How to Improve Your Charity Navigator Score
Running a nonprofit organization is a noble endeavor, driven by a passion to serve and support a deserving cause and make a difference. And to steer this meaningful mission toward success, you need support from like-minded people who share your passion and values. You need help from charitable and kind-hearted donors. To encourage people to join your cause, you need to build a foundation of trust, as it’s key to a long-lasting relationship.
Now, more than ever, transparency is crucial in the philanthropic landscape. Supporters expect honesty and openness about where their donations are going and how they’re making a difference in the world. To build that trust, you’ll need to improve your Charity Navigator score. In this guide, we’ll help you navigate this scoring system and offer simple yet effective ways to improve your charity rating immediately.
What Is a Charity Navigator Score?
The Charity Navigator score is a rating awarded to nonprofits based on their overall performance and fundraising effectiveness in supporting and advancing their organization goal. The higher your Charity Navigator score, the more trustworthy you appear to donors and the more likely they are to support your mission.
The score is primarily calculated from the nonprofit’s IRS Form 990. However, other areas are also considered in a comprehensive analysis of your charity’s performance.
How Are Charity Navigator Scores Calculated?
The Charity Navigator methodology calculates your score using the Encompass Rating System™. This system uses research and specific information about your nonprofit and scores your nonprofit using a formula comprising four areas, or “beacons,” as Charity Navigator calls them.
These four key beacons are:
- Accountability and Finance
- Impact and Measurement
- Leadership and Adaptability
- Culture and Community
The sum of a nonprofit’s beacons will total to a score out of 100. This score determines the star rating based on the total points your nonprofit earned. Often, nonprofits won’t have data available for all beacons. To qualify for a star rating, your organization must have an Accountability and Finance score or an Impact program evaluation. These two beacons are the minimum eligibility criteria.
Accountability and Finance
One of the essential beacons for a star rating is nonprofit financial health. It assesses your governance policies and financial health to measure the efficiency and effectiveness of your organization and accounts for 32.5% of your overall score.
Financial Efficiency Metrics
Nonprofits are held to the highest financial standards when managing donations. The organization must be financially stable and efficient to ensure its sustainability. To analyze this, Charity Navigator receives data from your annual IRS Form 990 tax filings and uses various sections from the form to generate scores. You need at least three years of accounting data available for review and assessment to receive a score.
Sections used to generate your financial efficiency metrics include:
- Program expense ratio: This is the percentage of expenses spent on mission activities. Ideally, this should be 75% or higher.
- Fundraising efficiency: This metric measures how much your nonprofit spends to raise $1. These expenses should be 10%-12% or less of total contributions.
- Admin expense ratio: The percentage of total expenses used for overhead should be as low as 10%-12%.
- Working capital ratio: This ratio measures how long the nonprofit can sustain programs without new revenue.
- Liabilities to assets ratio: This metric measures and compares total liabilities to total assets.
Accountability Metrics
Accountability metrics assess whether your charity follows nonprofit governance policies and ethics, and if it’s easy to find important organization information. For this data, Charity Navigator uses your website to evaluate various metrics for the accountability and transparency score.
Compared to financial metrics, accountability metrics can be easily improved by simply adding key documents, such as Form 990, financial audits and a board member list, to your website for transparency. You can also implement certain policies.
Update your website with the following information, where it’s easy to find:
- Information on your nonprofit’s Form 990
- Audited financial statements
- Information and access to your board members and senior staff
- Communicated Privacy Policy to protect donors
- Retention of board meeting minutes
- Policies such as whistleblower policy, conflict of interest policy, document retention and destruction policy
Quick Wins for Immediate Improvement
To improve your score on this beacon, you can implement a few fixes and adjustments.
Quick wins to improve your score include:
- Expense allocations: Ensure the majority of your charity’s expenses are allocated to programs, as this reflects your spending toward your mission.
- Board independence: An independent governing body is recommended to ensure full deliberation and diversity in governance and other matters.
- Independent audits: Depending on the nonprofit’s size, ensure an audit, review or compilation is prepared for each fiscal year.
- Form 990 reviews: Pay attention to adopted policies and independent board member numbers to ensure accuracy and maintain a strong Charity Navigator rating.
