Charity Intelligence moves to 5-star charity rating
When the global giants like Google, Apple, Uber, and The Times move to 5-star ratings, it sets the standard people use. With this ubiquity, Charity Intelligence’s 4-star rating led to confusion. Too often charities said “we’re rated 4 stars out of 5” by Charity Intelligence. Except Charity Intelligence did not have a 5-star category.
We do now. Today we shift our star ratings to the 5-star standard. The highest rating is 5-stars, and the lowest rating is 0-star. The ratings are based on objective measures covering results reporting, cost efficiency, need for funding, financial transparency, and demonstrated impact (see Understanding our Ratings methodology).
The highest 5-star rating is reserved for the Top 100 highest-rated charities. This is the elite of charities analysed. It is important to know that different charity raters have different systems. In the US, Charity Navigator, gives the highest star ratings to 40% of the charities it rates. We give the highest star rating to 13% of charities. Our intent is for 5-stars to be a marker of excellence for donors.
With a 5-star rating being an exceptionally high mark, we hope donors will also review 4-star rated charities in making giving decisions.
5 stars, but 6 categories
The 5-star ratings have six categories: exceptional, good, acceptable, underperforming, poor, and very poor.
Charity Intelligence is reserving the lowest, 0-star rating only for charities that have a double failure; a failure to meet basic transparency and accountability. This is a small (3%) proportion of charities. This is an area where Charity Intelligence has serious concerns.
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Positive skew to rating distribution
As before, Charity Intelligence’s star rating is positively skewed. Our star rating distribution has twice as many 5-star and 4-star charities (33%) than 1-star and zero-star charities (16%). Together, 5-star and 4-star charities represent a third of the charities analysed. Our middle ratings of 3 and 2 stars account for 50% of charities.
This positive skew is unchanged in the migration from the old 4-star rating to the new 5-star rating.
Charity ratings are desired by donors and disked by some charity professionals. We believe ratings are one useful tool for donors to see how a charity compares with other charities on objective measures.
For charities, these objective measures show areas for improvement. Since Charity Intelligence launched its ratings in 2014, there have been tangible improvements:
- Financial transparency, the simple practice of posting the most recent years audited financial statements on the charity’s website, has improved.
- Results reporting, the information Canadian charities report about their work and their results, has improved 21% since Charity Intelligence began measuring it in 2013.