Industry Insights

Charity Navigator Releases New Rating Methodology

July 2016
Author:  Kevin Ensminger

Kevin Ensminger

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Charity Navigator is America’s most prominent charity evaluator, rating thousands of charities and receiving more than 9 million website visits per year. The organization evaluates not-for-profit charities using three primary dimensions:

  • Financial health
  • Accountability and transparency
  • Results reporting

Using a data-driven approach, Charity Navigator developed a systematic formula with a star rating system (zero to four stars). Recently, the organization upgraded the rating system in an effort to provide a more accurate evaluation of charities’ performance.

On June 1, 2016, Charity Navigator launched the newest version of its rating system—CN 2.1. This model still only uses financial health, accountability and transparency metrics (results reporting is expected to be incorporated into the next version). However, according to Charity Navigator, the new system “better captures an organization’s long-term capacity and health by allowing for higher scores in program expense, removing the volatile primary revenue growth metric, including three-year averaging for non-capacity metrics, and introducing a new capacity metric, Liabilities to Assets Ratio ….” With CN 2.1, 19 percent of the examined charities experienced a one-star rating improvement, 8 percent experienced a one-star reduction and only a handful saw a two-star increase or decrease.

Below is a summary of the changes from the prior version of the rating system:

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