What Do Charity Watchdogs Want From Your Nonprofit?

by | Jul 13, 2022

Trust is the name of the game when it comes to fundraising. And charity watchdogs are a critical source of information for donors, grantmakers, and other funding sources when deciding who to trust with their money. 

So if you want to do a better job of raising money for your cause, you’ll need to be in good standing with these organizations. But each of these charity watchdog organizations approaches the concept of “trust” differently. 

This article will summarize the principal criteria the top 3 charity watchdogs use to evaluate your nonprofit organization. So you can understand where your organization needs to improve to boost your levels of public trust.

What are Charity Watchdogs?

Charity Watchdogs is a term used to describe various organizations attempting to measure the quality of a nonprofit organization. In this article, we’ll discuss the big 3 that your donors are most likely to rely on today: Charity Navigator, The Better Business Bureau (BBB), and GuideStar.

Each watchdog organization uses its own criteria to determine the trustworthiness of your organization, using some combination of financial, governance, and transparency. The ultimate goal is to ensure donors that as much of their money as possible will go directly toward accomplishing your stated mission.

The 3 Charity Watchdogs You Should Know

charity_navigator

The Biggest Watchdog: Charity Navigator

Charity Navigator calls itself the world’s largest and most-trusted nonprofit evaluator, and it’s hard to argue with them. Over the past 23 years, Charity Navigator has become the go-to charity evaluator for informed donors and grantmakers throughout the USA.

Charity Navigator’s Star Rating System

Charity Navigator has issued ratings for over 9,000 nonprofits using an easy-to-understand star system. To qualify for a star rating, you have to meet the following rigorous criteria:

  • Be an IRS-recognized 501(c3) nonprofit
  • Be in business for at least 7 years
  • Have at least $1M in annual revenue
  • Generate at least $500k (and a minimum of 40% of total revenue) from public support
  • Allocate at least 1% of expenses to fundraising for 3 years
  • Allocate at least 1% of expenses to administration for 3 years

And these organizations are not eligible to be rated by Charity Navigator:

  • Land Trusts
  • Hospitals
  • Schools
  • Sororities/Fraternities
  • Donor-Advised Funds
  • Fiscal Sponsors

The Star Rating is based on a proprietary methodology that considers both Financial Health and Accountability/Transparency. Charity Navigator uses only publicly available data for its nonprofit evaluations, including the IRS 990 and the company website. Learn more about the criteria, methodology, and score calculator on their website.

Based on the resulting score, nonprofit organizations are given a rating of zero to four stars, as shown in the chart below.

charity_navigator_star_ratings

Note: When Charity Navigator subjected their organization to their own review system, they ranked 4-stars with a score of 92.39 out of 100!

Charity Navigator’s Encompass Rating System

Because the standards for a star rating are so high, historically most nonprofits have not been eligible to be rated by Charity Navigator.

To help close this gap, Charity Navigator recently launched their new Encompass Rating System, which provides simpler ratings for over 200,000 organizations. It allows smaller and less-prominent nonprofits to have their basic information vetted and gain additional credibility with donors.


 

The Classic Watchdog: The Better Business Bureau (BBB)

Who did Charity Navigator turn to when they needed external evaluation of their own organization? The oldest name in the charity watchdog world: The Better Business Bureau.

You probably know the BBB for providing credibility for both for-profit and nonprofit businesses. They’ve been providing ratings for nonprofits in some form since the 1920s. And their brand is second-to-none when it comes to creating trust with the public.

BBB Wise Giving Alliance

Accreditation from the BBB’s Wise Giving Alliance is still the goal seal of success for many nonprofits. In fact, Charity Navigator was proud to announce its BBB accreditation when it received it in 2022.

Although the BBB has been rating nonprofits for nearly 100 years, The Wise Giving Alliance. was founded in 2001 when the National Charities Information Bureau merged with the Council of Better Business Bureaus Foundation. 

Unlike Charity Navigator, there is no minimum revenue, and you only have to be in operation for 6 months prior to submitting an accreditation request. For this reason, BBB remains extremely popular with smaller and newer nonprofits and the donors that fund them.

Wise Giving Alliance evaluates nonprofit organizations based on 20 Standards divided into 4 main categories:

  1. Governance and Oversight
  2. Measuring Effectiveness
  3. Finances
  4. Solicitations and Informational Materials

After they complete your review process, Wise Giving Alliance posts the full report on their website, like this one:

BBB_charity_assessment

To be accredited by the BBB, you must satisfy all 20 criteria (see those criteria here). If you don’t satisfy all 20 immediately, they will work with you to help you understand where you’re falling short and what you must do to be accredited.

To apply for BBB accreditation, visit Give.org to get started.

Is Wise Giving Alliance credible? Their #1 competitor, Charity Navigator, gives them a perfect score of 100/100 on their Encompass Rating System. That kind of praise from your top competition certainly helps build trust!


 

guidestar

The Data-Driven Watchdog: Guidestar

GuideStar bills itself as “the most complete, up-to-date nonprofit data available,” with data on over 1,800,000 nonprofit organizations. But their approach is different than the other Charity Watchdogs on this list.

Rather than evaluating nonprofits and issuing a rating, GuideStar’s mission is to make complete and accurate financial data on nonprofits as available as possible. They’ve done such a great job of accumulating financial data on nonprofits that Charity Navigator has partnered with them to share information. It’s yet another example of how these charity monitoring organizations work together.

By increasing transparency and consolidating resources into one platform, they hope their platform can build trust and streamline the grant writing process to make giving and receiving money much more efficient.

So, while they don’t rate your organization, they do make your information public to 12M+ annual visitors. And they offer you opportunities to make granular details of your finances available to their users.

GuideStar’s Candid Transparency Ratings

Through their Candid program, you can claim your nonprofit’s profile and update it with detailed information about your programs, your management team, and the specific impact you’re making in your community. And send all that information to 200+ charitable sites, including AmazonSmile, Facebook, and Network for Good.

Accurate contact information will get you Bronze Seal. And by sharing your financial statements, strategic plan, and demographic makeup, you can earn the coveted Platinum Seal of Transparency.


So Which Charity Watchdogs Should You Use?

The simple answer is all of them.

Each of these charity evaluating organizations has its areas of strength. By seeking out accreditation and updating profiles on all 3 platforms, you give your organization the best chance of gaining credibility with the donors you need most.

Some grantmakers and donors will look at all three of these resources before making a decision, so being as transparent as possible will reflect very well on your organization.

Never pass up any opportunity to build trust with your potential donors. And each of these Charity Watchdogs will help you build that trust.

Are Your Books And Internal Controls Not Ready for BBB?

If you’re concerned that your bookkeeping, accounting, and internal controls aren’t ready for prime-time, it’s okay. You’re definitely not alone. But it might be time to look for help.

The Charity CFO provides expert bookkeeping, accounting, and financial consulting exclusively for 501(c)(3) organizations in the USA. We’ve helped dozens of our 200+ nonprofit clients get ready and achieve their BBB accreditation.

We can also help you modernize your accounting systems, digitize your bookkeeping, produce consistent financial statements, and keep you always audit-ready.

Reach out to us to discover how we can help you build more trust with your potential donors.

 

Reach Out To The Charity CFO!
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