Charity Navigator

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.[13] This can lead to significant fluctuation in the ranking of a charity from year to year.[13] Also, the focus on the IRS Form 990 has itself been criticized, as the accuracy and reliability of IRS Form 990 data is questionable.[13] 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 (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. 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.[13]

It only 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)[14]

In December 2008, President and CEO Ken Berger[4] 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.[15] 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 (including transparency, governance and management practices) as well as outcomes (the results of the work of the charity).[16]

In July 2010, Charity Navigator announced its first major revamp.[17] 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[18]

1. financial health (Charity Navigator evaluated this from its inception),
2. accountability and transparency (begun in July 2010) and
3. results reporting (slated to begin rating this dimension in July 2012).[19]

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.[20]

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"[21]

In July 2020, Charity Navigator announced an additional nonprofit rating system, Encompass.[22] The new Encompass Rating System analyzes nonprofit performance based on four key indicators:

1. Finance & Accountability
2. Impact & Results
3. Leadership & Adaptability
4. 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.[23]