Gaming the System? How OUR Rescue’s 4-Star Rating Depends on Metrics That Exclude Millions in Legal Expenses

OUR Rescue (formerly Operation Underground Railroad) presently maintains a 4-star ranking with Charity Navigator (CN). What some donors might not notice is that Charity Navigator’s scores are largely automated and based mostly on what charities report about themselves of their unaudited IRS tax Forms 990.

CharityWatch’s evaluation of OUR Rescue’s 2024 IRS Form 990 and audited monetary statements discovered that the charity omitted thousands and thousands in authorized bills from its purposeful expense reporting in 2024. Because Charity Navigator’s Accountability & Finance “beacon” accounts for 25% of a charity’s general rating, this reporting resolution has a direct affect on its ranking.

CharityWatch routinely analyzes charity tax filings wherein we establish info that’s incomplete, inconsistent, incomparable, and even blatantly inaccurate. Donors who make giving choices based mostly on automated charity scores are placing belief in info that has not been vetted by an unbiased third-party able to figuring out and correcting for errors that affect the very scores they’re counting on.

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Millions in Legal Expenses Omitted From Tax Filing

OUR Rescue reported approximately $6.6 million in legal expenses in 2024 (IRS Form 990, Part IX, line 11b, & Schedule D, Part XIII). Yet, greater than $4.8 million of this quantity doesn’t seem within the group’s Statement of Functional Expenses in its IRS tax Form 990. This is the part of the shape wherein a charity allocates its bills to point out how a lot it’s spending on its packages as in comparison with overhead, which incorporates administration and fundraising prices.

This omission has a direct and measurable affect on how the group’s program and overhead spending is offered. Based on the charity’s self-reported figures, roughly 70% of its whole bills are allotted to program companies. By distinction, as soon as the almost $4.9 million in authorized bills are added to the charity’s 2024 administration bills (as would sometimes be anticipated for litigation-related bills) this system proportion drops to roughly 62%.

That distinction shouldn’t be trivial. It can materially change how donors understand the group’s effectivity, notably in a ranking surroundings the place small shifts in program ratios can affect whether or not a charity seems extremely environment friendly or not. In impact, the exclusion of those bills permits thousands and thousands of {dollars} in overhead to vanish from the very metrics donors depend on to judge how a lot of their donation is definitely going to packages.

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A Double Bind

In December 2025 CharityWatch reached out to OUR Rescue with questions on its monetary reporting. In response, OUR Rescue said that these authorized bills had been tied to “extraordinary litigation matters” that didn’t “benefit, support, or relate to the conduct of the organization’s mission or ongoing business operations,” and due to this fact shouldn’t be included in purposeful expense reporting.

The implications of this place are simple and troubling.

If these authorized bills actually don’t relate to the group’s mission, administration, or fundraising, then donors should ask why charitable funds had been used to pay for them in any respect. Spending thousands and thousands of {dollars} on actions the group itself says are unrelated to its charitable goal raises severe questions on whether or not or not it’s complying with legal guidelines governing nonprofit organizations.

Under IRS guidelines, charitable organizations should use their sources to further charitable activities. To preserve tax-exempt status underneath Section 501(c)(3), a public charity should be “organized and operated exclusively for exempt purposes.”

This makes OUR Rescue’s place particularly vital: if the group is appropriate that thousands and thousands in authorized bills are unrelated to its mission or operations, donors are left to query whether or not these expenditures are in keeping with the necessities for OUR Rescue sustaining its tax-exempt standing.

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What the Accounting Rules Actually Require

If, then again, these authorized bills do relate to the group’s operations and assist its charitable exempt goal, that might imply that they need to have been included within the charity’s purposeful expense reporting. For instance, if the charity spent funds to defend itself or its management in a authorized dispute, or incurred different kinds of authorized bills in the middle of its charitable work, then excluding this spending from purposeful bills would possible understate overhead and overstate program spending.

In its December 2025 response to CharityWatch’s preliminary set of questions, OUR Rescue cited U.S. GAAP for not-for-profit entities (ASC 958-720 and ASC 958-720-45) to assist its place that these authorized bills needs to be excluded from purposeful expense reporting in its audit.

However, those self same requirements emphasize that bills should be reported based mostly on their purposeful goal. That is, whether or not they relate to program companies, administration and common actions, or fundraising. ASC 958-720-45 makes clear that purposeful expense reporting is meant to replicate the actions that represent the group’s operations, and that prices needs to be allotted once they assist these actions. IRS Form 990 directions replicate an analogous requirement.

In our comply with up inquiry on March 4th, 2026, CharityWatch requested OUR Rescue to quote the particular steering it relied upon when deciding to omit thousands and thousands in authorized spending from its audit and Form 990 purposeful expense statements, and to supply us with a duplicate of that steering in order that we will reality verify it. OUR Rescue’s senior vp of finance responded that he would “work on providing a response soon.” However, as of March twenty sixth, 2026, we’ve got not obtained any extra communications.

Legal bills incurred in reference to litigation involving the group, its management, or its actions are sometimes thought-about a part of administration and common bills, as they relate to governance and the continued operations of the group. The charity’s place that almost $5 million in authorized prices fall fully outdoors all purposeful classes is uncommon. By definition, bills incurred by an working group are typically related ultimately to finishing up, sustaining, or defending that group. Excluding such a lot of bills from purposeful reporting removes them from the framework donors depend on to evaluate how their donations are used.