Impact and Measurement
Your score also includes impact and measurement metrics of your nonprofit. This beacon counts toward 50% of your overall score and assesses the impact of your charity’s program relative to its cost to run. Simply put, they want proof that your programs are performing and are successful. Successful programs need clear goals and a plan to measure their progress. Impact is important to donors, as it shows what your nonprofit has accomplished.
Outcome Measures
This assessment is open to all organizations and focuses on how a nonprofit monitors and assesses data and uses it to improve its program.
Charity Navigator reviews various program aspects, such as:
- Clear program goals.
- Evidence-based program design and alignment to serve the community’s needs.
- Data collection and analysis to improve effectiveness and decisions.
- Results shared with key audiences.
To score highly in this assessment, your nonprofit needs to showcase that it has built a learning and accountability culture that takes impact seriously.
Program-Level Impact Evaluation
This evaluation is available only to organizations with eligible programs meeting specific criteria and assesses the program’s cost-effectiveness. Nonprofits are rewarded for creating more good per dollar spent and driving high-impact missions. The evaluation process is adapted to the program type.
Scores are measured as follows:
- 100 points: Highly cost-effective
- 80 points: Cost-effective
- 65 points: Meets requirements but falls short on cost-effectiveness
Quick Wins for Immediate Improvement
To showcase the impact of your nonprofit and its cost-effectiveness and improve your score, there are two beacon-specific factors you can focus on.
These factors include:
- Consistent program result reviews: Track your program’s results often and evaluate the data regularly.
- Publicize your program goals and outcomes: Update your website with the latest insights by sharing annual reports to show your mission in action.
Leadership and Adaptability
When you’re focused on a specific mission, a strategic plan and adaptable leadership are necessary to navigate through the challenges that you may encounter along the way. This beacon assesses just that. It focuses on the organization’s leadership capacity, strategy development and adaptability to deliver on its mission in the face of change. This beacon accounts for 7.5% of your overall score.
This assessment is a questionnaire available on the Nonprofit portal, and the score is based on your responses to each of the three categories below. This questionnaire is an opportunity to earn up to 100 points toward your score.
Strategy
You’ll be asked to provide evidence of long-term and strategic goal-setting and rationale. This section of the assessment awards your nonprofit up to 40 points toward the overall Leadership and Adaptability score.
In the section, you’ll need to provide:
- Your nonprofit’s mission and vision.
- Three of your organization’s most important strategic goals.
- An explanation of the strategies your organization is implementing.
Leadership
For up to 30 points, this checklist focuses on your nonprofit’s leadership development and external mission activities.
You’ll need to provide information on:
- Leadership development investments such as coaching, DEI training and conferences.
- External leader mobilization activities, which include social promotion, partnerships and public policy advocacy.
Adaptability
In the adaptability section of the assessment, you’ll be asked to describe how your nonprofit has adapted to changes over the last 12 to 18 months across various areas. This section will count up to 30 points.
These areas include:
- Strategic plans
- Restructures
- Risk management
- Flexibility
- Capacity improvements
- Culture adaptations
- Collaborations
- Community engagement
Quick Wins for Immediate Improvement
Embracing and evolving through change can boost your score. And to prove this flexibility and adaptability, you’ll need to provide and showcase various reports.
Examples include your annual or impact reports on your website and storytelling platforms, combined with the assessment checklists. You can place them on your website for transparency.
Culture and Community
The last beacon of the Charity Navigator score focuses on your nonprofit’s overall culture and connectedness to its community. It covers inclusivity and engagement with the people it serves, including staff, beneficiaries and board members. You can earn up to 5%-10% of your total score based on which questionnaires you complete in this beacon.
There are two assessments in this beacon that you can complete via your nonprofit’s Candid profile. These are constituent feedback and equity strategies.
Constituent Feedback
Constituent feedback assesses how your organization gathers and uses feedback from the community it serves using the “How We Listen” questionnaire.
Activities to answer this questionnaire could be:
- Asking beneficiaries to provide their input.
- Sharing the nonprofit’s goals, outcomes and results with staff and stakeholders.
- Gathering feedback from the community and beneficiaries to help improve programs.
No matter where you are in your feedback activities, you’ll be able to earn points for transparency.
Equity Strategies
This assessment is a 14-point checklist that involves diversity, equity and inclusion (DEI) measures within your organization. It evaluates commitments and strategies that foster a positive and inclusive environment.
