In the current environment of fiscal cliffs, smaller government and economic crisis, the biggest losers are always those who need more help to overcome life’s unpredictable unfairness. Charitable organizations are our way, as a society, to ensure that the poor, the sick or the underserved have access to a better quality of life. All charities promote, one way or another, this idea that life should be better. Through medical research, environmental initiatives, animal welfare, human rights, access to food and water, sustainability, cultural development and support, it is all about living better, not only for those on the receiving end, but also for donors.

Charities depend on our support for their operating budgets. But just because a non-profit organization raises great amounts of money, does not mean that those funds will be allocated to the programs they sponsor. Other expenses plague the bank statements of many charities, expenses such as fundraising efforts and administration. How do we know our contributions go to fulfill the needs of those we want to help? This uncertainty makes it very difficult to know how charities use or abuse our donations, and to establish the most effective way to contribute to the causes we support. Here is where Charity Navigator comes in.

For ten years now, Charity Navigator has ranked non-profits according to very specific standards, providing relevant information before people can make a donation with confidence. They call themselves “your guide to intelligent giving”. The organization’s objectives are driven by two basic principles: “helping givers and celebrating the work of charities”.

Through their website www.charitynavigator.org, they place the spotlight on “truly effective organizations to ensure that charitable giving keeps pace with the growing need for charitable programs”. They also offer forums and conversations that inform donors of the intricacies that govern charitable giving, such as allocation of funds, transparency, cause-related marketing and other valuable tips.

Charities are rated after evaluating their financial health and their accountability and transparency. Financial health is rated by analyzing the organization’s tax returns in seven key areas related to their overall functional expenses. These are: program expenses (what the charity spends in actual benefit programs), administrative expenses (expenses used to run the organization), fundraising expenses, fundraising efficiency, primary revenue growth, program expense growth, and working capital ratio.

Donors should be aware that testimonials and anecdotes are not necessarily the best way to evaluate the results of an organization. CN depends on reports given by individual charities and is developing incentives for progressive improvement in results measurements in the future.

The website uses a complex mathematical formula to rate charities. For better understanding of their rating criteria, please visit the following link: www.charitynavigator.org

CN uses the star rating system. Zero stars are given to charities that perform far below industry standards, while four stars means that the organization exceeds such standards and outperforms most charities in its cause. Occasionally they will issue a Donor Advisory when “serious concerns have been raised about a charity, which prevents the issuance of a star rating.”

They provide Top 10 lists in categories such as Most Popular Charity Ratings, Most Followed Charities, Celebrity Based Charities and many more. The most popular charities are American Red Cross, World Vision and Doctors Without Borders. The top celebrity-related charities are Michael J. Fox Foundation for Parkinson’s Disease, Bette Midler’s New York Restoration Project and Tony La Russa’s Animal Rescue Foundation, all with 4 stars. The most super-sized charities are American Red Cross, Feeding America and Smithsonian Institution, all with expenses above $1 billion in the most recent fiscal year. Fastest growing charities: Kids Charity of Tampa Bay, The Hope Foundation and Second Harvest Community Food Bank. The charities with the most consecutive 4 star ratings are Carnegie Institution for Science, Rochester Institute of Technology, Carnegie Mellon University, Children’s Aid Society and the University of Miami, all with 12 consecutive 4 star ratings. Highly recommended charities include Matthew 25: Ministries, Globus Relief and Direct Relief International. And the best charities according to CN: Direct Relief International, Conservation Fund and Teach for America.

There are also charities that fail to live up to their mission and spend more than 50% of their budget in fundraising, leaving very little for their programs. Among them the Disabled Police Officers Counseling Center, Cancer Survivor’s Fund and The Committee for Missing Children. Others are in deep financial trouble, as is the case with B’nai B’rith International, Indianapolis Symphony Orchestra and Hale House Center, all with more than $10 million in debt.

These lists are constantly updated to reflect the efforts made by the organizations to provide the best possible services. CN publishes new ratings on the first of each month. We invite donors to review the standing of their favorite charities before making a donation. It is the smart thing to do. You may also include Charity Navigator in your list of donations. The organization is funded by individual contributions, a small price for a great service. To donate, visit www.charitynavigator.org

Charity Navigator rating for some of your favorite non-profits.

St. Jude Children Research Hospital ★★★

Animal Humane Society ★★★

Habitat for Humanity International ★★★

American Heart Association ★★★

March of Dimes ★★

American Cancer Society ★★

Muscular Dystrophy Association ★★