Back to School with Charity Navigator

Posted by Casey Hagy, CPA

Charity Navigator - Nonprofit CPA FirmSchool is in full swing across the country, and it looks like students won’t be the only ones who will be graded out of 100 points this year. Charity Navigator, a nonprofit organization that evaluates charities in the United States and compares them to charities with similar causes, recently changed their rating system from a 70-point scale to a 100-point scale. The mission of Charity Navigator is to guide intelligent giving. By guiding intelligent giving, they hope to advance a more efficient and responsive philanthropic marketplace. Their current rating system has two dimensions:

  1. Financial Health
  2. Accountability & Transparency

Charity Navigator analyzes 24 different metrics associated with these two dimensions and assigns an overall score and overall rating. Click here to learn more about the 24 metrics analyzed during the rating process. Because our educational system is based on the 100-point system, the organization thought the change from a 70-point scoring system to a 100-point scoring system would make their rating process simpler and easier to understand. The 70-point system was used from the founding of the organization in 2002 when there was only one dimension (Financial Health) and seven metrics used to judge nonprofits. In 2011, Charity Navigator expanded their rating analysis to include the second dimension (Accountability & Transparency) which added 17 metrics. They are currently working on adding a third dimension, Results Reporting, which will evaluate the outcomes of an organization’s work and whether these outcomes are providing a social value. Charity Navigator feels the third dimension will be the most important dimension in the rating process as charities exist to promote positive change in communities and people’s lives. They hope to have the new dimension implemented by the end of 2016.

Below is the formula Charity Navigator uses to calculate an organization’s overall score, as well as a description for each rating.

Charity Navigator Formula

 

 

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So, if you notice that your score is higher than 70 points, you haven’t received extra credit, but you are that much closer to the coveted four-star rating!

Photo by Ian Kelsall (License)

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