How Are the Transparency Ratings of Charitable Organizations Determined?


Quick Answer

Charity watchdog organizations determine the transparency of charitable organizations based on both the information that charities make public and data from public financial documents. They usually compare and contrast organizational publications and websites with additional data from bodies such as the Internal Revenue Service.

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Full Answer

Charity Navigator, which is one of the largest charity watchdog organizations in the United States, rates charities based on accountability and transparency. It defines accountability as a charity's willingness to share information about its actions with its stakeholders. It defines transparency as a charity's willingness to make key data about the organization public.

Charity Navigator uses two main sources to rate the transparency of charitable organizations: official charity websites and data from the IRS. It can use a website to gain information on charity board members, important decision makers within the organization, published financial statements, its IRS Form 990 and its privacy policy. These can determine how willing the organization is to share information about itself with the public and how open it is about how it uses donor data.

The IRS Form 990 is also a very important tool for determining charity transparency. All charitable organizations are required to fill out this form, which is made public after it is filed. Charity Navigator and other watchdogs can compare the data listed on Form 990 with the data that an organization publishes about itself. Form 990 includes information on independent organizational boards, diversion of assets, CEO salary, how the CEO's salary is determined, audited financial statements, loans that the organization or its members make or receive, whether or not the organization sends a copy of Form 990 to its governing body before filing it, the charity's whistleblower policy, its conflict of interest policy and board member compensation.

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