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CHARITY NAVIGATOR the Past, Present, & Future

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CHARITY NAVIGATOR the Past, Present, & Future CHARITY NAVIGATOR The Past, Present, & Future Michael Thatcher President & CEO CHARITY NAVIGATOR MISSION VISION MAKE IMPACTFUL A WORLD WHERE PHILANTHROPY PHILANTHROPY IS EASIER FOR ALL INCLUSIVE, VIBRANT, AND EFFECTIVE November 1, 2017 History • Founded in 2001 by Pat and Marion Dugan • Focused on meeting donor need for objective information about the organizations they support • Charitynavigator.org was launched in 2002 to guide intelligent giving and advance a more efficient and responsive philanthropic marketplace Rating System Evolution • April 2002: Launched with Financial Rating System (1.0) • September 2012: Added Accountability & Transparency Metrics (2.0) • June 2016: Comprehensive Update to Financial Metrics (2.1) • In Process: Integrating Results & Effectiveness • Ongoing: Expanding the Number of Charities Rated Current CN 2.1: Rating Methodology • Financial Health – 7 metrics at 10 points each • Accountability & Transparency – 17 metrics worth 3 to 15 points each Majority of Rated Charities Perform Well • Ratings • 35% have a 4-star rating, 47% have a 3-star rating • 1% have a 0-star rating • 400 charities are on our CN Advisory list • Spending on Programs • On average they spend 80% on programs • Only 3% charities spend <60% on programs • Rainy Day Funds • >50% have accumulated at least 1 year of working capital • Only 4% have <1 month's worth of working capital Which 9,000+ Charities Do We Rate? • Tax Status: 501(c)(3) charities • Sources of Revenue: Depend on support from individual givers • Type of Programs: Variety • Length of Operations: At least 7 years • Location: All parts of the country • Size: America's largest charities What Kinds of Charities Do We Not Rate? • Specific Types of Charities: Hospitals, hospital foundations, land trusts, universities • Smaller Charities: Less than $500,000 in public support • Churches: Exempt from filing the Form 990 (Salvation Army) • 501(c) (4) organizations: Spend a substantial portion of their revenue on lobbying, not every donation to them is tax-deductible (NRA, NOW) • Private Foundations: Receive the majority of support from only one individual, family or corporation (Bill & Melinda Gates Foundation) • Affiliates: Whenever possible we prefer to offer donors a consolidated rating (Susan G. Komen for the Cure, Ducks Unlimited, Alzheimer's Association) 7 Financial Metrics Information Obtained from the IRS Form 990 Program Expenses = Program Expenses/ Total Functional Expenses Administration Expenses = Management & General Expenses/ Total Functional Expenses Fundraising Expenses = Fundraising Expenses/ Total Functional Expenses Fundraising Efficiency = Fundraising Expenses/Total Contributions Program Expense Growth = [(Yn/Y0) (1/n) ]-1 Working Capital Ratio = Net Available Assets (most recent 990)/ Average Total Expenses Liabilities to Assets Ratio = Total Liabilities ÷ Total Assets Best practices: Accountability & Transparency Information Provided on the IRS Form 990 Is the following information easily Independent Voting Board Members accessible on the charity’s website? No Material diversion of assets Donor Privacy Policy Audited financials prepared by independent accountant Board Members Listed Does Not Provide Loan(s) to or Receive Loan(s) From related parties Audited Financials Documents Board Meeting Minutes Form 990 Provided copy of Form 990 to organization's governing body in advance Key Staff Listed of filing Conflict of Interest Policy Whistleblower Policy Records Retention and Destruction Policy CEO listed with salary Process for determining CEO compensation Board Listed / Board Members Not Compensated Hot Topics CN Advisory System The CN Advisory System is designed to alert the public to charities that may have engaged in unethical or illegal actions. 2013 A Letter to American Donors Focus Attention on: Transparency, Governance, Leadership & Results The Dilemma Instruction to Donors The Reality Don’t use overhead The vast majority of as the primary metric charities are not for charitable giving measuring and decisions. Instead focus reporting on on impact. their results. 2014 A Letter to American Nonprofits Requested to: Share data on Results, Manage towards results, educate funders on real cost of obtaining results Results Reporting – Timeline 2011 Research begins, development of initial metrics discussed and tested via independent study groups, universities and colleges 2012 Concept note and methodology published 2013-14 Implementation begins on a cause by cause basis Letters to Donors & Charities sent by CN, GS & BBB 2015 Data returns minimal with most orgs. lacking robust information February – reduced intake & processing to Elements 1 and 2 May – data collection and processing halted 2016 Review of Lessons Learned & Reengagement Strategic Planning process for 2021 RR – Reflections on First Pass What went well: • Organizations began adding results data to their sites • Organizations were enthusiastic about implementing impact measurement • Some orgs. had more information than they realized What did not go well: • Charities were confused or overwhelmed by the language used in the questions • Lack of sample data for teaching: Charities sought examples of correct answers in their cause area, which were not answerable due to newness of the process. • Interpreted as a One size fits all approach In June 2016 we did a website scraping project with Feedback Labs and discovered that only 2.5% of our rated charities utilize outcomes related language on their sites, confirming our findings that the data we were asking for was not publicly available. RR – Moving Forward • Research into existing outcomes & measurement standards – Focus on eliminating redundancies • Collaboration – Leverage existing expertise – Surface best practices • Gather sector input and convening a task force – (Want to help? Email [email protected]) 2021 Plan • Equip the entire philanthropic ecosystem with the tools, ratings and information they need to make impactful investments • Expand the number of people and organizations who understand and commit to the idea of intentional philanthropy • Deepen commitment to giving 2021 Plan First Steps ● Partnerships with GuideStar, Classy, and GlobalGiving ● Adding Results/Impact Data to Ratings Pages for ~2,400 rated nonprofits ● Live: #GivingTuesday 2017 Final Thoughts • Take Steps to Measure your Results • Advocate Funding to Measure Results • Publicly Share Results (990 & beyond) • Establish a Registered Representative with Charity Navigator • Suggestions to: [email protected] To Stay Connected and Learn More… CharityNavigator.org @CharityNav facebook.com/charitynavigator blog.charitynavigator.org/ [email protected].
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