March 6, 2024

Essentials of Charity Navigator’s Rating System

For most charities and organizations, fundraising is an essential function that ensures funding is available to continue existing programs, create new ones, and pay operating expenses. Without this money, it would be tough to maintain the ability to fulfill the core mission. This underscores the importance of a vibrant fundraising strategy that highlights successes, articulates how programs meet goals and provides a clear picture of how funds are used. Since donors want to feel they have contributed to a worthwhile cause, it’s vital to demonstrate the value provided. Attention will be focused on what an organization says about itself and what others are saying.

Third-party analysis and ratings provide essential insight into operations, finances, and community investments. Ensuring an organization is well-represented requires an understanding of the rating system. One of the most popular dating sites is Charity Navigator, which examines four primary areas: accountability and finance, leadership and adaptability, culture and community, and impact and results. The criterion speaks to different aspects of operations and how well each is functioning. To help clients, prospects, and others, Wilson Lewis has summarized the key details below.  

About the Rating System

Charity Navigator only rates 501(c)(3) tax-exempt organizations located in the United States that have operations across the globe. Only organizations that have an impact and results or an accountability and finance score are given a zero-to-four-star rating. Since not every beacon (listed above) is an indicator of success, the results are weighted depending on the amount of information available for analysis.  

Information on the Four Beacons

• Accountability & Finance – In the area, Charity Navigator analyses an organization’s financial health and governance practices to help donors find transparent and sustainable charities. The information collected is taken from various parts of the IRS Form 990 and is evaluated. Information on the organization’s audited financial statements, board composition, and different policies, including the conflict-of-interest policy. The website is also assessed to determine if Form 990, names of Board members, and key staff members are provided. Finally, financial metrics, including program expense ratio, working capital, and fundraising efficiency, are also reviewed.
• Leadership & Adaptability—The charity’s leadership capacity, strategic development, and ability to adapt to change are examined. An organization with a clear strategic plan and capable leadership is more likely to solve issues. The information provided is analyzed using strategy, leadership, and adaptability metrics. For example, the investment in leadership development and the external focus on mobilizing the mission are reviewed.
• Culture & Community – This area evaluates a charity’s overall culture and level of connection to the people and communities served. Engagement is assessed by constituent feedback and commitment to equity. Strong equity and inclusion practices can create a positive workplace culture and have been found to enhance staff motivation, innovation, and effectiveness.
• Impact & Results – This area evaluates the direct impact of programs relative to the cost required to run them to help donors find high-impact charities. This is an essential category because donors want to ensure funding is doing the best. The impact is assessed by reviewing publicly available information about program impact, evaluating the cost to produce programs vs. what would happen without it, and comparing estimated impact by established benchmarks to determine if it is cost-effective.

Contact Us

When courting donors, detailed information about different aspects of the organization’s activities is necessary. Obtaining a high rating on sites like Charity Navigator can go a long way toward overcoming doubts and motivating donors to support your organization. If you have questions about the information outlined above or need assistance with a tax or compliance issue, Wilson Lewis can help. For additional information, call 770-476-1004 or click here to contact us. We look forward to speaking with you soon.