Does That Charity Rating Measure What You Think It Measures?
Sep 24, 2026
You want to help people facing hunger, provide medical care overseas, protect animals, support veterans, or respond to a humanitarian crisis. Before donating, you do what donors are increasingly encouraged to do: You look up the charity’s rating.
A charity rating website gives the organization four stars and an overall score exceeding 90%.
Looks good. You donate.
But what if the rating itself may be misleading?
Some charity rating systems use automation to generate ratings for hundreds of thousands of nonprofits based largely on data charities self-report in their IRS Forms 990. This allows them to rate an enormous number of charities quickly. But scale should not be confused with reliability.
Charity financial reporting is complex, and Form 990 data can be inaccurate, inconsistent, incomparable, and incomplete for purposes of evaluating a charity’s financial efficiency.
Automation doesn’t solve those problems. It amplifies them.
And this is particularly problematic when a charity functions only or primarily as a fundraising arm for a related organization.
A computer can perform a calculation perfectly and still produce a misleading result if the underlying data are unreliable or the formula fails to account for what those numbers actually represent.
For you as a donor, the consequences are real. You may see a high rating and conclude that a charity will use your donation efficiently. But if the rating is based on unreliable financial information or a simplistic formula that doesn’t account for the charity’s structure, you could donate to an organization that spends your contribution much less efficiently than its rating suggests.
Garbage In, Garbage Out
Form 990 is an extraordinarily valuable public disclosure document, but it has several significant weaknesses: it is self-reported; it is unaudited; and it is not required to comply with Generally Accepted Accounting Principles (GAAP). This is why CharityWatch analyzes it in conjunction with a charity’s audited financial statements and other financial reporting rather than relying on the Form 990 in isolation.
CharityWatch has identified four fundamental problems with relying on automated Form 990 data to rate charities:
Accuracy: Reporting errors are common. Expenses may be entered on the wrong lines or allocated among program, fundraising, and management categories in ways that distort how efficiently a charity appears to operate. An automated system generally cannot recognize that a number is wrong simply because it can successfully calculate with it.
Consistency: Charities can report the same activities differently from one year to the next. Changing how an activity is reported can make a charity appear more efficient even when nothing meaningful about its operations has improved.
Comparability: Two charities conducting similar activities can report them very differently. One may classify expenses more aggressively as program costs or report fundraising in a way that produces more flattering ratios. An automated comparison can therefore reward more aggressive reporting rather than greater efficiency.
Completeness: Many charities operate through multiple related legal entities, with money and expenses flowing among them. An individual Form 990 generally reports only one legal entity. An automated rating may therefore miss significant fundraising or overhead costs incurred elsewhere in the organization.
The apparent precision of an automated rating can obscure these problems. A score of 96 out of 100 looks precise. Four stars look definitive.
But the precision of the output tells you nothing about the reliability of the inputs.
In other words, garbage in, garbage out.
Fundraising Arms Show Why This Matters
The completeness problem becomes particularly clear when a U.S. charity primarily raises money for an overseas parent, affiliate, or partner.
Suppose a U.S. organization raises $20 million and reports a $15 million grant to an overseas organization as a program expense. An automated rating system may count that $15 million as program spending when calculating the U.S. charity’s financial efficiency.
But what happened after the money left the U.S. organization?
The recipient organization may have its own administrative expenses. It may conduct additional fundraising or transfer money to still another organization before charitable services are ultimately delivered.
There is nothing inherently improper about this structure. U.S. fundraising affiliates can be legitimate and effective vehicles for supporting international charitable work.
But rating only the U.S. fundraising entity may tell you very little about how efficiently your donation was ultimately used.
To see CharityWatch’s detailed explanation for why we deemed a particular organization “Not Ratable,” click on the nonprofit’s name and navigate to the Analysts’ Notes section
| Charity | CharityWatch | Charity Navigator | Candid Transparency Seal |
|---|---|---|---|
| ActionAid USA | Not Ratable | 88% / 3 Stars | Platinum |
| Against Malaria Foundation | Not Ratable | 91% / 4 Stars | No Seal |
| American Brain Foundation | Not Ratable | 96% / 4 Stars | Platinum |
| American Friends of Magen David Adom | Not Ratable | 100% / 4 Stars | No Seal |
| Christian Advocates Serving Evangelism | Not Ratable | 86% / 3 Stars | Silver |
| Disabled American Veterans (DAV) Charitable Service Trust | Not Ratable | 96% / 4 Stars | Platinum |
| Disabled American Veterans (DAV) National Service Foundation | Not Ratable | Not Rated | Gold |
| GlobalGiving Foundation | Not Ratable | 96% / 4 Stars | No Seal |
| Greenpeace Fund | ? / Warning: See Analysts’ Notes | 65% / 2 Stars; Increased Caution | Gold |
| Humanity & Inclusion | Not Ratable | 85% / 3 Stars | Platinum |
| League of Conservation Voters Education Fund | Not Ratable | 84% / 3 Stars | No Seal |
| Plan International USA | Not Ratable | 97% / 4 Stars | Platinum |
| United States Association for UNHCR (USA for UNHCR) | Not Ratable | 92% / 4 Stars | No Seal |
| USA for UNFPA | ? / Warning: See Analysts’ Notes | 95% / 4 Stars | Platinum |
| Veterans of Foreign Wars Foundation | Not Ratable | 97% / 4 Stars | Platinum |
| World Animal Protection | Not Ratable | 93% / 4 Stars | Platinum |
| World Food Program USA | Not Ratable | 92% / 4 Stars | Gold |
| World Jewish Congress (American Section) | Not Ratable | 87% / 3 Stars | Gold |
| World Villages for Children | Not Ratable | 93% / 4 Stars | Platinum |
The chart above contains select examples of nonprofits to which CharityWatch (CW) has assigned “Not Ratable” ratings as of September 24th, 2026 based on our criteria. Charity Navigator’s (CN) ratings and Candid’s (Guidestar’s) seals were retrieved from those websites in September 2026 and reflect each nonprofit’s current rating or transparency seal as of the date retrieved. Visit charitywatch.org, charitynavigator.org, and (Candid) guidestar.org to view the most currently published ratings and profiles. NOTE: Candid’s seals are based on charities’ self-assessments and do not include a financial measurement of how efficiently a charity uses the donations it receives. Charity Navigator’s ratings are automated using data pulled from unaudited charity tax Forms 990.
