We have made available the following glossary of terms in order to assist you in your Charity Navigator research. Click on the relevant letter or number in the list below and you will be forwarded to that portion of our glossary of terms.
Please note that we only have displayed the letters which have matching glossary terms.
Organizations described under § 501(c)(3) of the Internal Revenue Code are public charities that are tax-exempt and eligible to receive tax-deductible contributions. Their earnings do not benefit private individuals, no substantial part of their activities should be used to influence legislation, and they do not participate in political campaigns or political endorsements. All charities in our database are classified under § 501(c)(3) and file Federal Forms 990 with the IRS.
Accountability is an obligation or willingness by a charity to explain its actions to its stakeholders.
A charity's Accountability & Transparency score, on a scale of 0 to 100, is derived by analyzing 17 metrics that relate to good governance and ethical best practices. Details on how it is calculated can be found in the Methodology section of the website.
Administrative Expenses: This measure reflects what percent of its total budget a charity spends on overhead, administrative staff and associated costs, and organizational meetings. Dividing a charity's administrative expenses by its total functional expenses yields this percentage.
Defines the organizational grouping in the context of the IRS group ruling.
Assets: A charity's assets include cash, savings, investments, property, and other items of ownership with an exchange value. By maintaining reserves of assets, a charity is able to further advance its purposes and meet its growing needs.
We check the charity's website to see if it has published its audited financial statements for the fiscal year represented by the most recently filed IRS Form 990. It is important for donors to have easy access to this financial report to help determine if the organization is managing its financial resources well. We are currently rating charities on whether or not they publish their audit on their website. In the future, for those charities that do publish their audit online we will also report and rate whether or not the auditor's opinion was qualified or unqualified.
If a charity does not publish its latest Audited Financial Statements on its website, then we deduct 4 points from its Accountability and Transparency score.
Audited financial statements provide important information about financial accountability and accuracy. They should be prepared by an independent accountant with oversight from an audit committee. (It is not necessary that the audit committee be a separate committee. Often at smaller charities it falls within the responsibilities of the finance committee or the executive committee.) The committee provides an important oversight layer between the management of the organization, which is responsible for the financial information reported, and the independent accountant, who reviews the financials and issues an opinion based on its findings. We check the charity's Form 990 reporting to see if it meets this criteria. In the future we also intend to review whether or not the charity has received an unqualified opinion from the auditor.
This metric will be assigned to one of the following categories:
The IRS requires that any compensation paid to members of the charity's governing body be listed on the form 990. Furthermore, all members of the governing body need to be listed whether or not they are compensated. It is not unusual for some members of the board to have compensation listed. The executive director of the organization frequently has a seat on the board, for instance, and is compensated for being a full time staff member. However, it is rare for a charity to compensate individuals only for serving on its Board of Directors. Although this sort of board compensation is not illegal, it is not considered a best practice.
If the charity fails to report its board members, or compensates any of the members for their participation on the board, then we deduct 4 points from its Accountability and Transparency score.
Our analysts check to see if the charity lists Board members on its website. Publishing this information enables donors and other stakeholders to ascertain the make up of the charity's governing body. This enables stakeholders to report concerns to the Board. Charity Navigator does not cross-check the Board members listed on the website with that reported on the Form 990 because the latter often isn't available until more than a year after the charity's fiscal year ends. In that time, the charity's Board members may have changed and the charity typically reflects those more recent changes on the website. In other words, since the Form 990 isn't especially timely, it can not be used to verify the Board information published on the charity's site.
If a charity does not publish board members on its website, then we deduct 4 points from its Accountability and Transparency score.
We classify charities in eleven groups or Categories based on their respective services. A Category represents a broad area of charitable activity (e.g., Health). We further divide the charities in each Category into smaller groups or Causes. Each Cause refers to a more narrowly defined area of charitable activity (e.g., Medical Research).
Charities are required to list their CEO's name and compensation on the new 990, an issue of concern for many donors. Our analysts check to be sure that the charities complied with the Form 990 instructions and included this information in their filing.
