Charity Navigator Encompass Rating System™
In order to better serve both donors and nonprofits, we've expanded the number of charities we rate from 9,000 to 160,000
To accomplish this goal, we built the Encompass Rating System (currently in beta) A pre-release of software that includes some of the look, feel, and function of the public release; however, design changes and functionality improvements are implemented with the help of testing., providing donors with a powerful tool to access comprehensive evaluations of organizational effectiveness for more than 150,000 nonprofits (and counting!). This is exponentially more than Charity Navigator has historically rated.
Donors are afforded peace of mind when considering supporting smaller and more recently established nonprofits, and these organizations are given a platform to promote their effectiveness to current and potential donors across multiple metrics, enhancing their ability to raise the funds they need to advance their mission. Star rated charities are not affected by this new system.
Encompass ratings are scored from 0-100 based on available data. A score of 75 or above indicates that a nonprofit is effective and transparent in the areas being assessed, based on Charity Navigator's criteria. These organizations will receive the "Give with Confidence" designation on their Charity Navigator pages.
Providing guidance through beacons
The Encompass Rating System uses a combination of automated methods and technology-supported manual research and analysis to provide donors and nonprofits with four clearly-visualized indicators of organizational effectiveness — we refer to these as beacons.
At this time, we have developed and released beta versions of three beacons: Finance & Accountability, Impact & Results (learn more), and Culture & Community (learn more). We issue Encompass ratings to nonprofits if they have been scored on either the Finance & Accountability or the Impact & Results beacons (an Encompass rating cannot currently be earned for a Culture & Community beacon alone). Over the coming months, we will develop and release the Leadership & Adaptability beacon, as well as make iterative changes to the currently released beacons.
Finance & Accountability
This beacon evaluates a nonprofit organization's financial health, including measures of stability, efficiency, and sustainability. We also include accountability and transparency practices to ensure integrity.
Impact & Results
This beacon assesses how well a nonprofit delivers on its mission. To issue an Impact & Results score, we estimate the actual impact a nonprofit has on the lives of those it serves, and determine whether it is making good use of donor resources to achieve that impact. Please see here for details on how and why we rate impact.
Leadership & Adaptability
(Coming soon)
This beacon will provide an assessment of the organization's leadership capacity, strategic planning, and the ability to readily innovate or respond to changes in constituent demand/ need to achieve the organization's mission.
Culture & Community
This beacon assesses whether nonprofit organizations engage in constituent feedback practices with their program beneficiaries and other stakeholders. Please see here for details on how and why we rate Culture & Community
The Encompass Rating System will remain in betaA pre-release of software that includes some of the look, feel, and function of the public release; however, design changes and functionality improvements are implemented with the help of testing. until all four beacons have been launched.
Criteria and methodology
While eligibility requirements for an evaluation through the Star Rating System disqualify less established and smaller nonprofits, the Encompass Rating System uses technology-supported automation to analyze the tax forms of 501(c)(3) organizations that have e-filed the IRS Form 990 (990PF, 990EZ or 990N is not sufficient) for three consecutive years. Nonprofits can also be rated on their delivery on stated missions via the Impact & Results beacon. The Encompass Rating System is based on a numerical score out of 100 and will live alongside the current Star Rating System.
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Program Expense (25 points)
The Program Expense Ratio is determined by the amount an organization spends on program expenses as a percentage of its total expenses. We calculate the average program percentage over the three most recent fiscal years. A charity with a reported percentage of 70% or higher will receive the 25 points for this metric. -
Independent Audit or Financial Review (25 points)
Organizations with a total revenue above $1 million are expected to have completed an independent audit. Charities with a revenue between $250K and $1 million are expected to have completed a formal audit, review, or compilation. Charities that have completed the expected financial documentation will receive the 25 points for this metric. This metric is not applicable to organizations with less than $250K in revenue*. -
Board Composition (25 points)
An organization must have at least three board members. In addition, more than 50 percent of those members must be identified on the Form 990 as independent (i.e. not compensated as an officer or other employee of the organization). A charity with an independent board that meets this criteria will receive the 25 points. -
Liabilities to Assets (15 points)
The Liabilities to Assets percentage is determined by total liabilities as a percentage of total assets. We calculate this percentage per the most recent fiscal year end. A charity with a reported percentage of less than 50% will receive the 15 points for this metric. -
Website listed (10 points)
The organization must have a website listed on its 990. This is an accountability and transparency measure; nonprofits act in the public trust and reporting publicly on activities is an important component of our rating. A charity that lists their website address on page 1 of the 990 will receive the 10 points.
*For the charities with less than $250K in revenue who are not subject to the Independent Audit, Review, Compilation metric; the scoring will be adjusted for the four remaining metrics as follows:
- Program Expense (35 points)
- Independent Board (35 points)
- Liabilities to Assets (20 points)
- Website Listed (10 points)
- A nonprofit receives a total of 0 out of 100 points if, after a thorough search of its public materials, we were unable to find sufficient information to estimate the impact of a substantial portion of its programs.
- A nonprofit receives a total of 50 out of 100 points if it has published sufficient information for us to estimate the impact of a substantial portion of its programs, but we found it was not cost-effective. We determine cost-effectiveness by comparing our estimate of the nonprofit's impact to a benchmark for performance.
- A nonprofit receives a total of 75 out of 100 points (a passing score) if it is cost-effective by our estimates.
- A nonprofit receives a total of 100 out of 100 points if it is highly cost-effective by our estimates.
Charity Navigator believes nonprofit organizations that engage in inclusive practices, such as collecting feedback from the people/communities they serve, may be more effective. We've partnered with GuideStar by Candid to survey organizations about their feedback practices. Nonprofit organizations are encouraged to fill out the How We Listen section of their Candid profile.
Charity Navigator awards every nonprofit that is eligible for an Encompass Rating that completes the survey full credit for this Beacon, in recognition of their willingness to publicly share this information with the nonprofit and philanthropic communities. Although the data is not evaluated for quality at this time, future iterations of this beacon will include third party or other data that will serve to validate the information provided by the nonprofit.
Nonprofits can also receive no score on the Finance & Accountability beacon, but a score on the Impact & Results beacon and vice versa. In that case, the nonprofit's is not penalized for not having a score on the other beacon. While a Culture & Community score affects a nonprofit's rating, an organization cannot earn an Encompass rating on a Culture & Community score alone.
Have questions?
Adam LowyAs a result of the COVID-19 pandemic, demand for our services are at an all-time high. The assurance of organizational effectiveness that a rating from Charity Navigator provides will allow us to expand our support base and advance our mission to end food insecurity – we are enormously proud to have received the highest rating possible in the new Encompass Rating System.”
Executive Director/Founder
Move For Hunger
