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December 16, 2010


Hi Aurelie,

First Book understands and appreciates the value of Charity Navigator’s efforts to develop analytical ways to evaluate the efficiencies of non-profits. Their analyses, while imperfect, are continually being modified as the sector evolves. The site itself says in the review of their methodology that donors should not pay attention solely to their star ratings because there are other complexities to consider.

For example, in First Book’s case, one of our models is the First Book National Book Bank (FBNBB). It’s the only online centralized system to receive large volumes of excess inventory from publishers and redistribute them to programs we serve – literally giving millions of new books to kids in need. First Book’s publishing partners control when we receive such donations, which are often on a massive scale. Sometimes we receive books in December, but it takes us until January to distribute them. The fact that we receive revenue in one year which is not expensed until the next results in a lower rating for that portion of the formula, as does the size of the contributions. As you noted, our rating for efficiency is still 4-stars.

As a First Book supporter, we know you are familiar with the newest innovation, the First Book Marketplace which at scale will solve this problem of access to great educational resources for those in need. We are excited to be on the threshold of a tremendous phase of growth and impact. In fact, First Book has never been in a better, stronger financial position. We are debt-free, enjoying robust multiyear relationships with strategic partners, applying individual donations efficiently to create the most impact, and reaching more programs serving children in need than ever before.

Please get in touch if you’d like to talk about this in greater depth. Regardless, we appreciate your continued support of our work.

Brian Minter
First Book
bminter at firstbook.org

Hi Brian,

Thanks a lot for sharing this information! I was so disappointed and even shocked when I found out First Book had lost its 4-star rating. Your comment makes me feel much better about my decision to donate anyway. As you mention, there are other complexities to consider and, while I did look into other charities promoting literacy as possible alternatives before I decided to donate again, I feel First Book's size, track record, national reach and continued top rating for efficiency allow it to have more of an impact than a smaller charity. I do hope First Book will regain its 4-star rating soon, though!

You make an interesting point regarding revenue that is not expensed until the new year. I hadn't noticed that the Fiscal Year Ending for First Book was December - I can certainly imagine that December is an important month for donations & contributions and that it is not always practical to distribute books right away.

The First Book Marketplace is a great concept and definitely deserves its 2007 Social Enterprise Innovation Award!

Keep up the good work.

Dan Pallotta at HBR has some interesting thoughts on the evaluation of non-profits: http://blogs.hbr.org/pallotta/2010/11/our-ineffectiveness-at-measuri.html

Great link! Thanks, Nick. That HBR blog post really was eye-opening.

This part gave me pause: "[The literature] is devoid of any discussion about how these new efforts [to measure charity effectiveness] will marshal any more money for it than is currently available to measure overhead. Which is a pittance — the combined annual budgets for the three watchdogs (Charity Navigator, Better Business Bureau Wise Giving Alliance, and American Institute for Philanthropy) is about $3 million annually, or 0.000013% of the $225 billion that American individuals donate to charity annually. It's less than a pittance; it's statistically zero." -Dan Pallotta

I don't think Pallotta has come up with a convincing/realistic replacement, but the ideas he describes in his post have merit nonetheless.

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