If the charity does not properly report CEO compensation on form 990, then we deduct 4 points from its Accountability and Transparency score.
The Combined Federal Campaign, the nation's largest workplace giving campaign, offers federal civilian employees, members of the military, and U.S. Postal Service workers the opportunity to contribute to charities. Charity Navigator rates nearly 1,000 of the participating charities. To locate a rating for a specific charity enrolled in the campaign, simply enter its CFC number in the search box. Alternatively, you can limit any search to charities in the CFC by using our advanced search tool or by selecting CFC as a filter criteria on the search results page.
Charity: A charity exists to serve a societal or group mission, and does not pursue a self-interest or pay out profit to individuals. It is recognized by the IRS as tax-exempt and eligible to receive tax-deductible contributions. We use the terms charity and non-profit interchangeably.
Charts: These charts are derived from the data extracted from the organization's 990 and subsequently evaluated by Charity Navigator. The specific functionality of each chart is articulated in the glossary entry for that particular chart.
IRS classification of the type of organization; differs slightly from NTEE classification.
Based on the data found in each charity's most recently filed Form 990, we include salary, cash bonuses, and expense accounts when we measure a CEO's compensation. We do not include contributions to benefit plans or deferred compensation that is allocated to be paid in later years. Deferred compensation is often accrued over many years and then is paid as a lump sum in one year. As such, we do include deferred compensation as part of the compensation figure in the year in which it is actually paid out to the employee and/or when it is expensed per the 990..
Many charities use fiscal years that differ from the calendar year. In these cases, it is important to recognize that the CEO’s compensation reported on the Form 990 reflects the CEO’s pay for the calendar year, not the fiscal year. Why? Because the IRS requires that charities report compensation on the Form 990 exactly the same as they did on the W-2 Form (which is based on the calendar year).
Some charities are able to pay their leaders through multiple affiliated organizations. Using information reported on an organization's most recent Form 990, we list an individual's aggregate compensation from related organizations. This compensation can include salary, cash bonuses, expense accounts and other allowances.
Many charities use fiscal years that differ from the calendar year. In these cases, it is important to recognize that compensation reported on the Form 990 reflects the employee's pay for the calendar year, not the fiscal year. Why? Because the IRS requires that charities report compensation on the Form 990 exactly the same as they did on the employee's W-2 Form (which is based on the calendar year).
Such a policy protects the organization, and by extension those it serves, when it is considering entering into a transaction that may benefit the private interest of an officer or director of the organization. Charities are not required to share their conflict of interest policies with the public. Although we can not evaluate the substance of its policy, we can tell you if the charity has one in place based on the information it reports on its Form 990.
If the charity does not have a Conflict of Interest policy, then we deduct 4 points from its Accountability and Transparency score.
Contact Information: This box displays an organization's address, phone and fax numbers, and web and email addresses. This is the most current information available to the giving public, and may be pulled from that organization's web site, stationery, annual report, or 990.
Signifies whether contributions made to an organization are tax-deductible.
An official record of the events that take place during a board meeting ensures that a contemporaneous document exists for future reference. Charities are not required to make their Board meeting minutes available to the public. As such, we are not able to review and critique their minutes. For this performance metric, we are checking to see if the charity reports on its Form 990 that it does keep those minutes. In the future, we will also track and rate whether or not a charity keeps minutes for its committee meetings.
If the charity does not keep board meeting minutes, then we deduct 4 points from its Accountability and Transparency score.
Donors have expressed extreme concern about the use of their personal information by charities and the desire to have his information kept confidential. The exchanging and sale of lists for telemarketing and the mass distribution of "junk mail," among other things, can be minimized if the charity assures the privacy of its donors. Privacy policies are assigned to one of the following categories:
Charity Navigator has monitored this metric since 2004, but it was not used in the ratings calculations until the implementation of CN 2.0 in September 2011.
EIN (Employer Identification Number): A unique number assigned by the Internal Revenue Service to every employer in the United States for the purposes of identification. Similar in purpose to the Social Security Number assigned to individuals.
