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A Letter from the CEO

Charity Ratings and "The Overhead Myth": What Really Matters is Impact

Heifer CEO Pierre Ferrari
Heifer CEO Pierre Ferrari

This is Pierre Ferrari, Heifer International's President and CEO. I want to share some thoughts with you about charity ratings and impact. Most nonprofits are in the business of helping people, but how do we measure success?

Charity Navigator is one of the primary charity rating services along with BBB Wise Giving Alliance. Recently, Charity Navigator revised its rating of Heifer International from three stars to two stars (based on a four star system) for our fiscal year 2012 rating – this after receiving three stars overall for the previous eight years. The BBB Wise Giving Alliance awards Heifer its highest rating. What does any of this really mean?

Charity Navigator's financial dimension is based on the IRS Form 990, and this includes functional allocation, or the percentages of an organization's funds spent on programming versus fundraising and administrative costs. This approach does not value periodic growth investments, and in fact, penalizes organizations like Heifer that make short-term investments to diversify and increase fundraising or build global systems … activities that will yield exponentially more programmatic impact long-term.

The chief executive officers of three rating services, including Charity Navigator, actually address this issue in a recent joint letter entitled "The Overhead Myth," that states in part:

"The percent of a charity's expenses that go to administrative and fundraising costs − commonly referred to as overhead − is a poor measure of a charity's performance … In fact, many charities should spend more on overhead. Overhead costs include important investments that charities make to improve their work − investments in training; planning; evaluation; and internal systems; as well as efforts to raise money so they can operate their programs."

The people and communities served by charities don't need low overhead, they need high performance. "The Overhead Myth"

Heifer International is committed to running an efficient, high performance organization. We believe that periodic investments are necessary for exponential long-term growth. Clearly, the most important measure of a charity is impact. It is why we exist … and none of the rating services currently address how effective a charity is in its programmatic mission.

Heifer's impact can be seen in the more than 20.7 million families who have been lifted out of hunger and poverty, but I invite you to do an evaluation of your own:

Together, we can shine a light on what really matters – and that's impact for our mission to end hunger and poverty. I invite you to join me on this journey.

Sincerely,

Pierre Ferrari
Pierre Ferrari