This checklist can include strategies such as:
- Racial equity audits
- Equity outcome goals
- Published demographic data
- Inclusive hiring practices
- Diverse board practices
Quick Wins for Immediate Improvement
There are two immediate improvements you can make to improve your score:
- Complete the “How We Listen” questionnaire: On your Candid profile, share your feedback practices by completing the questionnaire. This survey is a simple 5% to add to your overall score.
- Implement equity strategies: Adopt equity strategies and relay your progress on the checklist.
Overall Star Rating
After your nonprofit has been scored across the various beacons using the collected data and insights, Charity Navigator will calculate your overall score, which will determine your organization’s star rating. Each beacon is given a specific value in the overall score. However, if you haven’t provided data for all of the beacons, it’ll be reallocated among the others.
Here is how Charity Navigator’s overall star ratings are ranked and what each score means.
| Score | Rating | Evaluation | What it means |
|---|---|---|---|
| 90+ points | 4 Stars | Great | Exceeds and meets best practices and industry standards in almost all beacons. |
| 80–89 points | 3 Stars | Good | Meets nonprofit best practices and industry standards in some beacons. |
| 70–79 points | 2 Stars | Needs improvement | Meets industry standards in select beacons, but underperforms most charities. |
| 55–69 points | 1 Star | Poor | The organization doesn’t meet industry standards in most beacons and underperforms. |
| < 55 points | No Star Rating | Very poor | The nonprofit performs below industry standards and underperforms. |
As a nonprofit, your goal is to achieve a 4-star rating, as this indicates that your organization is a highly effective charity.
What Is a Good Charity Navigator Score?
Receiving a score of 75 and more is considered a good score. It shows that your nonprofit is transparent, financially sound, accountable and effective. Receiving a good rating from Charity Navigator will give like-minded donors the confidence and trust they need to support your nonprofit, knowing that you are making a difference.
How Often Are Scores Updated?
Charity Navigator continuously collects insights directly from nonprofits, their data partners and the IRS. However, their ratings are updated and released on their website only five times per year. This timeline allows you time to improve your score across the different beacons and get a better rating before submitting your data for evaluation.
For release dates and submission deadlines, visit their ratings release schedule.
Additional Tips to Improve Your Charity Navigator Score
Between submission deadlines, take time to go through all of your data and information to ensure that it’s up to date, relevant and visible. The more information that’s provided on your platforms for donors to see, the better your chances of improving your Charity Navigator score.
In addition to the abovementioned beacon-specific improvement tips, there are other areas you can explore to further improve your ratings.
- Update your Charity Navigator profile regularly: Be active and update your profile with the most recent information and metrics to improve your Accountability and Finance score.
- Update your website: Link your Charity Navigator profile on your website and share your 990 for transparency.
- Optimize your IRS Form 990: Review it and ensure your website URL is included, along with your nonprofit’s procedures and policies.
- Practice transparent data tracking: Invest in reliable fundraising software to collect your data and arrange it on dashboards. It allows you to create and customize reports efficiently.
- Review your National Taxonomy of Exempt Entities (NTEE): Check your NTEE code to ensure that it fits with your nonprofit’s cause. Donors use this code to find charities they want to support. Having the correct code ensures your organization is visible.
- Stay in the know: Stay on top of nonprofit transparency and reporting trends through reputable sources online.
- Improve the weak beacon: Determine which of the four beacons you’re scoring low in and improve it.
- Vary your fund sources: Improve your score by working with diverse fund providers.
- Treat your donors with care: You oversee your donors’ information and donations, so ensure you follow nonprofit best practices.
Optimize Your Nonprofit’s Success With Marshall Jones
Managing and sustaining a nonprofit is a challenging yet rewarding task. And by ensuring that your nonprofit hits all of the required finance, accountability, impact, community and culture metrics, you’ll improve your score with ease and build stronger trust with your donors, both long-standing and prospective. And if you need assistance with your finance metric, we’re here ready to help wherever we can.
Marshall Jones Certified Public Accountants And Advisors are here to help you manage your finances. With over 40 years of experience performing audit and assurance services, we deliver seamless nonprofit financial solutions and advantages you can trust and rely on.
Ready to optimize your nonprofit’s performance? Contact us today for a consultation and to learn more.