Defines the type of exemption held by the organization.
Indicates the primary return the organization is required to file with the IRS.
A charity's Financial score, on a scale of 0 to 100, is derived by analyzing 7 financial metrics. Details on how it is calculated can be found in the Methodology section of the website.
Form 990: For every fiscal year it is in operation, a charity discloses its financial and programmatic information in an annual federal return filed with the IRS. Forms 990 are public documents. By law, a copy of the forms must be supplied to anyone who requests them. We use Forms 990 as the primary source of information for evaluating charities.
We check the charity's website to see if it has published its most recently filed IRS Form 990 (a direct link to the charity's 990 on an external site is sufficient). It is important for donors to have easy access to this financial report to help determine if the organization is managing its financial resources well.
If the charity has not published its latest form 990 on its website, then we deduct 3 points from its Accountability and Transparency score.
IRS classification of type of foundation. This is only applicable to 501(c)(3) organizations.
Fundraising Efficiency: The amount spent to raise $1 in charitable contributions. To calculate a charity's fundraising efficiency, we divide its fundraising expenses by the total contributions it receives.
Fundraising Expenses: This measure reflects what a charity spends to raise money. Fundraising expenses can include campaign printing, publicity, mailing, and staffing and costs incurred in soliciting donations, memberships, and grants. Dividing a charity's fundraising expenses by its total functional expenses yields this percentage.
Organizations that operate primarily as fundraisers are identified on our site with this image:
These organizations primarily fundraise for the Cause in which they are located, then make grants to other entites that carry out the work.
Typically, organizations within the same Cause area operate similarly to one another when it comes to their financial structure. However, we have identified a number of organizations, namely fundraisers, that are similar to one another in the way they function financially, but working across different Causes. In order to better compare their financial health, we have identified these Fundraising organizations and compare them to each other, rather than to other organizations in their Cause.
The twelve month period defining a charity's annual cycle of activity, at the conclusion of which a charity (if it isn't exempt from doing so) files an informational tax return Form 990 with the IRS. A charity can designate any month as the beginning of its fiscal year. We commonly refer to a charity's FYE (fiscal year ending), the month, day, and year when a charity's fiscal year ends. For example, we would refer to a fiscal year ranging from July 1, 2001 to June 30, 2002 as FYE 2002.
Name of the group to which an organization is a part of. Only applicable if an organization has an affiliation to a group.
Income Statement: All financial information we present derives from the Federal Forms 990 filed by charities with the Internal Revenue Service (IRS). This particular statement shows the breakdown of a charity's revenue and expenses, its payments to affiliates, excess or deficit, and total net assets reported in the most recent fiscal year.
The presence of an independent governing body is strongly recommended by many industry professionals to allow for full deliberation and diversity of thinking on governance and other organizational matters. Our analysts check the Form 990 to determine if the independent Board members are a voting majority and also at least five in number.
If a charity has less than 5 independent voting members of the board or if the independent members do not constitute a voting majority, then 15 points are deducted from the charity's Accountability and Transparency score.
A key element of Charity Navigator’s mission is to contribute to an increase in the number of informed charitable givers/social investors, and to the depth of their knowledge.
But what does it mean to be an informed charitable giver or social investor? We believe it means:
Consistent with Generally Accepted Accounting Principles (GAAP), some organizations that follow SOP 98-2 or ASC 958-720-45 report a portion of their specific joint costs from combined educational campaigns and fundraising solicitations as program costs. The IRS requires that these organizations disclose the allocation on the Form 990. In most cases, charities utilizing this technique allocate a small percentage of their solicitation costs to program expenses from fundraising expenses. However, we believe that donors are not generally aware of this accounting technique and that they would not embrace it if they knew a charity was employing it, nor does Charity Navigator. Therefore, as an advisor and advocate for donors, when we see charities using this technique we factor out the joint costs allocated to program expenses and add them to fundraising. The exceptions to this policy are determined based on a review of the 990 and the charity’s website (in some cases we review data provided to us from the charity directly). We analyze these items to see if the organization’s mission includes a significant education/advocacy program or other type of program that would directly be associated with joint costs. If that is the case, we inspect in further detail the charity’s expenses in regards to those specific programs. Finally, we review the charity’s website to confirm that there is clarity for a potential donor that the organization in question employs the types of programs that entail joint cost activity.
