charity rating Archives

Financial documentation is an important part of any nonprofit’s existence. Your nonprofit is of course incorporated in it’s home state, has an Employee Identification Number (EIN) and your Letter of Determination from the IRS, plus tax filings for each year of existence. Making sure your tax and other paperwork is filed on time and correctly is essential to staying in good graces with the IRS but also for attracting and retaining donors.

Financial material should be conveyed clearly on your website, in brochures and in a grant package that is sent out to potential donors. Materials should clearly communicate the comprehensive information relevant to an informed funder or stakeholder.

Donors may want to know:

where does your money come from? Nonprofits can generate revenue from a variety of sources
What percent of monies collected goes toward covering administrative expenses and other overhead
What other major donors are giving to your organization? a bust donor may not have the time to thoroughly read through your information

Financial information any nonprofit should have easily available:

Sources of donations broken down by type: grants from foundations, donations from individuals, fees, income from an endowment, interest etc…
IRS Letter of Determination
Last 2 or 3 IRS Form 990
A chart of annual revenue and expenses
Annual Revenue and Expense data reported
EIN
Links to your reports on GuideStar, Charity Navigator and the Foundation Center

Other documentation you should have:

Mission Statement
Board of Directors’ Bios

Donors want to know if you are effectively reaching your intended target. All of this data demonstrates a high degree of worthiness of funders’ support. In a busy world, a donor could be dicing between you and another organization. If they ahave to ask a lot of questions and wait for answers, it may be easier to write a check to someone else!

What you need to know about Charity Navigator’s new rating system

Charity rating website, Charity Navigator, announced that it will introduce a change to its rating system by 2016. The new methodology called Results Reporting will attempt to rate how effective a nonprofit really is.

Originally Charity Navigator only rated a nonprofit’s financial health. That rating was based solely on evaluations made from tax returns and IRS 990 Forms. The 10,000 nonprofits on the site were rated on program expenses, administrative expenses, plus fundraising expenses and efficiency.

In 2011, CN 2.0 was launched to expand the analysis to include accountability and transparency. Both of these factors tell a donor how easy it is the obtain important information about a nonprofit’s activity, assets and financial history.

According to a website post, Charity Navigator will, for the next several years:

“…give donors immediate access to our research during this process, we will post our findings on each charity’s page month by month, as the new data is gathered.

However, this new analysis will not impact any charity’s star rating until we have gathered the data for all 10,000.
This is a data gathering phase for the the new rating system. The information will be displayed as it is updated but the ratings wont change until each charity’s data is organized and displayed.”

The new rating system elements are:

Alignment of Mission

Solicitations and Resources

Results Logic and Measures

Validators, and Constituent Voice

Published Evaluation Reports.