Charity Navigator#Evaluation method

{{short description|Charity assessment organization that evaluates charitable organizations in the U.S.}}

{{Infobox organization

| image = Charity Navigator logo.svg

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| formation = {{start date and age|2001}}

| type = Nonprofit corporation

| status = Active

| purpose = Charity evaluation

| headquarters = Saddle Brook, New Jersey, U.S.

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| language = English

| leader_title = CEO

| leader_name = Michael Thatcher{{cite web|url=https://www.charitynavigator.org/index.cfm?bay=content.view&cpid=19|title=Board and Staff|work=Charity Navigator}}

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| leader_title2 = Chief Program Officer

| leader_name2 = Laura Andes

| leader_name3 = Nancy Sadek

| leader_title3 = Chief Administrative Officer

| board_of_directors = Hope Lyons (chair),{{cite web|url=https://www.charitynavigator.org/index.cfm?bay=content.view&cpid=2143|title=Board of Directors : Charity Navigator|access-date=2021-07-26}} Michael Cooney (vice chair)

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| founder = John Patrick Dugan

| tax_id = 13-4148824{{cite web | title=Charity Navigator | website=Internal Revenue Service | url=https://apps.irs.gov/app/eos/details/ | access-date=May 20, 2023}}

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| website = {{url|https://www.charitynavigator.org/}}

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Charity Navigator is a charity assessment organization that evaluates more than 230,000{{Dubious|IRS_is_sometimes_way_better.|date=May 2025|reason=Inconsistent claim.}} charitable organizations based in the United States, operating as a 501(c)(3) organization.{{Cite web|url=https://www.vox.com/future-perfect/2020/10/16/21515488/charity-navigator-impact-matters-nonprofit |title=Which charities do the most good? Charity Navigator joins the effort to answer this crucial question. |first=Kelsey |last=Piper |date=October 16, 2020 |website=Vox}} It provides insights into a nonprofit's financial stability, adherence to best practices for both accountability and transparency, and results reporting. It is the largest and most-utilized evaluator of charities in the United States.{{cite web |url=https://morristowngreen.com/2021/02/16/covid-relief-drives-record-giving-at-community-foundation-grants-topped-87-5m-in-2020/ |title=COVID relief drives record giving at Community Foundation; grants topped $87.5M in 2020 |date=February 16, 2021 |website=morristowngreen.com |access-date=June 3, 2023}} It does not accept any advertising or donations from the organizations it evaluates.{{cite web |url=https://www.charitynavigator.org/index.cfm?bay=content.view&cpid=1653 |title=Charity Navigator: About Us |access-date=September 26, 2020}}{{Primary source inline|date=June 2023}}

According to a 2025 study, ratings by Charity Navigator shape donor behaviors, as donors increase their contributions to better rated charities.{{Cite journal |last=Mayo |first=Jennifer |date=2025 |title=Navigating the Notches: Charity Responses to Ratings |url=https://www.journals.uchicago.edu/doi/10.1086/732241 |journal=Journal of Political Economy Microeconomics |volume=3 |pages=98–137 |doi=10.1086/732241 |issn=2832-9368|url-access=subscription }} The study also found that charities try to achieve better ratings by cutting expenditures on administration and fundraising, as well as misreporting or mislabelling expenditures to game the ratings.

History

Charity Navigator was launched in the spring of 2001 by John P. (Pat) Dugan, a pharmaceutical executive and philanthropist.{{cite news |url=https://www.nytimes.com/2010/11/27/business/27charity.html |title=To Help Donors Choose, Web Site Alters How It Sizes Up Charities |author=Stephanie Strom |date=November 26, 2010 |newspaper=The New York Times}}{{cite news |author=Marc Gunther |title=Why Charity Navigator needs an upgrade |url=http://nonprofitchronicles.com/2015/04/05/why-charity-navigator-needs-an-upgrade |access-date=July 6, 2015 |newspaper=Nonprofit Chronicles |date=April 5, 2015}} The group's mission was to help "donors make informed giving decisions and enabling well-run charities to demonstrate their commitment to proper stewardship" of donor dollars.{{cite magazine |url=http://www.fastcompany.com/magazine/73/socialcapital.html |title=Charitable Deductions: Charity Navigator dares to hold the nation's nonprofits accountable for their fund-raising |last=Overholt |first=Alison |date=August 2003 |magazine=Fast Company |issue=73 |page=46 |archive-url=https://web.archive.org/web/20060325082444/http://www.fastcompany.com/magazine/73/socialcapital.html |archive-date=March 25, 2006 |url-status=dead}}

Over the years, the group grew from 1,100 to over 230,000 charities.Benz, Christine (17 November 2021). [https://www.morningstar.com/articles/1040717/which-charities-deserve-your-dollars "Which Charities Deserve Your Dollars"]. Morningstar.

