Reference no: EM132765828
Question: Charity Navigator (CN), founded in 2001, evaluates and rates individual charitable organizations (nonprofits). The two key areas of performance it considers are Financial Health and Accountability and Transparency. It evaluates financial health using the informational tax return that charities of a certain size must file with the U.S. IRS-Form 990. It analyzes seven key areas that assess financial efficiency and financial capacity, including (a) the percentage of total expenses spent on program activities; (b) the percentage spent on administration; (c) the percentage spent on fundraising; and (d) fundraising efficiency, that is, how much the nonprofit spends to raise each $1 of contributions. The top rating for each of these seven areas results in 70 points, to which CN adds 30 points to convert to a scale of 100. As of December 2017, CN had rated over 8,500 U.S. charities with the following results:
- Program expenses. Charities rated by CN spent an average of 80.2 percent of their budgets on program expenses. CN found that 7 out of 10 charities evaluated spend at least 75 percent of their budget on the programs and services they exist to provide. Charities that spend 85 percent or more on program expenses are given a rating of 10 for this area.
- Administrative expenses. CN found that the average administrative expense rate for all charities is 10.5 percent. CN gives a charity that spends less than 15 percent on administrative expenses a rating of 10 for this area.
- Fundraising expenses. CN finds the median fundraising expense for all charities was 9.1 percent. Charities that spend 10 percent or less on fundraising are given a rating of 10 in this area.
- Fundraising efficiency. CN finds that the three-year average cost for a charity to raise $1 in charitable contributions is 11 cents. Charities that spend ten cents or less to raise $1 in contributions are given a rating of 10 in this area.
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