Methodology

• What Kind of Charities Do We Evaluate?
• How Do We Classify Charities?
• How Do We Rate Charities?
• Our Ratings Tables
• What Do Our Ratings Mean?
• What Else Do We Consider in Our Evaluation Process?
• How Current are Our Ratings?
• Glossary of Terms

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Our Ratings Tables

Program Expenses

Percent of total functional expenses spent on programs and services (higher is better)

Rationale behind score adjustments:

Program Expenses less than 33.3%:
Our data shows that 7 out of 10 charities we've evaluated spend at least 75% of their budget on the programs and services they exist to provide. And 9 out of 10 spend at least 65%. We believe that those spending less than a third of their budget on program expenses are simply not living up to their missions. Charities demonstrating such gross inefficiency receive zero points for their overall organizational efficiency score.

Deficit Adjustment:
While charities are not created to make a profit, they should not outspend their means. When a charity runs a combined deficit over time, we adjust its efficiency score downward. We do this by comparing its average annual deficit to its total functional expenses for the most recent year, and we then deduct that percentage from the charity's program expenses percentage.

Administrative Expenses

Percent of total functional expenses spent on management/general (lower is better)

Rationale behind score adjustments:

Food Banks, Food Pantries, and Food Distribution:
As primarily non-cash operations, these charities demonstrate very little need for spending on overhead. Their median administrative expenses percentage of 2.0% is far below the median of 9.6% among all charities.

Fundraising Organizations:
These charities serve as fundraising vehicles for other community-based charities, and appropriately demonstrate smaller overhead spending. The median administrative expenses percentage among fundraising organizations is 6.6%, as compared to 9.6% among all charities.

Community Foundations:
Much like fundraising organizations, these charities serve as fundraising vehicles, and must as a result limit overhead spending. The median administrative expenses ratio for community foundations is 6.5%, as compared to the median among all charities of 9.6%.

Museums:
With expensive collections and property to maintain and expand, these charities encounter significantly above-average administration costs. Their median administrative expenses percentage is 15.5%, whereas the median among all charities is 9.6%.

Fundraising Expenses

Percent of total functional expenses spent on fundraising (lower is better)

Rationale behind score adjustments:

Public Broadcasting and Media:
These charities use expensive air time to raise money, requiring a higher investment in their fundraising efforts and thus raising fundraising costs. Among these charities, the median fundraising expenses percentage is 15.9%, as compared to a median of 7.5% among all charities.

Fundraising Efficiency

Amount a charity spends to raise $1 (lower is generally better)

Rationale behind score adjustments:

Community Foundations; Food Banks, Food Pantries, and Food Distribution:
By managing long-term donor-advised funds, community foundations are able to raise large sums of money while spending relatively small amounts on fundraising. Because donated food is their primary revenue source, food banks also are able to devote far less of their resources to fundraising. As compared with a median fundraising efficiency of $0.09 among all charities, the median fundraising efficiency for community foundations is $0.01 and for food banks is $0.02.

Public Broadcasting and Media:
As mentioned above, by relying on the use of expensive air time to raise money, these charities require a higher investment in their fundraising efforts, thus lowering their fundraising efficiency. The median fundraising efficiency for these charities is $0.20, which far exceed the median of $0.09 for all charities.

Primary Revenue Growth

Measures growth of grants and contributions, revenue generated from programs and services, and membership fees and dues over the past three to five fiscal years.

Rationale behind score adjustments:

Normalizing primary revenue growth scores:
While weak economic conditions slowed charitable giving considerably in recent years, Giving USA reports that in 2004, contributions rose for the first time since 2000. Although this indicates a significant shift in philanthropic trends, our research shows that the downturn in giving was broadly felt throughout the charitable sector and its impact will likely be seen for the next several years. On April 15, 2002, the median average annual growth of primary revenue among all of the charities we evaluated was 7.62%, and the average was 11.1%. As of November 1, 2009, the median rate of primary revenue growth had dropped to 7.40% and the average had dropped to 10.36%.

In response to these economic fluctuations, and in an effort to evaluate charities fairly, we normalized primary growth rates by adding 3.72% to each charity's growth rate. The primary revenue growth rate displayed on each charity's summary page is its actual growth rate, not the normalized figure which we use in evaluating the organization.

Program Expense Growth

Measures growth of program expenses over the past three to five fiscal years.

Working Capital Ratio

Determines how long (in years) a charity could sustain its level of spending using only its net available assets, as reported on its most recently filed Form 990.

Rationale behind score adjustments:

Food Banks, Food Pantries, and Food Distribution:
Because the bulk of their expenses take the form of donated food and goods, these charities need only small amounts of working capital. Their median working capital ratio is only 0.11 years (1.32 months), while the overall median is 0.70 years (8.4 months).

Development & Relief Services; Humanitarian Relief Supplies:
As with food banks, much of the expenses for these charities are in the form of donated food, goods, and supplies, and as a result they need only small amounts of working capital. The median working capital ratio for Development & Relief Services and Humanitarian Relief Supplies charities is 0.37 years (4.44 months) and 0.03 years (less than a month), respectively, as compared to a median of 0.70 years (8.4 months) for all charities.

Religious Activities; Religious Media and Broadcasting:
Religious Activities organizations and Religious Media and Broadcasting organizations maintain relatively small amounts of working capital. The median working capital ratio for Religious Activities charities and Religious Media and Broadcasting charities is 0.23 years (2.76 months) and 0.21 years (2.52 months), respectively, as compared to a median of 0.70 years (8.4 months) for all charities.

Botanical Gardens, Parks, and Nature Centers; Private Liberal Arts Colleges; Private Elementary and Secondary Schools; Museums:
As part of their need to finance acquisitions and improvements to their collections and property, charities in these Causes maintain larger reserves of working capital. While the median working capital ratio among all charities is 0.70 years (8.4 months), the median among Botanical Gardens, Parks, and Nature Centers is 1.7 years, the median among Private Liberal Arts Colleges is 2.3 years and Private Elementary and Secondary Schools is 1.5 years, and the median among museums is 2.1 years.

Libraries, Historical Societies & Landmark Preservation:
These organizations demonstrate unusually large reserves of working capital. The median working capital ratio for Libraries, Historical Societies & Landmark Preservation is 3.4 years, as compared to the median of 0.70 years (8.4 months) for all charities.

Community Foundations:
These charities exist to build and manage donor-advised funds and to distribute those funds over time. As a result, they maintain substantial investments in securities. The median working capital ratio among these charities is 7.3 years, as compared to the median of 0.70 years (8.4 months) among all charities.

Working Capital > $250 Million:
Charity Navigator understands that after a certain point raising additional funds for the purpose of increasing working capital becomes counterproductive. As a result, we have adjusted the working capital score so that any organization with $250 million or more in working capital receives 10 points.

Summation Scores

Rating:					0 Stars
Organizational Efficiency Score	≥ 37.5	32.5 - 37.5	27.5 - 32.5	22.5 - 27.5	< 22.5
Organizational Capacity Score	≥ 22.5	17.5 - 22.5	12.5 - 17.5	2.5 - 12.5	< 2.5
Overall Score:	≥ 60	50 - 60	40 - 50	25 - 40	< 25