Charity Navigator is a charity assessment organization that evaluates charitable organizations in the United States, operating as a free 501 organization, that accepts no advertising or donations from the organizations it evaluates.
About
Charity Navigator was launched in spring 2001 by John P. Dugan, a wealthy pharmaceutical executive and philanthropist. 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. Initially, Charity Navigator provided financial ratings for 1,100 charities, and it has data on 8,500 as of mid-2017. 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. However, in a 2014 Chronicle of Philanthropy interview on the nonprofit sector, 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." A 2014 survey of attitudes toward charity evaluation lauded Charity Navigator in six of seven categories.
Evaluation method
Using publicly available tax returns 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. Based on how the charity rates in each of the two areas, it is assigned an overall rating, ranging from zero to four stars. To help donors avoid becoming victims of mailing-list appeals, each assessment of a charity's performance is accompanied by a review of its commitment to keeping donors' personal information confidential.
Limitations of initial methodology
This method was criticized in an article in the Stanford Social Innovation Review for taking into account only a single year's IRS Form 990. This 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 is questionable. Form 990 categorizes a charity's expenditures into three broad categories that are open to accounting manipulation. The nonprofit sector does not have the strict financial regulation and transparency required from public corporations, creating limitations on how accurately a charity's efficiency can be graded based on a tax return. Particularly relevant to Charity Navigator's methodology is 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. It only rates the 6% of charity organizations in the United States that have over $1 million in annual revenue, and argues these charities have better expertise for reporting to the IRS, are under greater public scrutiny and therefore their reporting tends to be more accurate. As of December 2007, Charity Navigator would recommend donors support concerns that meet six criteria:
Able to communicate who they are and what they do
Defined short-term and long-term goals
Able to state the progress it has made toward its goal
Programs make sense to the donor
Trustworthy
Programs that the donor feels they can make a long-term commitment to
Revisions
In December 2008, President and CEO Ken Berger announced on his blog that the organization intends to expand its rating system to include measures of the outcomes of the work of charities it evaluates. 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 will also include measures of accountability as well as outcomes. In July 2010, Charity Navigator announced its first major revamp. This revamping begins what the organization states is the process to move toward CN 3.0, which is a three-dimensional rating system that will include what they consider the critical elements to consider in making a wise charitable investment
financial health,
accountability and transparency and
results reporting.
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 financial health and accountability and transparency.
2013 expansion
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". Charity Navigator's website explains the new methodology and its plans for the future.
Executive compensation
In recent years, Charity Navigator has become outspoken against what it calls high CEO compensation. At the same time, they note that nonprofit CEOs should be paid what the market demands. They complete a CEO compensation study each year. In the study, they have consistently argued that a low six-figure salary for a CEO of a mid-to-large-sized nonprofit is the norm and should be acceptable to donors. They further argue that these are complex multimillion-dollar operations that require a high level of expertise. They are, however, outspoken against the phenomenon of million-dollar-plus compensation, which they do not believe is justified for a tax-exempt public charity.
Governance
On its 2014 Form 990, Charity Navigator reported the salary of CEO Ken Berger as $160,644.
Reports
Charity Navigator compiles lists of charities that contract fundraising to corporate solicitors who retain more than 50% of the charity's budget. The charities were "ranked by the percentage of their total functional expenses spent on professional fundraising fees." The worst was the Disabled Police and Sheriff's Foundation which only kept 5.8% for its own programs and services. The rest of the donations, which represented 90.5 percent of the total collected, went to the for-profit fundraisers. Both The Cancer Survivors' Fund, and The Association for Firefighters & Paramedics saw over 80 percent of donations retained by the corporate fundraisers.
Improvements in response
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."
Criticism
In response to an op-ed authored by Charity Navigator's CEO entitled "The Elitist Philanthropy of so-called Effective Altruism," the cofounder of the Centre for Effective Altruism wrote "What Charity Navigator Gets Wrong About Effective Altruism."
