One reason to be proud of Americans is that they are, on the whole, a generous people.  When Americans see people in desperate need, they leap into action both at home and abroad.  When a tsunami devastated Southeast Asia at the end of 2004, Americans raised $1.5 billion in relief. In 2006, donations for Hurricane Katrina exceeded $6 billion.

Unfortunately, that generosity is not always matched by competence, as there are tales of charities who do not actually benefit those for whom they are fundraising.  Even more unfortunate are the instances where that generosity is met with avarice; "charities" that are little more than scams looking to profit off the troubles and goodwill of others.

So that donors can make more informed decisions about where their money goes, websites like Charity Navigator were created, dedicated to providing ratings and research on a variety of nonprofits.  With such a powerful tool available to donors, here's what your nonprofit should know about this website.

Using a rather complicated mathematical formula found here, Charity Navigator provides a 0-4 star rating for an organization based on the factors of financial stability, along with accountability and transparency.  Both of these are key, as the most transparent organization with no money will still net zero stars, just as the most financially powerful organization that is shadowy and reclusive will not receive any stars.

After the initial score of the charity, the page then reports on a number of specifics for each.  For "Financial Performance Metrics," they detail the percentages of Program Expenses, Administrative Expenses and Fundraising Expenses.  That is followed by Fundraising Efficiency (in dollars and cents), Primary Revenue Growth and Program Expenses Growth, and finally Working Capital Ratio (in years).

After that is a rather massive checklist in the "Accountability & Transparency Performance Metrics." Charity Navigator is looking for the following information on the charity's most recent IRS Form 990, providing a positive green checkmark if it is provided:

  • Independent voting board members

  • No material diversion of assets

  • Audited financials prepared by independent accountant

  • Does not provide loan(s) to or receive loan(s) from related parties

  • Documents board meeting minutes

  • Provided copy of Form 990 to organization's governing body in advance of filing

  • Conflict of Interest Policy

  • Whistleblower Policy

  • Records Retention and Destruction Policy

  • CEO listed with salary

  • Process for determining CEO compensation

  • Board listed / board members not compensated

Charity Navigator also looks to see if the following information is easily accessible on the charity's website:

  • Donor Privacy Policy

  • Board members listed

  • Audited financials

  • Form 990

  • Key staff listed

After this, a charity's page on Charity Navigator lists their Income Statement for the previous fiscal year, charts their expenses and the trend of revenue vs. expenses, the charity's mission statement, links to the charity's Form 990, and a comparison to similar charities.  Indeed, the information offered by Charity Navigator is pretty extensive.

On top of this, users can leave reviews of the charity, providing a more personal touch to the raw metrics provided by the website.  Obviously, Charity Navigator provides a lot of information, both analytical and anecdotal, and it is wise for a charity to pay close attention to the data found there.

Charity Navigator's full FAQ for charities can be found here, and includes information on how to update your listing or how to get your charity listed if it isn't already.  On their FAQ they explain:

 We evaluate, for free, ten times more organizations than anyone else in America has ever attempted. In fact, the ones we evaluate account for roughly 50% of the donations in America. But with approximately 1 million charities in this country, there are many that we have yet to rate.”

For more information on this and other nonprofit research websites, or for any questions on interfacing technology with your organization, please don't hesitate to contact us.