Charity Navigator is a US-based organization that evaluates NGOs and ranks them according to specific criteria. It is the most credible and widely used evaluator of charitable organizations in the United States. The organization releases a list of best-performing charities every year to help donors in selecting the most suitable charitable organizations. Here’scharity navigator everything you need to know about it.
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The Mission of Charity Navigator
Every year millions of dollars are donated to charities. A lot of donors are interested in knowing about the performance of charitable organizations. They want to know if the NGOs are efficient at spending the donations in the right manner. Charity Navigator gives donors this clarity.
It ranks the charitable organizations according to their performances and lets the donors know about the best charities. Charity navigator tracks the record of charities over the years. It provides ratings about sustainability, governance, and practices.
How NGOs Get Listed On Charity Navigator
IRS Tax Status
The Internal Revenue Service or IRS is a department of the US Federal Government that deals with taxes. Charitable organizations are exempted from taxes under 501(c). Charity Navigator only evaluates those NGOs that maintain this status. Charities need to file Form 990 with the IRS to get this status. To get the exemption charities, need to ensure:
- Earnings of the NGO do not benefit a private individual.
- Activities of the NGO should not influence legislation.
- The NGO does not participate in political endorsement and campaigns
Charity Navigator does not entertain organizations that file Form 990-EZ which grants partial exemption to foundations and charities.
Revenue Collection
For an organization to be evaluated by Charity Navigator it needs to collect certain revenue in two consecutive years. The amount changes after regular intervals. As of 2022, NGOs need to collect at least 1 million USD for two consecutive years.
Length of Operations
For a fair evaluation, each organization should have the same head start. Charity Navigator ensures that by rating organizations that have been operational for at least 7 years. Newer NGOs have higher operational costs and low income which is why they cannot be compared with established organizations.
Location of Charity
Only those organizations that are registered in the US and have received 501(c) status are eligible for evaluation. The scope of charities can be international but they must be registered in the US. For example, Transparent Hands is a Pakistan-based NGO, but it is registered in the US as well.
Public Support
Charities collect revenue either directly from the public or by investing in different projects. Income from both means is exempted from taxes. Charity Navigator only evaluates those organizations that collect at least 500,000 USD for two consecutive years from the public. The said amount should account for at least 40% of the total revenue that NGOs collect over the year. Public support includes grants, contributions, gifts, and membership fees of corporations and foundations.
Fundraising Expenses
Charitable organizations need to allocate at least 1% of their revenue towards fundraising to be evaluated by charity Navigator. The practice should be maintained for at least three consecutive years. It is crucial as the charities that depend on public support need fundraising for their operations.
Administrative Expenses
Charity Navigator puts no maximum limit on the administrative expense, but it has set a minimum limit. NGOs need to allocate at least 1% of their revenue towards administrative expenses. And like fundraising expenses, this practice must also be maintained for at least three consecutive years. Administrative expenses can include human resources, office management, cost of legal services, and accounting.
How Does Charity Navigator Evaluation Work?
Charity Navigator evaluates organizations based on their financial health, accountability, and transparency.
Financial Health
Charity Navigator obtains the financial information of charitable organizations from the tax returns that they file in IRS Form 990. It evaluates the efficiency and capacity of NGOs’ finances corresponding to their scope of operations. The scores are given out on a scale of zero to ten.
Transparency and Accountability
Transparency and Accountability are gauged via the information provided by NGOs in their tax returns and on websites. Audit reports reveal whether the organizations have maintained best practices and ethics in governance and distribution of funds.
Bottom Line
Charity Navigator empowers donors to make an informed decision while donating to charitable organizations. After all, donors want to give their donations to organizations like Transparent Hands that not only provide details of where all the donations have been utilized but also create the greatest impact. Since 2014, Transparent Hands has provided more than 43,000 surgical and medical treatments to people belonging to underprivileged communities in Pakistan. You can support Transparent Hands to continue this noble mission with your donations.
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