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Why This Matters for a 4-Star Rating

Charity Navigator’s scores rely, partially, on program expense ratios derived instantly from Form 990 knowledge. Because these scores are largely automated, they often don’t alter for omissions or uncommon reporting choices.

By excluding roughly $4.9 million in authorized bills from purposeful classifications, these prices are faraway from the effectivity metrics that feed into Charity Navigator’s ranking of OUR Rescue. This might make the charity seem extra environment friendly than it in any other case would if these bills had been absolutely mirrored, doubtlessly impacting its 4-star rating.

Charity Navigator, utilizing OUR Rescue’s self-reported Form 990 figures that exclude greater than $4.8 million in authorized bills, computed that the charity spent 69.7% of its whole bills on packages in 2024. It assigned the charity an general rating of 96% out of 100% and a 4-star ranking based mostly on standards that features a program spending measurement.

This contrasts with CharityWatch’s computation of 62%, which displays what OUR Rescue spent on its packages as soon as the omitted authorized bills are added again to its 2024 administration bills. However, this isn’t our last, computed program proportion determine for OUR Rescue for 2024.

CharityWatch additionally recognized $948,877 of “Cost of Merchandise Sold” (additionally referred to as Cost of Goods Sold, or COGS) within the charity’s purposeful expense reporting, of which it allotted $933,877 to program expense and $15,000 to fundraising. COGS are purported to be reported in a distinct part of the shape (IRS Form 990, Part VIII, strains 10a-10c), not as program or fundraising bills. Once we alter COGS out of the charity’s 2024 purposeful expense reporting, its last computed program proportion decreases from 62% to 61%.

We can solely speculate as as to whether OUR Rescue’s reporting decisions had been motivated by a want to enhance its Charity Navigator ranking or to in any other case affect donors’ perceptions about how effectively it’s working. Irrespective of its motivation, these decisions have the results of making it look like working extra effectively than it truly is.

CharityWatch assigned a “?” ranking to OUR Rescue for 2024 provided that we finally deemed the charity’s monetary reporting to be unreliable for functions of computing how effectively it’s elevating and spending public {dollars}.

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Tim Ballard, Legal Controversies, and Financial Implications

These monetary reporting points come up within the context of serious authorized controversies involving OUR Rescue’s founder and former CEO, Tim Ballard, who departed the group in 2023.

Multiple civil lawsuits have been filed alleging misconduct, together with claims of sexual assault, coercion, and abuse of authority throughout anti-trafficking operations. According to reporting by retailers equivalent to WIRED and The Salt Lake Tribune, some allegations contain using an undercover tactic generally known as a “couples ruse,” wherein ladies had been allegedly requested to pose as Ballard’s companion throughout operations. Ballard has denied these allegations, and no prison expenses have been filed. In addition, some cases have been dismissed. However, other civil litigation cases stay ongoing.

These issues are instantly related to the group’s monetary reporting. Legal bills of the magnitude reported in 2024 could also be related to defending the group, its management, or actions performed underneath its identify, making their classification and disclosure particularly necessary for donors.

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Transparency Concerns Extend Beyond Legal Expenses

OUR Rescue’s Form 990 stories substantial funds to unbiased contractors, together with a number of six-figure funds to people recognized solely as “anonymous individual, available upon request.” While the group cited security and operational considerations as the rationale for anonymity, it didn’t present the requested identities.

This lack of disclosure limits the power of donors and analysts to evaluate potential conflicts of curiosity, related-party transactions, or whether or not people related to previous management stay financially concerned with the group.

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Initial Inquiry, The Ballard Question, and Unanswered Follow-Ups

On December fifteenth, 2025, CharityWatch despatched an in depth inquiry to OUR Rescue requesting clarification on a number of points recognized in its audit and Form 990.

Among the questions posed:

• The nature of the almost $4.9 million in authorized bills and the litigation to which they relate
• The accounting and IRS steering relied upon to exclude these bills from purposeful reporting
• The id of a former board member paid $192,600 for authorized companies
• The identities of people receiving six-figure funds listed as “anonymous individual, available upon request”
• The foundation for reporting almost $949,000 in Cost of Goods Sold as program prices when the Form 990 directions require such prices to be excluded from purposeful bills.

OUR Rescue offered partial responses, explaining its accounting therapy and stating that sure contractors had been stored nameless for safety causes. It additionally said that the previous board member referenced in its audit was not one of many nameless contractors.

On March 4th, 2026, CharityWatch submitted follow-up questions searching for additional clarification, together with whether or not charitable funds had been used to pay bills the group characterizes as unrelated to its mission and the way such bills may moderately fall outdoors all purposeful classes.

As of the date of publication, OUR Rescue has not responded to those follow-up questions, together with our direct query as as to whether or not Ballard was one of many “Anonymous” contractors receiving six-figure funds from the group.

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Conclusion

The points recognized in OUR Rescue’s filings spotlight a broader downside: automated charity scores are solely as dependable as the info they depend on. Many donors hunt down charity scores when attempting to know if their donation to a selected group shall be used effectively and responsibly. When ranking methods take self-reported monetary knowledge at face worth with out adjusting for omissions or inconsistencies, they’ll produce scores that seem authoritative however might not replicate what donors suppose they do.

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