Right on the Money: New Charity Ratings Provide Blueprint for Transparency and Accountability

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A father and child make paper airplanes.

The largest U.S. charity evaluator, Charity Navigator, has for the past ten years rated nonprofit organizations based on their financial health. This year, the evaluator added measures meant to rate “accountability and transparency,” a charity’s willingness to explain its actions to the public and make available information about its inner workings.

Sandra Miniutti, Charity Navigator’s vice president of marketing says her organization’s new measures promote better nonprofits. “When charities follow these best practices of good governance, the risk that they’re going to misuse donors’ money, be involved in a scandal or be ineffective goes down,” she says.

And she adds that for charities, being open and transparent is just good business. “The public’s trust in a charity is its most closely held commodity,” she says. “Without trust, it’s going to be hard to get donations.”

To create the accountability and transparency ratings, Charity Navigator examines publicly available information on organizations’ websites and in their Forms 990, a tax form most charities must fill out. The ratings are based on new IRS standards and on good governance policies endorsed by the Panel on the Nonprofit Sector.

Miniutti says that whether or not a charity is listed on the Charity Navigator website, the new measures provide a blueprint for appearing open and transparent to donors and other members of the public.

Charity Navigator’s Accountability and Transparency Measures

Information reported on the Form 990

The charity:

  • Has an independent board
  • Has had no material diversion of assets in the last two years
  • Has audited financials prepared by independent accountant with an audit oversight committee
  • Has not made loans to or from related parties such as key officers, staff or board members
  • Keeps board meeting minutes
  • Has provided a copy of its Form 990 to its governing body in advance of filing
  • Has a conflict of interest policy
  • Has a whistleblower policy
  • Has a records retention and destruction policy
  • Has listed its CEO with salary on the Form 990
  • Has a process for determining CEO compensation
  • Does not compensates board members

Information published on the charity’s website

  • Board members’ names
  • Key staff members’ names
  • Audited financial reports
  • Most recent Form 990 (a direct link to the charity's 990 on an external site is sufficient)
  • Privacy policy for donors

For full explanations of the measures and how they affect a charity’s rating, go to http://www.charitynavigator.org/index.cfm?bay=content.view&cpid=1093

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