In 2011, Kiplinger's Personal Finance selected Charity Navigator as a Money Management Innovation for "helping millions of people become philanthropists", and it was on Time magazine's top 50 websites of 2006 list.{{cite web |url=http://kiplinger.com/slideshow/great_financial_innovations/1.html#top |title=20 Financial Innovations You Can't Afford to Ignore |date=June 2011 |publisher=Kiplinger |access-date=2012-01-05 |url-status=dead |archive-url=https://web.archive.org/web/20120117071027/http://kiplinger.com/slideshow/great_financial_innovations/1.html#top |archive-date=Jan 17, 2012 }}{{cite magazine |title=50 Coolest Websites

|magazine=Time |date=August 2006 |author1=Maryanne Murray Buechner

|url=http://www.time.com/time/2006/50coolest/index.html|archive-url=https://web.archive.org/web/20060815190013/http://www.time.com/time/2006/50coolest/index.html|url-status=dead|archive-date=August 15, 2006}}

In a 2014 Chronicle of Philanthropy interview on the nonprofit sector, journalist Nicholas Kristof identified it with a trend he deplored: "There is too much emphasis on inputs and not enough on impact", Kristof said. "This has been worsened by an effort to create more accountability through sites like Charity Navigator. There is so much emphasis now on expense ratios that there is an underinvestment in administration and efficiency."{{cite web

|url=http://philanthropy.com/article/Inspiring-People-to-Make-a/148813

|title=Inspiring People to Make a Difference

|work=The Chronicle of Philanthropy |date=September 15, 2014 |first1=Caroline |last1=Bermudez |url-status=dead |archive-url=https://web.archive.org/web/20181207102728/https://www.philanthropy.com/article/Inspiring-People-to-Make-a/152645 |archive-date= Dec 7, 2018 }}

A 2014 survey of attitudes toward charity evaluation indicated positive results for Charity Navigator in six of seven categories.{{cite web

|url=http://able-altruist.softwareadvice.com/survey-do-watchdog-ratings-impact-giving-0714/

|title=Survey: Do Ratings From Watchdog Groups Impact Giving Decisions?

|author=Janna Finch|work=The Able Altruist |publisher=Software Advice |date=2017-04-25

|url-status=dead |archive-url=https://web.archive.org/web/20170424142656/http://able-altruist.softwareadvice.com/survey-do-watchdog-ratings-impact-giving-0714/ |archive-date= Apr 24, 2017

}}

In October 2020, Charity Navigator acquired impact-based charity evaluator ImpactMatters.{{cite web|url=https://www.impactmatters.org/ |title=ImpactMatters has been acquired by Charity Navigator. |website=ImpactMatters |date=2020-10-14 |archive-url=https://web.archive.org/web/20201018011028/https://www.impactmatters.org/ |archive-date=2020-10-18 |url-status=dead }}

In August 2023, Charity Navigator acquired Causeway, a philanthropy technology startup. {{cite web |title=Causeway |url=http://withcauseway.com/ |access-date=29 August 2023 |archive-date=August 24, 2023 |archive-url=https://web.archive.org/web/20230824062245/http://withcauseway.com/ |url-status=live }}

Evaluation method

Using publicly available tax returns (IRS Form 990) filed with the Internal Revenue Service and information posted by charities on their web sites, the Charity Navigator rating system bases its evaluations in two broad areas—financial health and accountability/transparency.{{cite news

|newspaper=The New York Times |date=September 27, 2017

|url=https://www.nytimes.com/2017/09/27/world/americas/help-disaster-victims.html

|title=How to Decide Where to Donate Your Money After Disasters

|author=Niraj Chokshi}} Based on these criteria charities are awarded one to four stars.{{cite web | url=https://www.charitynavigator.org/about-us/our-methodology/ratings/#:~:text=Eligible%20charities%20receive%20a%20zero,scores%20(0%2D100). | title=Ratings | Charity Navigator }}