Why CharityWatch Sometimes Says “Not Ratable”
CharityWatch takes a different approach.
We don’t assume that a number is accurate simply because a charity reported it on its Form 990, or that two charities’ numbers are comparable simply because they appear on the same lines of their respective tax filings.
Our analysts review charities’ independent audited financial statements and footnotes in conjunction with their tax filings. We examine related organizations and transactions among them, look for inconsistencies between audited and tax reporting, and analyze how significant expenses and transactions have been classified.
When appropriate, we make adjustments so that the information used in our ratings is as accurate, consistent, comparable, and as complete as reasonably possible.
Sometimes that analysis leads us to conclude that we cannot responsibly calculate a rating.
This frequently occurs when a U.S. charity primarily functions as a fundraising arm for a parent, affiliate, or partner organization. If much of the U.S. organization’s reported program spending consists of grants to the charity’s related organization, simply treating those grants as the final charitable program expense may produce a misleading result.
We don’t think it is meaningful to compare that percentage with the Program Percentage of a charity that actually operates its own programs or vets grant recipients and makes grants to independent organizations.
When the financial reporting does provide a complete picture, however, CharityWatch can produce and publish a rating. For example, if a U.S. fundraising entity is included in audited financial statements that consolidate or combine its financial activities with those of the related organizations that ultimately conduct the charitable programs, CharityWatch analyzes and publishes a rating on the combined organization.
We can do so in these cases because consolidated reporting captures the relevant program, fundraising, and administrative activities across the related entities, rather than stopping at the point where money is transferred from one entity to another. Consolidated financial statements “wash” related party transactions and only allow a group of related organizations to count donations once, rather than double counting them when they are transferred amongst themselves. Such statements also allow CharityWatch to make other adjustments necessary to calculate a meaningful rating.
By contrast, when the available financial information doesn’t allow us to determine the ultimate program, fundraising, and administrative expenses associated with the funds transferred to a related organization, we label the U.S. charity Not Ratable.
That isn’t a failure to analyze the charity.
It is the result of analyzing it.
“Not Ratable” Doesn’t Mean “No Information”
A Not Ratable designation doesn’t mean CharityWatch leaves you without useful information.
Our analysts explain why the organization cannot be meaningfully rated and describe relevant parent, affiliate, partner, or related-organization relationships.
When the financial reporting allows it, we may calculate the U.S. organization’s Cost to Raise $100, even when we cannot calculate a meaningful Program Percentage.
We also continue to provide information that can help you make an informed giving decision, including executive compensation, governance and transparency benchmarks, organizational relationships, financial information, Analysts’ Notes, and relevant articles and alerts.
In other words, “Not Ratable” doesn’t mean we don’t know anything about the charity.
It means we won’t pretend to know something the available financial information doesn’t allow us to measure reliably.
Look Beyond the Stars
Charity ratings aren’t interchangeable.
A transparency seal may tell you that a charity supplied particular information to an agency to build out its online profile page. A governance score may tell you whether certain policies exist. An automated financial score may tell you how numbers reported on a Form 990 perform against a formula.
But before relying on a rating, ask what it actually measures.
Does the organization conduct its own charitable programs, or does it primarily raise money for another organization? If it is a fundraising arm, does the rating evaluate only the U.S. entity, or does it account for the organization that ultimately spends the money?
Were audited financial statements reviewed? Were related organizations and transactions considered? Were obvious reporting differences and errors investigated and adjusted?
Most importantly, does the rating actually tell you how efficiently your charitable dollars are ultimately being used?
Charity financial reporting is complicated. A rating system that ignores that complexity doesn’t eliminate it.
It simply hides it from you.
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