1. Charity Navigator
Masterclass
Session 1:
Accountability & Finance Beacon

2. Today’s Experts
Laura Andes
Chief Program Officer
Charity Navigator
Kevin Doyle
Accountability & Finance Ratings
Charity Navigator
Jeremy Ladyga
Nonprofit Board Consultant
OnBoard

3. Our mission: Make governance simple, effective, and secure
Helping nonprofits simplify governance
so they can focus on their mission and
accelerate their impact
● Making board meetings informed, seamless, and uncomplicated
● Transforming board collaboration and communication
● Innovating every day to empower modern boards
Helping today’s leaders create a better world
About OnBoard

4. Our mission: Make impactful giving easier for all
Helping people turn their values,
passions, and beliefs into meaningful
change and impact
● Providing the data, ratings, and advice that cut through the noise
● Supporting donors to make informed choices that turn intent into action
● Partnering with nonprofits to define strategic objectives that matter
Building a bridge of trust for all to cross
About Charity Navigator

5. Help nonprofit boards & executives understand the importance
of the IRS Form 990 and its role in their governance
Today’s Goals
Provide a deeper understanding of the Accountability & Finance
Beacon’s methodology and scoring criteria
Offer tips and best practices for effectively engaging with your
Accountability & Finance rating

6. A Quick Poll
Are you a board member or a nonprofit leader?
1. Board Member
2. Nonprofit Leader
3. Just interested

7. Who uses Charity Navigator?
Small individual
donors
Every day donors who want
to make sure they are giving
to an effective, impactful &
trustworthy organization
“I will not donate to a charity
unless they receive a 3 or 4 star
on Charity Navigator”
- Debbie who gives $5-10K per
year
Foundations and
grant makers
Foundations of all sizes use
Charity Navigator as an
initial due diligence screen
“We use Charity Navigator as
an initial screening tool when
reviewing applications- if they
are not a 3 or 4 star charity,
they don’t move on”
- Foundation Program Officer
Institutional DAFs
Use it when researching
recommendations for high
net worth philanthropists
“I provide giving
recommendations to high net
worth individuals. A lot of my
research is on Charity
Navigator”
- DAF advisor

8. Our Ratings
RATINGS
Drawing from a knowledge base of research, analysis,
and constituent feedback, our team develops ratings that
are both analytical and responsive to the data needs of
our site users.
Eligible charities receive a zero to four-star star rating —
this is determined by the weighted sum of the
organization’s individual beacon scores (0-100).

9. Providing Guidance Through Beacons
Our Encompass Rating System provides a comprehensive
analysis of charity performance across four key domains, which
we call "beacons."
Nonprofit Effectiveness

10. Understanding A Charity Rating: What does it mean?
This is a four-star charity with
a 93% overall rating
They have earned two beacons:
- Accountability & Finance
(90%)
- Leadership &Adaptability
(10%)
These individual beacon scores
are combined* to create the
aggregate score.
Incomplete beacons are
“unscored”
This is a four-star charity
with a 100% overall rating
They have earned four beacons:
- Accountability & Finance
(32.5%)
- Leadership &Adaptability
(7.5%)
- Impact & Results (50%)
- Culture & Community
(10%)
These individual beacon scores
are combined* to create the
aggregate score
*We use a weighted average to of beacon scores to create the overall numeric
score. The weighting is based on the number of beacons earned. The weights are in
parenthesis.
Pro-Tip: 80% of donors say that they would rather donate to a
“complete” rating than one with just 1 or 2 beacons, even if it is a
lower overall score.

11. Accountability & Finance

12. Accountability & Finance- Eligibility & Rating Source
501c3 organizations with three
or more e-filed IRS form 990.
(note: not 990-EZ, 990-N or
990 PF)

13. The IRS Form 990

14. What is the IRS Form 990?
• The 990 is an annually filed tax form for tax-exempt entities, such as
charities and other nonprofits
• Organizations with gross receipts > $200k or total assets >$500k are
required to file the full Form 990 - other organizations may file either
the 990EZ or the 990N, depending on their size
• The 990 includes information on revenue, expenses, adherence to best
practices, and key officers and board members of the organization
• The form was revised in 2008 to include proven metrics of
accountability & governance.
• The 990 is also the FOUNDATION for the Charity Navigator rating

15. What is the board’s role in the 990?
• A nonprofit’s board of directors is responsible for the
timely filing of its Form 990.
• It is also a best practice for the board to review the 990
prior to filing, both to gain a better understanding of the
organization’s financial position and to check for
accuracy.
• Finally, the board is generally responsible for both the
tax form itself and for the selection and oversight of the
accountant responsible for compiling, reviewing, and/or
auditing the organization’s financial statements and
producing the 990.