=Limitations of initial methodology=

In the early years, the group's methodology was the subject of some criticism for its approach at the time. This method was criticized in a 2005 article in the Stanford Social Innovation Review for (at the time) taking into account only a single year's IRS Form 990.{{cite web

|url=http://www.ssireview.org/articles/entry/the_ratings_game

|title=The Ratings Game: Evaluating the three groups that rate the charities

|author=Lowell, Trelstad and Meehan |date=Summer 2005

|publisher=Stanford Social Innovation Review }} This approach can lead to significant fluctuation in the ranking of a charity from year to year. Also, the focus on the IRS Form 990 has itself been criticized, as the accuracy and reliability of IRS Form 990 data may be questionable, according to the chief executive of GuideStar. Form 990 categorizes a charity's expenditures into three broad categories that are open to accounting manipulation.{{fact|date=February 2021}} The nonprofit sector does not have the strict financial regulation and transparency required from public corporations (under the Securities Act of 1933, the Securities Exchange Act of 1934, and the Sarbanes-Oxley Act, among others), creating limitations on how accurately a charity's efficiency can be graded based on a tax return.{{fact|date=February 2021}} Particularly relevant to Charity Navigator's methodology in 1999 was that 59% of the 58,000 charities receiving public donations in 1999 failed to report any fundraising expenditures, illustrating a potential problem with relying on Form 990 figures alone when analyzing an organization.

Charity Navigator rates the 6% of charity organizations in the United States that have over $1 million in annual revenue (these 6% get 94% of the revenues that come into the nonprofit sector each year).{{cite web|url=http://www.urban.org/books/nonprofit_almanac/?gclid=CLXLh6DhvasCFTAaQgodqmhBwA|title=UI Press - Nonprofit Almanac 2008 - Summary|work=urban.org|access-date=2011-09-27|archive-url=https://web.archive.org/web/20120328143150/http://www.urban.org/books/nonprofit_almanac/?gclid=CLXLh6DhvasCFTAaQgodqmhBwA|archive-date=2012-03-28|url-status=dead}}

=Revisions=

In December 2008, President and CEO Ken Berger announced on his blog that the organization intended to expand its rating system to include measures of the outcomes of the work of charities it evaluated.{{cite web

|url=http://www.kenscommentary.org/2008/12/measure-of-outcome.html

|title=A Measure of Outcome

|date=December 8, 2008

|publisher=Kenscommentary.org

|access-date=15 September 2010

|archive-url=https://web.archive.org/web/20110725222316/http://www.kenscommentary.org/2008/12/measure-of-outcome.html

|archive-date=25 July 2011

|url-status=dead

}} This was described in further detail in a podcast for The Chronicle of Philanthropy in September 2009. The article explained that plans for a revised rating system would also include measures of accountability (including transparency, governance, and management practices) as well as outcomes (the results of the work of the charity).{{cite web

|url=http://www.kenscommentary.org/2009/09/kens-podcast-interview.html

|title=Ken's Podcast Interview

|date=September 11, 2009

|access-date=15 September 2010

|archive-url=https://web.archive.org/web/20100718154348/http://www.kenscommentary.org/2009/09/kens-podcast-interview.html

|archive-date=18 July 2010

|url-status=dead

}}

In July 2010, Charity Navigator announced its first major revamp.{{cite web

|url=https://www.charitynavigator.org/index.cfm?bay=content.view&cpid=1107

|title=Charity Navigator Expands Rating Methodology

|author=Ken Berger

|date=July 1, 2010

|publisher=Charity Navigator

|access-date=15 September 2010

|archive-url=https://web.archive.org/web/20100819075746/http://www.charitynavigator.org/index.cfm?bay=content.view&cpid=1107

|archive-date=19 August 2010

|url-status=dead

}} This revamping began what the organization stated is the process to move toward CN 3.0, which is a three-dimensional rating system that would include what they consider the critical elements to consider in making a wise charitable investment{{cite news

|newspaper=The New York Times |date=November 6, 2017

|url=https://www.nytimes.com/2017/11/06/business/charity-disaster-relief.html

|title=Want to Help? Do Your Research Before You Donate

|quote=investments .. balanced portfolio

|author=John Hanc}}

financial health (Charity Navigator evaluated this from its inception),
accountability and transparency (begun in July 2010) and
results reporting (slated to begin rating this dimension in July 2012).{{cite news|title=Where We Are Headed (2013 and Beyond)|newspaper=charitynavigator.org|url=https://www.charitynavigator.org/index.cfm?bay=content.view&cpid=1193|url-status=dead|access-date=6 July 2015|archive-url=https://web.archive.org/web/20150629084105/http://www.charitynavigator.org/index.cfm?bay=content.view&cpid=1193|archive-date=29 June 2015}}