It is important for donors and other stakeholders to know who runs the organization day-to-day. Charity Navigator does not cross-check the leadership listed on the website with that reported on the Form 990 because the latter often isn't available until more than a year after the charity's fiscal year ends. In that time, the charity's leadership may have changed and the charity typically reflects those more recent changes on the website. In other words, since the Form 990 isn't especially timely, it can not be used to verify the leadership information published on the charity's site.
If the charity does not publish senior staff on its website, then we deduct 3 points from its Accountability and Transparency score.
This is the month and year of the nonprofit’s most recently filed Form 990.
Leadership: The person identified as holding the highest position of management, and therefore who would normally be responsible for carrying out the mission of the charity and leading the organization on a day-to-day basis. Common titles categorized as such are Chief Executive Officer (CEO), Executive Director and President. The name, title, and compensation for this executive appear as reported on the most recent 990 available to the public.
Leadership Compensation: The compensation paid to the person identified as holding the highest management position at the charity for the accounting period reflected on the income statement of the charity.
Leadership Compensation and Other Salaries of Note as a Percentage of Total Expenses: Many donors are understandably interested in how much the leaders of charities earn. This information is public record so Charity Navigator reports it for our users. This information does not factor into an organization's Charity Navigator rating. We provide this percentage so donors can quickly put the salary into perspective. For comparative purposes, a charity with total expenses of $20 million, which compensates its highest paid executive at $200,000 per year (or 1%) would appear to have tighter control on expenses than the $1 million organization which pays its chief executive the same amount (or 20% of expenses for one person).
Registered users can view leadership salaries and percentages side-by-side using the "compare charities" feature. It is accessible to registered users on the search results page and their "My Charities" page as well as on each charity's rating page by clicking "Compare These Charities."
Two things you should know: 1) If a charity has not reported a salary for its chief executive, that does not necessarily mean the leadership is actually uncompensated. The charities we rate are all large, complex organizations that rarely can succeed with voluntary leadership. More likely, the charity has not, in violation of IRS code, provided the data in an appropriate manner. If you are considering a donation to a charity which does not report executive level compensation, we encourage you to contact that charity directly to ascertain how that charity is able to thrive without having to pay their executives. (Please note, for those few organizations where we have confirmed volunteer leadership, we show “not compensated”, and will list other salaries of management). 2) Some charities are able to pay their leaders through multiple affiliated organizations -- allowing them to report a lower salary on any one 990, satisfying donors who want to keep the number low. Charity Navigator publishes the salary paid by the charity, as well as the portion paid by an affiliate entity (or entities), in separate columns; this lets donors know how much the CEO earns for running that organization, no matter how diverse the money trail.
Part of our goal in rating the financial performance of charities is to help donors assess the financial capacity and sustainability of a charity. As do organizations in other sectors, charities must be mindful of their management of total liabilites in relation to their total assets. This ratio is an indicator of an organization’s solvency and or long term sustainability. Dividing a charity's total liabilities by its total assets yields this percentage.
Making loans to related parties such as key officers, staff, or Board members, is not standard practice in the sector as it diverts the charity's funds away from its charitable mission and can lead to real and perceived conflict-of-interest problems. This practice is discouraged by sector trade groups which point to the Sarbanes-Oxley Act when they call for charities to refrain from making loans to directors and executives. And the IRS is concerned enough with the practice that it requires charities to disclose on their Form 990 any loans to or from current and former officers, directors, trustees, key employees, and other "disqualified persons." Furthermore, some state laws go so far as to prohibit loans to board members and officers. And although employees and trustees are permitted to make loans to charities, this practice can also result in real and/or perceived conflict of interest problems for the charity. Furthermore, it is problematic because it is an indicator that the organization is not financially secure.
