Charity Navigator Announces Methodology Update, Enhances Nonprofit Evaluations
Charity Navigator, a large and influential nonprofit evaluator, announced its Fall Ratings Methodology Update that will give donors a more holistic and nuanced view of nonprofit effectiveness. With the inclusion of new data, Charity Navigator has now rated a total of 209,503 charities, the most in the organization's history.
Charity Navigator analyzes nonprofit performance based on four key indicators—Accountability & Finance, Impact & Results, Culture & Community, and Leadership & Adaptability— referred to as beacons. In this latest update, 5,954 organizations have been scored on three or more beacons, a more than 50% increase. Based on a survey among Charity Navigator donors, 80% would rather donate to a four-star charity with all four beacons compared to one beacon.
The Fall Methodology Update also makes important changes to the way scores are calculated. Highlights include:
- Tailored Scores: Accountability & Finance scores will be calculated based on defined nonprofit characteristics. Larger, donor-funded charities will undergo a more in-depth evaluation, while organizations that are smaller or not funded by donors will be assessed with a more focused set of metrics.
- Removing Outdated Metrics: Administrative expense ratio, fundraising expense ratio, and program expense growth metrics will no longer be assessed to create a more balanced evaluation process.
- Promoting Equity: Nonprofits that report on one or more of the Culture & Community Equity Practices will receive a score, allowing donors to view their commitment to promoting equity.
- Adapting to the Pandemic: If the pandemic significantly negatively impacted an organization's revenue during 2020 or 2021, that year's IRS Form 990 will be removed from the Accountability & Finance score calculation.
"Our latest rating methodology represents a step forward in our commitment to provide donors with the most comprehensive insights possible," says Michael Thatcher, President & CEO of Charity Navigator. "This release brings the total number of organizations assessed on impact over the 2,000 mark, empowering donors with a deeper understanding of the transformative impact they're making on the causes closest to their hearts."
The Fall Methodology Update is the latest of Charity Navigator's enhancements to its Encompass Rating System to make nonprofit evaluations more comprehensive and impact-focused. Earlier this year, the organization partnered with Impact Genome, the world's leading social impact registry, to evaluate the quality and availability of nonprofit impact data.
"We're thrilled to partner with Charity Navigator to level the playing field for all nonprofits and shift the conversation from overhead to outcomes," says Jason Saul, co-founder of Impact Genome.
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