After collecting data for more than a year, in September 2011 Charity Navigator launched CN 2.0, which is a two-dimensional rating system that rates a charity's: (1) financial health, and (2) accountability and transparency.{{cite web |last=Berger |first=Ken |url=http://www.kenscommentary.org/2011/09/cn-20-more-knowledge-more-good.html |title=Ken's Commentary: CN 2.0: More Knowledge, More Good |publisher=Kenscommentary.org |date=2011-09-20 |access-date=2012-01-05 |archive-url=https://web.archive.org/web/20120112123756/http://www.kenscommentary.org/2011/09/cn-20-more-knowledge-more-good.html |archive-date=2012-01-12 |url-status=dead }}

= Expansions =

In January 2013, Charity Navigator announced another expansion to its rating methodology, "Results Reporting: The Third Dimension of Intelligent Giving". Because mission-related results are the very reason that charities exist, Charity Navigator developed this new rating dimension to specifically examine how well charities report on their results. The new rankings now include "various criteria, including ... privacy policies".{{cite web |website=The New York Times

|title=Before Giving, Check Out Charities and Their Policies on Privacy

|url=https://www.nytimes.com/2015/12/02/your-money/before-giving-check-out-charities-and-their-policies-on-privacy.html

|author=Ann Carrns |date=December 2, 2015}}

In July 2020, Charity Navigator announced an additional nonprofit rating system, Encompass.{{Cite web|title=Charity Navigator Initiates New Era in Charitable Giving with Launch of Encompass Rating System|url=http://www.charitynavigator.org/index.cfm?bay=content.view&cpid=8092|access-date=2020-08-19|website=Charity Navigator|language=en}} The new Encompass Rating System analyzes nonprofit performance based on four key indicators:{{fact|date=February 2021}}

Finance & Accountability
Impact & Results
Leadership & Adaptability
Culture & Community

This alternative methodology allows the organization to increase the total number of rated nonprofits from 9,000 to 160,000 at launch. The rating system launched with the first key indicator, Finance & Accountability, with a plan to release additional indicators over the next 18–24 months.{{Cite web|last=Toussaint|first=Kristin|date=2020-07-29|title=Charity Navigator is launching a new rating system to help better evaluate nonprofits|url=https://www.fastcompany.com/90533562/charity-navigator-is-launching-a-new-rating-system-to-help-better-evaluate-nonprofits|access-date=2020-08-19|website=Fast Company|language=en-US}}

Since then, Chartity Navigator has continued to expand its methodology to include additional impact ratings, and assessments on Equity policies and practices, feedback and measurement best practices. As of June 2024, there are over 230,000 rated organizations and over 3000 organizations rated on Impact & Measurement.

=Improvements in response; reception=

Some charities, in response, began to supply more information. The New York Times reported in 2010 that one non-profit began "reporting on its finances using the same format as the 10-K."

In response to an op-ed authored by Charity Navigator's CEO entitled "The Elitist Philanthropy of so-called Effective Altruism",{{cite news |date=November 25, 2013

|website=SSIR.org

|url=https://SSIR.org/articles/entry/the_elitist_philanthropy_of_so_called_effective_altruism

|title=The Elitist Philanthropy of so-called Effective Altruism

|author1=Ken Berger |author2=Robert Penna}} the cofounder of the Centre for Effective Altruism wrote "What Charity Navigator Gets Wrong About Effective Altruism".{{cite web|url=https://SSIR.org/articles/entry/what_charity_navigator_gets_wrong_about_effective_altruism|title=What Charity Navigator Gets Wrong About Effective Altruism (SSIR)|author=William MacAskill|date=December 3, 2013|website=SSIR.org (Stanford Social Innovation Review)}}