Welcome to Charity Navigator's Blog!

The team from Charity Navigator, the nation's largest independent charity evaluator and leading donor advocate, shares their thoughts on emerging nonprofit-sector issues and offers tips to better inform your intelligent giving decisions.

Return to Main Site   |   Find a Charity   |   Receive Email Updates   |   Support Charity Navigator

Monday, September 21, 2020

Encompassing a Nonprofit's Story Begins with the Form 990

For nearly two decades, Charity Navigator has helped donors make better giving decisions and served to strengthen the sector in the process by promoting greater accountability and transparency practices. Until recently, our ratings applied to a subset of organizations that were predominantly older, larger, and better funded. This year, we set out to expand both the scope and depth of our ratings by developing a new rating system that encompasses over 150,000 charities and enables our site users to assess financial health metrics within the greater context of the organization’s overall effectiveness. 

The Finance & Accountability indicator, launched in July of 2020, provides a new opportunity for organizations not eligible for an evaluation under our star rating system to begin telling their story, one which starts with the information submitted on their tax Form 990. This form offers a great starting point for evaluating measures relevant to the four domains that comprise our new Encompass Rating System - 1) Finance & Accountability, 2) Leadership & Adaptability, 3) Community & Culture, and 4) Impact & Results. 

As we wrote in a blog post last year, nonprofits can use the Form 990 to tell their own story by utilizing key sections that offer a qualitative look at what goals the charity intends to accomplish, along with how they intend to accomplish those goals. These sections can provide a window into a nonprofit’s value beyond the financial numbers and governance items that have traditionally been used by third-party evaluators, including Charity Navigator. Here are some of the most important places in the Form 990 where organizations can share their stories:

  1. Mission Statement (Part I line 1 and Part III line 1) An organization’s mission is among the most important pieces of information donors consider when making a giving decision. By ensuring that the mission statement on its Form 990 is succinct, clear, and passionate, a nonprofit can provide a powerful first impression of its goals and programs.

  1. Program Service Accomplishments (Part III lines 4a-4c) These lines provide an opportunity for an organization to describe its biggest accomplishments in the fiscal year. These are typically the largest programs an organization offers and are the nuts and bolts of what an organization does. This piece ties directly into the mission, describing just how an organization attempted to accomplish the goals it set.

The IRS now requires nonprofits to file electronically, ensuring data can be more easily accessed by both donors and evaluators. In fact, in order to be evaluated under the new Encompass Rating System, nonprofits must have e-filed a full Form 990 for at least 3 consecutive years. Data drawn from the Form 990 is integrated into our ratings electronically and may expand and evolve over the coming years to capture more quantitative and qualitative information that will enable nonprofits to paint a more comprehensive picture of their organization and the constituents they serve. Submitting clear, thoughtful information on the Form 990, ensures the data we evaluate and publish on the nonprofit’s profile page is accurate, meaningfully conveys the organization’s story, and provides donors and stakeholders with important information needed to make better giving decisions.

This post was written by Kevin Doyle, Senior Program Analyst at Charity Navigator, and Ofira Bondorowsky, Director of Ratings & Nonprofit Engagement at Charity Navigator. Kevin and Ofira both work primarily on charity data collection, research, analysis, and evaluation.

As a 501(c)(3) organization itself, Charity Navigator depends on public support to help donors make informed choices. Please consider investing in the future of Charity Navigator by making a donation today. Donate now >>

No comments: