Planet Princeton annual giving guide for 2019
For the second year in a row, Planet Princeton has reviewed all of the New Jersey-based charities that are evaluated by Charity Navigator, a charity assessment organization based in Glen Rock that evaluates charitable organizations in the United States. We have compiled a chart that includes the ratings and detailed scores for 61 Princeton area and regional charities in order to help readers make informed giving decisions this 2019 holiday season.
Charity Navigator uses publicly available tax returns filed with the Internal Revenue Service and information posted by charities on their web sites to rate nonprofits. The rating system evaluates two broad areas—financial health and transparency. Based on how a charity rates in each of the two areas, it is assigned an overall rating, ranging from zero to four stars. On the Charity Navigator website, the profile of each organization that is rated also includes charts, financial data, and information on compensation paid to leaders. Charity Navigator only rates charity organizations in the United States that earn more than $1 million in annual revenue. There are more than 45,000 non-profit organizations operating in New Jersey. Just under 200 are rated by Charity Navigator. Some charities that are potentially eligible for a rating have not been rated yet. Charity Navigator also has profiles for the other nonprofits it has not rated that link to valuable information like tax returns.
What if an organization I’m considering supporting is not rated by Charity Navigator?
Even if an organization you are seeking information about is not rated by Charity Navigator, there are are some simple steps you can take to conduct your own review of the organization. Easy-to-find facts about nonprofits are available online that will help you decide which charities deserve your contributions.
Charities are required to submit an annual Form 990 with the IRS. This document provides information about a charity’s finances and governance practices. The first thing you need to do is to locate the charity’s profile page on the Charity Navigator site at charitynavigator.org and scroll to the bottom of the page. There you’ll see links to the charity’s Form 990. You need to complete a free registration process and log into the site for the links to function.
There are three main things to look at when evaluating a charity: Financial health, accountability, and transparency.
Examine the charity’s financial health. The majority of charities listed on Charity Navigator spend at least 75% of their expenses directly on their programs. That means the organization should spend no more than 25% of their total expenses on administrative overhead and fundraising costs combined. To determine the percentage going to programs for the charity you are reviewing, scroll to page 10 (statement of functional expenses), find Line 25 (total functional expenses). Divide column B (program services) by column A (total expenses) then multiply by 100. The resulting figure is the percentage that the organization is spending directly on their programs and services. For a more detailed break out of the program expenses, review the “statement of program service accomplishments” located on Page 2, Part III.
Determine if the charity you are considering supporting is expanding or shrinking over time. You can quickly do this by comparing the total program expenses- page 10, line 25B of the current year with prior years. While the growth doesn’t need to be dramatic, charities that are shrinking are very likely cutting the very programs that you want to support.
Examine the funding sources. Take a look at lines 1a through 1g (on page 9, “statement of revenue”) to learn about a charity’s funding sources. Some charities rely heavily on membership dues (line 1b), or government support (line 1e) while others survive almost solely on individual contributions and fundraisers (line 1f; 1c) and still others depend on program service revenue (line 2g). Having multiple sources of revenue can be beneficial for a charity. For example, if an organization experiences a drop in donations from individuals, then it can draw from other revenue sources to sustain its programs. If a charity has no revenue listed on line 1f, then it may not even be prepared to accept private contributions.
Look at executive pay. On page 7 of Form 990 (compensation of officers, directors, etc.) organizations are required to report the CEO’s pay and any current officers making over $100,000 annually. As you examine salaries, keep in mind that a variety of factors impact pay including geographic location, size of the organization, and type of work performed.
Determine if a charity uses professional fundraisers by examining the charity’s Form 990 in Part I, line 16a, column b and in Schedule G (which offers a more detailed breakdown). The use of professional fundraisers in and of itself is not necessarily a bad thing. Professional fundraisers can be more efficient and effective at raising funds for the charity than staff or volunteers would be and some of the costs spent on these third party companies are funds that would also have to be spent on staff, equipment, and technology if the campaign were entirely managed in-house as well. However, if the charity is spending a lot on outside fundraising firms with little going towards its charitable mission, then you may want to look for another charity to support.
Look to see if fundraising costs are allocated to program costs: Joint costs, reported in Part IX, line 26, refer to activities that combine educational campaigns with fundraising. For example, a direct mailing’s primary purpose may be fundraising but there may also be a portion of the mailing dedicated to public education, such as a public safety organization printing tips to prevent crime in your neighborhood. Not all nonprofits that engage in advocacy, education and awareness choose to use this accounting methodology, which requires substantial documentation and impact on audited financials varies depending on the charity’s activities. You can see the amount of joint costs that are included in a nonprofit’s program expenses by reviewing page 10 line 26B.
Check for evidence of the charity’s commitment to accountability and transparency. The best charities are transparent and accountable to the public. You should be able to see evidence of this in the information they provide on their web site. Can you readily find information about the charity’s staff and board of directors? Did the charity publish its financial information such as its most recently filed Form 990 or audit? Does the charity create and post an annual report that includes financial information?
On the IRS Form 990, look at pages 3-6 to see if the charity is committed to best practices. For example, does it have a conflict of interest policy? Does it have a whistleblower policy? Does it have a process for setting the CEO’s pay?
Investigate the charity’s results by reviewing its website, and by talking with staff. They should be able to tell you about the quality and depth of their results as well as their capacity to continue to get these results, not just the number of activities or people served. Check the charity’s recent media coverage through Google news or another similar service.
Area charities rated by Charity Navigator
You can access the Planet Princeton spreadsheet listing 61 area nonprofits and their rankings online (click this link).
Top performers from our region with four stars and total scores of 95 or higher for 2019 went to: the Community Foundation of New Jersey, HomeFront, the Princeton Area Community Foundation, the New Jersey Performing Arts Center, the United Way of Mercer County, the Rescue Mission of Trenton, and the Trenton Area Soup Kitchen. A dozen other area nonprofits received four-star ratings of 90 or higher. For the full listings, see the chart.
Only nine area nonprofits received perfect scores of 100 for accountability and transparency: Arm in Arm, the Community Foundation of New Jersey, Covenant House of New Jersey, HiTops, HomeFront, the Princeton Symphony Orchestra, the Rescue Mission of Trenton, the Trenton Area Soup Kitchen, and the United Way of Mercer County.
Two area nonprofits received only one-star ratings: HiTOPS and the Parkinson’s Unity Walk. Methodist Homes of New Jersey received a zero-star rating. Seven area nonprofits received two-star ratings: the Hemophilia Association of New Jersey, the Multiple Sclerosis Association of America, the Police Unity Tour, The Shakespeare Theatre of NJ, Trinity Counseling Service, and Uih Partners.
Our chart lists the following information for each nonprofit:
The star rating
The overall score
The overall financial score
The accountability and transparency score
Program expenses – The percent of the charity’s total expenses spent on the programs
and services it delivers
Administrative expenses – The percent of the charity’s total expenses spent on administrative expenses
Fundraising expenses – The percent of the charity’s expenses spent to raise money. Fundraising expenses can include campaign printing, publicity, mailing, and staffing and costs incurred in soliciting donations, memberships, and grants.
Fundraising efficiency – The amount spent to raise $1 in charitable contributions.
Working capital ratio – How long a charity could sustain its level of spending using its net available assets, or working capital, as reported on its most recently filed Form 990.
Program expenses growth – Program expense growth rate.
Liabilities to assets – The ratio is an indicator of an organization’s solvency and or long term sustainability. Dividing a charity’s total liabilities by its total assets yields this percentage.
Planet Princeton updates this list once a year in late November. We do not update the story later if the score has changed in the interim. Please see Charity Navigator for the latest scores.