News & Updates

 

Wise Giving Wednesday: Donor Reliance on Financial Ratios Drops

Nov 18, 2020

Last week, BBB Wise Giving Alliance released the latest edition of the Give.org Donor Trust Report. Since this is the third year we produce the report, this edition included a retrospective on trends observed in our surveys.  One significant shift is the reduced importance placed by donors on financial ratios as a top signal of trust. Specifically, the portion of respondents who say they rely on financial ratios as a top signal of trust decreased from 35% in 2017 to 19% in 2020.

Financial Ratios as Top Signal of Charity Trustworthiness:

  • December 2017     35%
  • December 2018     30%
  • December 2019     28%
  • August 2020     19%

When asked what most signals that a charity is trustworthy, the top factors in August 2020 were:

  • Third-party evaluation     36%
  • Charity name recognition     34%
  • Accomplishments shared by the organization     30%
  • Opinions expressed by friends & family     21%
  • Financial ratios     19%

BBB Wise Giving Alliance has long maintained that excessive focus on any one factor, like overhead spending, can be misguided and harmful to a charity’s capacity to thrive. We remind donors that assessing a charity’s trustworthiness takes both a keen eye and a broad view. The BBB Standards for Charity Accountability, for instance, consider adequate board oversight, how funds are spent, appeal accuracy, accomplishment reporting, and transparency. Each component can factor into donor considerations, but no single factor is enough to make a complete assessment.

About seven years ago, BBB Wise Giving Alliance joined with GuideStar (now known as Candid) and Charity Navigator to issue an open letter to donors, The Overhead Myth, that urged them not to solely rely on charity financial ratios when deciding which charities to support. However, it also pointed out that “at the extremes the overhead ratio can offer insight: it can be a valid data point for rooting our fraud and poor financial management.” In the ensuing years, we have continued to make this point in our outreach to the donating public.

It is likely that a combination of factors influenced this change in donor attitudes, but we would like to believe that we were a part of this shift and hope that contributors will continue to take a more complete view of a charity’s accountability.


Video of the Week

As part of our Building Trust Video Series, we are pleased to provide a video featuring an interview with Haroon Shaikh, President of SUIT North America (a BBB Accredited Charity) that seeks to provide medicines and equipment to non-profit hospitals and institutions dealing with kidney diseases, dialysis and end stage renal diseases. SIUT North America reports that its major focus is on helping SIUT Pakistan secure necessary funds for medicines, treatments and equipment. The organization reports that all SIUT patients are treated free of charge and without discrimination. In addition SIUT reports that it helps other organizations in the U.S. through voluntary services and donations.


Recent Reports

We are always working with charities to publish or update reports for donors. Visit Give.org or local BBBs to check out any charity before giving. Our recently evaluated charities include:

Finally, remember to let us know by going to www.give.org/charity-inquiry if you are interested in seeing a report on a charity not on the list and we will do our best to produce one.

H. Art Taylor, President & CEO
BBB Wise Giving Alliance