Financial Ratings Tables

At Charity Navigator we recognize that different types of organizations work differently. This variation isn't a bad thing. Rather, different types of charities have different resource and spending requirements. For example, our research shows that museums exhibit above-average administration costs as compared to other types of charities. We can account for this variation in the data because we know how costly it is for museums to maintain their facilities and collections. To ensure that we are taking these types of differences into account, and thereby comparing apples to apples and not apples to oranges, we've developed the following ratings tables.

Program Expenses

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

Converted Score = Raw Score x 10

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 a 0-star rating for their Financial Health.

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 financial 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. A charity's average annual deficit is limited to the same fiscal years over which we evaluate the organization more generally (see our discussion of performance categories 5 and 6 to learn how we determine the number of years to consider in evaluating an organization).

For example, charity Z, which spent 71.4% on its programs, ran a deficit of $425,000 in 2003, a $350,000 deficit in 2004, a surplus of $275,000 in 2005, and a deficit of $200,000 in 2006. Over a four-year period, it ran a combined deficit of $700,000, which averages to $175,000, or 5% of $3.5 million in total functional expenses for its most recent year. We deduct that 5% from Charity Z's program expenses score, adjusting it to 66.4%, and now use the revised program expenses to score Charity Z.

Administrative Expenses 

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

Converted Score: 10 7.5 5 2.5 0
General: 0% - 15% 15% - 20% 20% - 25% 25% - 30% > 30%
Food Banks, Food
Pantries & Food Distribution
0% - 3% 3% - 5% 5% - 10% 10% - 15% > 15%

Fundraising Organizations

0% - 7.5% 7.5% - 12.5% 12.5% - 20% 20% - 25% > 25%
Community Foundations 0% - 10% 10% - 15% 15% - 20% 20% - 25% > 25%

Museums

0% - 17.5% 17.5% - 25% 25% - 30% 30% - 45% > 45%

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 fall below the median for all of the charities we rate.

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 lower than that of all the charities we rate.

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 less than the median for all of the charities we rate. 

Museums:
With expensive collections and property to maintain and expand, these charities encounter significantly above-average administration costs. Their median administrative expenses percentage is higher than the median among all of the charities we rate.

Fundraising Expenses

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

Converted Score: 10 7.5 5 2.5 0
General: 0% - 10% 10% - 15% 15% - 20% 20% - 25% > 25%
Public Broadcasting
and Media
0% - 20% 20% - 25% 25% - 30% 30% - 35% > 35%

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 higher than the median of all of the charities we rate.

Fundraising Efficiency

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

Converted Score: 10 7.5 5 2.5 0
General: $0.00 - $0.10 $0.10 - $0.20 $0.20 - $0.35 $0.35 - $1.00 > $1.00
Food Banks, Food
Pantries & Food Distribution
$0.00 - $0.03 $0.03 - $0.10 $0.10 - $0.15 $0.15 - $0.20 > $0.20
Community Foundations $0.00 - $0.03 $0.03 - $0.10 $0.10 - $0.15 $0.15 - $0.20 > $0.20
Public Broadcasting
and Media
$0.00 - $0.20 $0.20 - $0.30 $0.30 - $0.45 $0.45 - $1.00 > $1.00

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 among all of the charities we rate, the median fundraising efficiency for community foundations and for food banks is much lower.

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 far exceeds the median for all of the charities we rate.

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.