If the charity has reported loans to or from officers or other interested parties, then we deduct 4 points from its Accountability and Transparency score.
A diversion of assets - any unauthorized conversion or use of the organization's assets other than for the organization's authorized purposes, including but not limited to embezzlement or theft, also can seriously call into question a charity's financial integrity. We check the charity's last two Forms 990 to see if the charity has reported any diversion of assets. If the charity does report a diversion, then we check to see if it complied with the Form 990 instructions by describing what happened and its corrective action. This metric will be assigned to one of the following categories:
Mission: A statement of an organization's purpose, programs, and services rendered. Charities often define their core purposes in a formal mission statement. "Mission" as it appears below is not necessarily a charity's formal mission statement. This mission, however, does consist entirely of text taken from each organization's own web site, Form 990, annual report, and/or brochure.
Registered name with IRS.
Keep in mind that some organizations actually operate under a DBA (Doing Business As) name. In the not-too-distant future, both the charity’s registered name and DBA name will be provided.
Net Assets: The difference between a charity's assets and its liabilities. Although charities do not exist to make money, they do work to build and maintain reasonable reserves of net assets. Growing its net assets helps a charity outpace inflation and sustain future program activities.
Non-profit: A non-profit organization exists to serve a societal or group mission, and does not pursue a self-interest or pay out profit to individuals. It is recognized by the IRS as tax-exempt and eligible to receive tax-deductible contributions. We use non-profit and charity interchangeably.
The National Taxonomy of Exempt Entities (NTEE) is a system developed by the National Center for Charitable Statistics (NCCS) and the Internal Revenue Service (IRS) to classify nonprofit organizations.
We assess three key indicators to determine how well a charity can sustain its efforts over time: average annual growth of program expenses, working capital ratio and the ratio of total liabilities to total assets. We issue a rating in each category, as well as a rating that combines a charity's performance in all three categories.
Organizational Efficiency: We assess four key indicators to determine how efficiently and responsibly a charity functions day to day: fundraising efficiency, fundraising expenses, program expenses, and administrative expenses. We issue a rating in each of the four categories, as well as a rating that combines a charity's performance in all four categories.
The compensation paid to Board Directors; persons earning as much or more than the chief executive; former chief executives still on payroll; relatives of key decision makers (such as Board members, founders and officers); and persons holding honorary titles within the organization.
Further, if a charity does not disclose the compensation of the chief executive, we report the compensation paid to the person responsible for running the day-to-day operations of the organization. Also, we list other highly compensated employees who may assume functions traditionally performed by a chief executive officer.
Many charities use fiscal years that differ from the calendar year. In these cases, it is important to recognize that the employees' compensations reported on the Form 990 reflects the employees' pay for the calendar year, not the fiscal year. Why? Because the IRS requires that charities report compensation on the Form 990 exactly the same as they did on the employees' W-2 Form (which is based on the calendar year).
The scale below shows how a charity's overall rating is derived from its overall score.
3-Star: 80 to 90
2-Star: 70 to 80
1-Star: 55 to 70
0-Star: < 55
A charity's overall score, on a scale of 0 to 100, is derived by analyzing the charity's (1) Financial Health and (2) Accountability and Transparency performance. Details on how it is calculated can be found in the Methodology section of the website.
Payments to Affiliates: Payments certain charities distribute to national, state, or other closely affiliated organizations. These payments or dues are used for a variety of purposes and are not typically included in a charity's functional expenses. We do, however, include these payments in a charity's total expenses.
Performance Categories: Our rating system analyzes seven performance categories of a charity's financial health. Those analyses are based on separate and relatively simple mathematical formulas, and serve as key indicators of two broad areas of a charity's financial health: its organizational efficiency and its organizational capacity.
Primary Revenue: The revenue a charity generates as a result of the work it does. A charity's primary revenue includes grants and contributions, revenue produced from programs and services, and membership fees and dues.
This process indicates that the organization has a documented policy that it follows year after year. The policy should indicate that an objective and independent review process of the CEO's compensation has been conducted which includes benchmarking against comparable organizations. We check to be sure that the charity has reported on its Form 990 its process for determining its CEO pay.