16. Parts of the 990
● Part I: Summary
● Part III: Statement of Program Service Accomplishments
● Part IV: Checklist of Required Schedules
● Part VI: Governance, Management, and Disclosure
● Part VII: Compensation of Officers
● Part VIII: Statement of Revenue
● Part IX: Statement of Functional Expenses
● Part X: Balance Sheet
● Part XII: Financial Statements and Reporting

17. Parts of the 990: Summary and Accomplishments
● Part I: Summary
○ Summarized financial data from all other sections
○ Provides a snapshot of the organization’s finances for
the fiscal year
● Part II: Just a signature (Authorized Officer)
● Part III: Statement Program Service
Accomplishments
○ Tells the organization’s story by providing space for the
mission statement
○ Includes a listing of your organization’s three largest
programs by expense
○ This is an excellent section for providing storytelling for
your organization’s accomplishments and goals

18. Parts of the 990: Schedules, Governance, and Officers
● Part IV Checklist of Required Schedules
○ Line items that determine the structure of the organization
○ Using this checklist, your organization can learn if it is required to fill out any of the additional
990 sections that are not part of the core form
● Part VI Governance, Management, and Disclosure
○ Includes line items about sector best practices, including whether your organization maintains
policies such as a whistleblower policy or conflict of interest policy
○ Important section for nonprofit Accountability and Transparency
● Part VII Compensation of Officers
○ Includes full list of all board members who served in the fiscal year
○ Includes CEO listed with salary (regardless of amount of compensation!)
○ Important schedule for disclosure of decision makers for the organization

19. Parts of the 990: Financial Disclosures
● Part VIII: Statement of Revenue
○ Includes all revenue sources, such as donations, program service revenue, event
income, income from sale of inventory, etc.
● Part IX: Statement of Functional Expenses
○ Breaks out expenses into specific line items, such as grants or employee salaries
○ Each line item is broken out by expense type: Program, Management & General, and
Fundraising
○ This section describes how much money was allotted to Program Expenses
● Part X: Balance Sheet
○ Includes a breakout and summary of Total Assets and Total Liabilities
○ Includes Total Net Assets, which is a useful indicator of financial capacity
● Part XII: Financial Statements
○ Describes whether the organization compiles, reviews, and/or audits its financial
statements
○ Includes whether the board of directors has assumed responsibility for selection and
oversight of an independent accountant

20. How Charity Navigator uses the 990 to create an
Accountability & Finance Score
3 consecutive years of 990s
create most CN A&F scores

21. Accountability
& Finance
All organizations are automatically rated on
this beacon when they file three Forms 990.
All metrics refer to the items on your Form 990
or website and are considered best practices in
the field.
Two Parts:
● Financial Health & Sustainability via
calculated financial metrics. These
metrics are a 3-year average of recent
990s.
● Adherence to best practices in Nonprofit
Governance, Accountability &
Transparency
Points Allocation:
● Points are allocated to each metric based
on the evidence-base, alignment with
best practices and agreed-upon industry
standards.
The Basics

22. Accountability refers to an organization’s
adherence to broadly agreed-upon best
practices in the nonprofit sector.
● We measure Accountability using 10-14
disclosures on the Form 990
+
● For larger, donor-funded nonprofits, we
review the nonprofit’s website for
relevant disclosures
Accountability: What is it?

23. Accountability Metrics
These metrics are composed of
disclosures on the nonprofit’s website
Website
Metrics
● 990 and audit made available to public
● Key staff and board of directors listed
● Donor Privacy Policy
These metrics are composed of
disclosures on the IRS Form 990
● Whistleblower Policy
● Records Retention Policy
● Board Meeting Minutes
● 990 listed on website (New!)
● …and other best practices
These metrics are the most
important and highest weighted in
our methodology
Key
990
Metrics
● Audited Financial Statements
● Material Diversion of Assets
● Independent Board of Directors

24. Financial
Capacity
Financial
Efficiency
Liabilities to
Assets Ratio
Working
Capital Ratio
Program
Expense Ratio
Fundraising
Efficiency Ratio
Finance: What do we measure?
All rated nonprofits Large, donor supported nonprofits only All rated nonprofits
Metrics we no
longer evaluate
Fundraising
Expense
Administrative
Expense
Program
Expense Growth
Financial Metrics

25. Financial &Accountability:
Size and Classification Philosophy

26. Consider it a checklist of best practices for
nonprofit governance
❏ Do we have in place all of the policies &
procedures that are considered best
practices in the sector? E.g. conflict of
interest and whistleblower policy
❏ Is our organization conducting an annual
audit?
❏ Is our board keeping minutes and is there a
document retention policy?
❏ Are we disclosing our 990 on the website?
How can the board use the Accountability section to
improve Governance?

27. Using Financial Metrics for Benchmarking
● Financial metrics are scores based on industry averages
● If your organization is not receiving full credit, then your financial ratios
are “outside of the norm”
● Often there are good reasons for organizations to deviate from these
averages, but as a board member, you should understand why.

28. What to do now?
Board Members
● Review your Charity Navigator
Accountability & Finance score to ensure
you are following the best practices.
● Pay attention to the 990! Make sure you
and the Board review this and the audit
before submission.
● Make sure your board is majority
independent & keeps board minutes.
● Check in with your executive team about
any missing policies or best practices.
Executive Directors
● Make sure your board is aware of their
governance responsibilities over the 990.
● Review your 990 with the board before
submission.
● Use the Accountability & Finance report to
to ensure you are following best practices.

29. Your rating is a tool..
..To highlight areas for
improvement
&
to convey trust and
accountability to your donors.

30. Ask us About
Accountability &
Finance!
Q&A Session

31. The Charity Navigator
Masterclass
Presented by OnBoard x Charity Navigator
Session 2: Culture & Community Beacon | Sept. 20 @ 2pm ET
Session 3: Leadership &Adaptability Beacon | Oct. 3 @ 2pm ET
Session 4: Impact & Results Beacon | Oct. 20 @ 2pm ET
Sign Up Now!
An exclusive four part series that explores how
and why Charity Navigator rates nonprofits,
covers each Charity Navigator Beacon in detail.
Session Details