Converted Score: 10 Intermediate Score 0
Advocacy and Civil Rights >7% Raw Percentage +3% <-3%
Animal Rights, Welfare, and Services >10% Raw Percentage <0%
Botanical Gardens, Parks, and Nature Centers >9% Raw Percentage +1% <-1%
Children's and Family Services >6% Raw Percentage +4% <-4%
Community and Housing Development >9% Raw Percentage +1% <-1%
Community Foundations >7% Raw Percentage +3% <-3%
Development and Relief Services >9% Raw Percentage +1% <-1%
Diseases, Disorders, and Disciplines >6% Raw Percentage +4% <-4%
Environmental Protection and Conservation >6% Raw Percentage +4% <-4%
Food Banks, Food Pantries, and Food Distribution >10% Raw Percentage <0%
Foreign Charity Support Organizations >6% Raw Percentage +4% <-4%
Fundraising Organizations >5% Raw Percentage +5% <-5%
Homeless Services >9% Raw Percentage +1% <-1%
Humanitarian Relief Supplies >5% Raw Percentage +5% <-5%
International Peace, Security, and Affairs >7% Raw Percentage +3% <-3%
Libraries, Historical Societies and Landmark Preservation >5% Raw Percentage +5% <-5%
Medical Research >9% Raw Percentage +1% <-1%
Multipurpose Human Service Organizations >9% Raw Percentage +1% <-1%
Museums >6% Raw Percentage +4% <-4%
Other Education Programs and Services >8% Raw Percentage +2% <-2%
Patient and Family Support >10% Raw Percentage <0%
Performing Arts >6% Raw Percentage +4% <-4%
Private Elementary and Secondary Schools >9% Raw Percentage +1% <-1%
Private Liberal Arts Colleges >7% Raw Percentage +3% <-3%
Public Broadcasting and Media >6% Raw Percentage +4% <-4%
Religious Activities >7% Raw Percentage +3% <-3%
Religious Media and Broadcasting >7% Raw Percentage +3% <-3%
Research and Public Policy Institutions >7% Raw Percentage +3% <-3%
Social Services >7% Raw Percentage +3% <-3%
Treatment and Prevention Services >8% Raw Percentage +2% <-2%
Universities, Graduate Schools, and Technological Institutes >8% Raw Percentage +2% <-2%
Wildlife Conservation >5% Raw Percentage +5% <-5%
Youth Development, Shelter, and Crisis Services >7% Raw Percentage +3% <-3%
Zoos and Aquariums >9% Raw Percentage +1% <-1%

 

Rationale behind score adjustments:

Normalizing primary revenue growth scores:
Weak economic conditions slowed charitable giving considerably in recent years. Charities in the causes listed above have been particularly hard hit during the recession in terms of their ability to generate revenue. We have adjusted the primary revenue growth scores for each of these causes starting with the fiscal year ending 2009, when we first began to see the negative impact of the recession.  Each cause was adjusted individually based on the actual reported data.

As of 2013, adjustments to our ratings tables will be made after we have process new financial data for at least 2/3 of the charities we rate. We believe this provides a more precise and timely analysis of each charity’s primary revenue growth. 

Program Expense Growth

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

Converted Score: 10 Intermediate Score 0
Advocacy and Civil Rights >6% Raw Percentage +4% <-4%
Animal Rights, Welfare, and Services >7% Raw Percentage +3% <-3%
Botanical Gardens, Parks, and Nature Centers >7% Raw Percentage +3% <-3%
Children's and Family Services >6% Raw Percentage +4% <-4%
Community and Housing Development >7% Raw Percentage +3% <-3%
Community Foundations >10% Raw Percentage <0%
Development and Relief Services >7% Raw Percentage +3% <-3%
Diseases, Disorders, and Disciplines >4% Raw Percentage +6% <-6%
Environmental Protection and Conservation >7% Raw Percentage +3% <-3%
Food Banks, Food Pantries, and Food Distribution >10% Raw Percentage <0%
Foreign Charity Support Organizations >8% Raw Percentage +2% <-2%
Fundraising Organizations >4% Raw Percentage +6% <-6%
Homeless Services >9% Raw Percentage +1% <-1%
Humanitarian Relief Supplies >2% Raw Percentage +8% <-8%
International Peace, Security, and Affairs >6% Raw Percentage +4% <-4%
Libraries, Historical Societies and Landmark Preservation >5% Raw Percentage +5% <-5%
Medical Research >7% Raw Percentage +3% <-3%
Multipurpose Human Service Organizations >7% Raw Percentage +3% <-3%
Museums >6% Raw Percentage +4% <-4%
Other Education Programs and Services >7% Raw Percentage +3% <-3%
Patient and Family Support >8% Raw Percentage +2% <-2%
Performing Arts >5% Raw Percentage +5% <-5%
Private Elementary and Secondary Schools >4% Raw Percentage +6% <-6%
Private Liberal Arts Colleges >5% Raw Percentage +5% <-5%
Public Broadcasting and Media >4% Raw Percentage +6% <-6%
Religious Activities >7% Raw Percentage +3% <-3%
Religious Media and Broadcasting >6% Raw Percentage +4% <-4%
Research and Public Policy Institutions >8% Raw Percentage +2% <-2%
Social Services >7% Raw Percentage +3% <-3%
Treatment and Prevention Services >8% Raw Percentage +2% <-2%
Universities, Graduate Schools, and Technological Institutes >6% Raw Percentage +4% <-4%
Wildlife Conservation >9% Raw Percentage +1% <-1%
Youth Development, Shelter, and Crisis Services >5% Raw Percentage +5% <-5%
Zoos and Aquariums >7% Raw Percentage +3% <-3%

