decisions despite CN’s findings, the juxtaposition she mentions does greatly reduce donor confidence.

Removal from the CN Watchlist requires the same public domain documentation that Donor Advisory removal requires and, though not explicitly discussed, I’m assuming the same 2-day notification window Mr. Thatcher mentioned applies as well.

I wish I could give a good answer as to how fundraisers can avoid the Charity Navigator snags but I’ve realized that finding and providing that answer would be detrimental to donors.

CN and Fundraisers should be at odds sometimes as with any watchdog group and the groups it watches. The friction that exists forces honesty, transparency and financial accountability. I would say the major flaw is that Charity Navigator doesn’t seem to be publicly holding itself to the same standards to which it holds nonprofit organizations.

There are instances where the system will fail, as with all systems as we work to improve, but I’m encouraged by the strides CN plans to take with CN 3.0. I’m encouraged by the dialogue between fundraisers and Mr. Thatcher and I hope that he will move forward with his board to increase the accountability and transparency of Charity Navigator itself. So be encouraged Fundraisers, finding cures for cancer, ending poverty, saving animals, and protecting children is not easy from any standpoint - be that in direct care or fundraising to support it. You’re doing amazing jobs and our world is truly a better place because of it.

 DM