If the charity does not have a process for determining CEO compensation, then we deduct 4 points from its Accountability and Transparency score. However, in cases where the CEO is truly a volunteer and not compensated, no points will be deducted.
This measure reflects what percent of its total expenses a charity spends on the programs and services it exists to deliver. Dividing a charity's program expenses by its total functional expenses yields this percentage.
Program Expenses Growth: We compute the average annual growth of program expenses using the following formula: [(Yn/Y0)(1/n)]-1, where Y0 is a charity's program expenses in the first year of the interval analyzed, Yn is the charity's program expenses in the most recent year, and n is the interval of years passed between Y0 and Yn.
Providing copies of the Form to the governing body in advance of filing is considered a best practice, as it allows for thorough review by the individuals charged with overseeing the organization. The Form 990 asks the charity to disclose whether or not it has followed this best practice.
If the charity has not distributed its Form 990 to the board before filing, then we deduct 4 points from its Accountability and Transparency score.
Any combination of gifts, grants, contributions and membership fees from the general public (donors), foundations and corporations. Note: We do not include government funds when discussing public support.
These IRS documents are the sources of the data displayed for the Unrated Organizations on Charity Navigator's site.
Charity Navigator's ratings measure the financial health and Accountability and Transparencyof charities. We assign every charity ratings ranging from 0- to 4-stars for its Financial Health, Accountability and Transparency, and Overall Rating. Our ratings indicate how well a charity meets industry-accepted standards and how well it compares with the other charities we evaluated.
Such a policy establishes guidelines for handling, backing up, archiving and destruction of documents. These guidelines foster good record keeping procedures that promotes data integrity. Here we are reporting on the existence of a policy as reported by the charity on its Form 990.
If the charity does not have a Records Retention and Destruction Policy, then we deduct 4 points from its Accountability and Transparency score.
Region: The physical area where a charity primarily renders and practices its services. We classify a charity as regional, national, or international in scope. It may function locally within a particular state or region of the country, operate on a national level or to influence national policies, or serve countries and people internationally.
Revenue: Charities can derive revenue or funding from a variety of sources, including contributions, program services, membership dues, interest on savings, investment income, special events, and sales of inventory.
Revenue/Expenses Trend: This chart compares a charity's primary revenue and its program expenses over the course of its three most recent fiscal years. Frequently, as a charity's funding increases, its spending on programs and services should increase as well.
This is the month and year on a ruling or determination letter recognizing the organization's exempt tax status.
Codes which define the category under which an organization may be exempt from taxes.
Transparency is an obligation or willingness by a charity to publish and make available critical data about the organization.
For the purposes of Results Reporting assessment, we recognize the work of other organizations which, through their processes, standards or analysis, examine or assess the charities we evaluate. Charity Navigator realizes that it is not the only organization that evaluates charities; and that the evaluation processes of many other organizations have merit. Our intent therefore is to give charities credit for making public on their own websites or other materials the results of evaluations or analyses from these other “validator” organizations.
Important Note: In this very early stage of development for Results Reporting, Charity Navigator has not evaluated these organizations to form our opinion regarding the robustness of these “validators” or their methodologies. Their being listed on our site at this point does not constitute an endorsement by Charity Navigator to that effect. For now, we have only verified that their processes do include consideration of Results Reporting.
This policy outlines procedures for handling employee complaints, as well as a confidential way for employees to report any financial mismanagement. Here we are reporting on the existence of a policy as reported by the charity on its Form 990.
If the charity does not have a Wistleblower Policy, then we deduct 4 points from its Accountability and Transparency score.
Working Capital Ratio: Determines how long a charity could sustain its level of spending using its net available assets, or working capital, as reported on its most recently filed Form 990. We include in a charity's working capital unrestricted and temporarily restricted net assets, and exclude permanently restricted net assets. Dividing these net available assets by a charity's total expenses (including payments to affiliates) for the most recent fiscal year, yields the working capital ratio.