Rationale behind score adjustments:

Normalizing program expense growth scores:
In response to the recession, many charities have trimmed expenses either because they were forced to as actual revenues declined or in anticipation of such a decline. Among all the types of charities we evaluate, these causes have reported the biggest changes in their spending on programs since the recession took hold. Adjustments for the program expense growth scores for each of these categories began with the fiscal year ending 2009.  Each cause was adjusted individually based on the actual reported data. Each charity's rating page shows its actual program expense growth rate, not the normalized figure which we use in evaluating the organization. 

As of 2013, adjustments to our ratings tables will be made after we have process new financial data for at least 2/3 of the charities we rate. We believe this provides a more precise and timely analysis of each charity’s primary revenue growth. 

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.

Converted Score: 10 7.5 5 2.5 0
General: > 1.0 0.5 - 1.0 0.25 - 0.5 0.0 - 0.25 < 0.0

Food Banks,
Food Pantries and
Food Distribution

> 0.25 0.0833 - 0.25 0.042 - 0.0833 0 - 0.042 < 0.0
Development & Relief Services > 1.0 0.5 - 1.0 0.0833- 0.5 0 - 0.0833

< 0.0

Humanitarian Relief Supplies > 0.10 0.06 - 0.10 0.02 - 0.06 0.0 - 0.02 < 0.0
Religious Activities > 1.0 0.5 - 1.0 0.0833- 0.5 0 - 0.0833 < 0.0

Religious Media &
Broadcasting

> 1.0 0.5 - 1.0 0.0833- 0.5 0 - 0.0833 < 0.0
Botanical Gardens,
Parks, & Nature Centers
> 3.0 1.0 - 3.0 0.5 - 1.0 0 - 0.5 < 0.0
Private Liberal Arts
Colleges
> 3.0 1.0 - 3.0 0.5 - 1.0 0 - 0.5 < 0.0
Private Elementary and
Secondary Schools
> 3.0 1.0 - 3.0 0.5 - 1.0 0 - 0.5 < 0.0

Museums

> 3.0 1.0 - 3.0 0.5 - 1.0 0 - 0.5 < 0.0
Libraries, Historical Societies
& Landmark Preservation
> 4.0 1.0 - 4.0 0.5 - 1.0 0 - 0.5 < 0.0
Community
Foundations
> 5.0 2.0 - 5.0 1.0 - 2.0 0 - 1.0 < 0.0

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 far lower than the overall median for all of the charities that we rate.

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 lower than the median reported for all of the charities rated by Charity Navigator.

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 lower than the median working capital ratio found for all of the charities rated by Charity Navigator.

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. The median working capital ratio among Botanical Gardens, Parks, and Nature Centers, Private Liberal Arts Colleges, and Private Elementary and Secondary Schools, and Museums is far more than the median for all of the charities we rate.

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 much greater than the median working capital for all charities we rate.

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 much, much greater than the median reported for among the rest of the charities rated by Charity Navigator.

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.

Financial Health Scores

Financial Health Rating: 4 Stars 3 Stars 2 Stars 1 Star 0 Stars Donor Advisory
Financial Health Score: ≥ 60 50 - 60 40 - 50 25 - 40 < 25 N/A

 
 
   
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