Survey: Do Ratings From Watchdog Groups Impact Giving Decisions?July 9, 2014 by Janna Finch
There are about a dozen charity evaluation and watchdog organizations that offer seals of approval to organizations for meeting certain accountability standards. Charities can then display those seals on their websites and printed materials to show donors that they responsibly manage funds.
However, a hefty fee and many hours of time may be required to obtain that approval. For small charities, the expense and time commitment can be burdensome—but leaders may also worry that their organization is at a disadvantage to acquire new supporters, should they not secure third-party accreditation.
So, are ratings seals really worth the time and cost? We surveyed donors about how much these seals impact their giving decisions. Here’s what we found.
Donors Look for Ratings Seals on Charity Websites
A combined 55 percent of respondents say they “always” or “sometimes” look for ratings seals on charity websites when deciding whether or not to make a donation. Conversely, 45 percent say they “never” look for ratings seals.
Donor Likelihood to Check Website for Ratings Seals
Clearly, most prospective donors do take notice of ratings seals on charity websites. Since over half claim they’re proactive in doing so, this suggests that it’s good practice for a charity to display third-party ratings seals to show donors that their organization abides by certain standards.
Displaying a Seal Positively Impacts Giving Decisions
We also asked respondents to tell us how much the display of a ratings seal on a charity website would impact their decision to donate to that charity.
Almost one-third (32 percent) claim that if the charity displays an approval seal on its website, that would “greatly” impact their likelihood to make a donation, while a combined 40 percent say the display would “moderately” (20 percent) or “slightly” (20 percent) increase their likelihood to donate. Only 28 percent of respondents say that the presence of a ratings seal would not increase their likelihood to donate.
Likelihood the Presence of a Ratings Seal Will Increase Giving
A recent Charity Commission report on public trust and confidence in charities found that one of the main reasons people trust a given charity less is because they don’t know how it spends their money. Moreover, the report notes that 78 percent of people say it’s important for charities to provide the public information about how money is spent.
With this in mind, it makes sense that the presence of a ratings seal—which provides verification of a charity’s commitment to transparency and the responsible use of funds—could increase a person’s likelihood to donate. Ratings seals could be especially helpful for small charities that lack brand-name recognition, to assure prospective donors that their donation will be used wisely.
Lack of Seal Significantly Decreases Likelihood of Giving
A large number—66 percent—of respondents say the absence of a seal on a charity’s website would “greatly” decrease the likelihood that they would make a donation to that organization.
A combined 27 percent of respondents say the lack of a ratings seal on a charity’s website would “somewhat” (18 percent) or “slightly” (9 percent) impact their decision not to donate, while only 7 percent say it would have no impact on their decision at all.
Likelihood the Lack of a Ratings Seal Will Decrease Giving
Obviously, there is some discrepancy here—after all, only 55 percent of respondents claim that they proactively look for ratings seals on charity websites in the first place, and just 52 percent say that the presence of a seal would either “greatly” or “moderately” increase their likelihood to give.
Still, because survey respondents’ answers trend towards the lack of a ratings seal negatively affecting their likelihood to donate, we can conclude that it’s better to have a ratings seal than not.
Better Business Bureau Seal Most Influential, GuideStar Least
Next, we sought to determine which ratings seals had the most influence on survey-takers. We showed respondents seven popular ratings seals and asked them to rate to what degree the display of the seal on a charity’s website would impact their decision to give, with one star equaling “no impact” and five stars equaling “high impact.”
The ratings seals included:
- BBB Wise Giving Alliance: To display the seal, a charity must pay an annual fee of $1,000-$15,000. They are also evaluated based on governance and oversight information, mission effectiveness, financial data and fundraising practices.
- Great Nonprofits: No annual fee for displaying the seal. Evaluation is based on user reviews.
- Independent Charities of America: Charities displaying the seal must pay membership fees. Evaluation is based on financial statements, Form 990 and governance information.
- CharityWatch1: No annual fee. Evaluation is based on the charity’s annual report, audited financial statements and Form 990.
- Charities Review Council: Annual fee of $100-$3,000. Evaluation is based on public disclosure, governance and financial activity and fundraising benchmarks.
- Charity Navigator: No annual fee. Evaluation is based on seven years of Forms 990.
- GuideStar Exchange2: No annual fee. Evaluation is based on an audited financial report, impact report and other organization information.
According to survey respondents, the BBB Wise Giving Alliance seal is, upon first impression, most likely to influence a person’s decision to donate. The BBB seal received the highest rating of five stars, while the Great Nonprofits and Independent Charities of America seals tied for second, with 3.75 stars each. The seal least likely to impact a donor’s decision to give is GuideStar Exchange.
The chart below shows the results, from the highest to lowest scores.
Except for Great Nonprofits—which rates organizations based on reviews from people who have actually interacted with them—charity evaluators and watchdogs typically request financial documents to evaluate charities, including:
- One or more previously filed Forms 990.
- Audited financial statements.
- Fundraising report.
- Impact report.
However, because 49 percent of nonprofits we recently surveyed use manual methods, such as paper ledgers, to track financial data, gathering those documents might be an arduous task for charities that don’t have a good nonprofit accounting system in place.
Dawn Brolin, a certified public accountant, speaker and consultant, says knowing that an organization is putting the effort into properly tracking donations is a key indicator to watchdog and evaluation organizations of how organized and responsible a charity is.
“Whether using top-notch accounting software or an effective and correct set of Excel spreadsheets, it’s critical to the mission to accurately reconcile and record what’s going on with unrestricted donations,” says Brolin.
Ratings Seals Increase Trust and Donations
Overall, the survey data shows that the presence of a ratings seal on a charity’s website can positively influence a prospective donor’s decision to give. Therefore, working to earn a seal of approval can be advantageous—especially for lesser-known charities that need to earn the trust of new donors.
The Charity Commission study found that while people trust charities in general, 49 percent are more likely to trust a charity that ensures “a reasonable proportion of donations make it to the end cause.”
And since charity evaluators and watchdogs use evaluation criteria intended to gauge the financial effectiveness of a charity, a ratings seal can provide donors that assurance.
To find the data in this report, we conducted a two-day online survey which consisted of ten questions, and gathered 3,861 responses from randomly selected charitable donors within the United States. We worded the questions to ensure that each respondent fully understood their meaning and the topic at hand.
Sources attributed and products referenced in this article may or may not represent partner vendors of Software Advice, but vendor status is never used as a basis for selection. To further discuss this report, or obtain access to any of the charts above, feel free to contact me at email@example.com.
- Charities may not request to be evaluated by CharityWatch. This membership organization selects about 600 charities to evaluate each year based on the interests of its members, and tends to focus on charities with more than $1 million in annual revenue.
- GuideStar is not a charity evaluator or watchdog organization; rather, it is an organization that collects and provides nonprofit information as a public service. We have included GuideStar in this list because it serves a similar purpose and its seal is displayed on many charity websites.