The American Institute of Philanthropy, or AIP, is a nationally recognized group that functions as a watchdog of charitable institutions. Its service purports to interested prospective donors with published information relative to a charity’s honesty, efficiency and integrity -- all in the hope of allowing them to make informed charitable decisions.

The AIP facilitates this by rating charitable organizations after first assessing (among other factors) the percentage of expenses they spend on programs relative to that which goes into fund-raising and executive compensation. In this way, the degree to which a charity is truly dedicated to the well-being of others rather than (as has sometimes sadly been the case) to its own enrichment can be determined. While other organizations, such as GiveWell, Charity Navigator, and GuideStar perform a generally equivalent function, the AIP’s system for the evaluation of charities is considered the most stringent in the industry.

But Who Watches the Watchers?

According to IRS records, in 2008 the AIP spent most of its $485,000 outlay on salaries – this amount intended to cover the evaluation of only 500 charities relative to the more than 5,400 assessed by competitor Charity Navigator. Furthermore the AIP has been charged by more than one charity receiving of its low rating that it fails to use Generally Accepted Accounting Principles – a practice that robs them of ratings that would otherwise be outstanding, according to their own lights. Citing favorable ratings from other sources of charity information, these charities also claim that the AIP doesn't properly take the quality of their programs into account.

Another criticism of AIP involves the charge of an overwhelming liberal bias. Thus, the organization is said (in part by the Vietnam Veterans Memorial Fund, among others) to freely rate large numbers of leftist groups for prospective donors, while keeping ratings of conservative – and particularly pro-military – charities to a minimum. Another group receiving what it regards as unfair criticism by the AIP has been the Paralyzed Veterans of America.

These criticisms and others cited by a study reported in the Stanford Social Innovation Review -- an award-winning magazine covering successful strategies of non-profits, foundations and "socially-responsible" businesses -- found that the AIP performed its evaluations in a way that lacked transparency while nonetheless retaining a corrosive "gotcha" mentality. The report concluded with the statement that "as donors make important decisions using potentially misleading data and analyses, the potential of watchdog agencies to do harm may outweigh their ability to inform."