Rating Methodology v3.0
How we calculate charity ratings
Rating Overview
CharityData NZ rates charities on a scale of 0-100, with letter grades from A+ to F. Our rating combines three equally-weighted components: Financial Health, Governance, and Transparency.
Grade Scale
Financial Health (33%)
Evaluates how effectively a charity manages its finances and deploys resources toward its mission.
Reserve Levels
Charities should maintain reasonable reserves (3-12 months of expenses is typical). Excessive reserve accumulation may indicate funds aren't being deployed effectively. Too-low reserves may indicate financial instability.
Revenue Stability
We assess revenue trends over multiple years. Consistent or growing revenue suggests financial sustainability. Volatile or declining revenue may indicate risk.
Operating Efficiency
Based on available expense data. Note: NZ charity reporting doesn't require detailed program/admin breakdowns, so this metric uses available categories (employee costs, other expenses).
Governance (33%)
Assesses board composition, oversight quality, and governance practices.
Board Size & Composition
Effective boards typically have 5-12 members. Too few may indicate insufficient oversight; too many may indicate inefficiency. We also consider tenure diversity.
Officer Disclosure
Charities should disclose complete officer/trustee information including names and roles. Missing or incomplete officer data reduces governance scores.
Overboarding Check
We identify trustees serving on excessive numbers of boards, which may indicate limited ability to provide adequate oversight to each organisation.
Transparency (33%)
Measures how openly a charity shares information with the public.
Filing Timeliness
Charities that file annual returns on time demonstrate better accountability. Late or missing filings reduce transparency scores.
Financial Disclosure Quality
We assess the completeness of financial information provided in annual returns. More detailed disclosures receive higher scores.
Contact Information
Charities providing complete contact details (website, email, phone, address) score higher than those with limited public contact information.
Red Flag Detection
In addition to scores, we identify specific concerns that may warrant further investigation:
- Excessive Reserves - Reserves exceeding 3+ years of expenses
- High Admin Costs - Administrative expenses significantly above sector average
- Governance Concerns - Very small boards, overboarded trustees, or missing officer data
- Late/Missing Filings - Annual returns filed late or not at all
- Revenue Decline - Significant multi-year revenue decline
Note: Red flags indicate areas for further research, not wrongdoing. There may be valid explanations.
Profile Analytics
Each charity profile includes computed analytics that provide context beyond the rating score. These are calculated server-side using peer data from the same sector and size band.
Revenue Diversification Score
A Herfindahl-Hirschman Index (HHI) across 6 income sources: government grants, donations, trading/services, investment income, rental income, and other. Charities with 80%+ from a single source are flagged. A normalised 0-100 score indicates diversification (higher = more diverse).
Sector Percentile Benchmarking
Ranks charities on revenue, expenses, surplus, assets, and rating score within their sector and size band. Shows P25/P50/P75 markers so you can see how a charity compares to its peers.
Trend-Based Red Flags
Analyses multi-year financial history to detect 8 trend patterns: revenue decline, expense growth, surplus deterioration, reserve depletion, revenue concentration increase, staff cost spikes, asset decline, and liability growth. Each flag includes severity (low/medium/high) and a sparkline.
5-Year Trend Dashboard
Interactive bar chart showing financial metrics over time. Anomaly detection flags years with > 40% year-on-year changes in any metric, helping identify unusual financial movements.
Staff Cost Benchmarking
Compares staff costs as a percentage of total expenses against sector and size band peers. Shows P25/P50/P75 percentile gauges so you can assess whether staffing costs are typical.
Peer Comparison
Auto-groups charities by sector and size band, then ranks on 5 metrics: revenue, surplus margin, reserve months, rating score, and staff cost efficiency. Shows rank badges and links to top peers.
Methodology Limitations
- Ratings are based solely on publicly filed data - they cannot assess program quality or impact
- NZ charity reporting doesn't require detailed program vs. admin expense breakdowns
- Small charities may score lower due to less comprehensive reporting requirements
- Ratings don't capture qualitative factors like mission effectiveness or community impact
- Data may lag - annual returns reflect the previous financial year
Frequently Asked Questions
Data sourced from Charities Services register and annual returns. Our datasets may not be complete. Automated analysis can produce errors. If you believe any data on this page is incorrect, please contact us at hello@nzxplorer.co.nz.
For informational purposes only. Not investment advice.