Charity Navigator – love them or hate them – it generally depends on how many stars they award your nonprofit. And for those organizations with the top rating? You can be certain they let you know it – all the time. Press releases, big logos on their websites and the like.
But Charity Navigator, and they are not alone, places way to much emphasis on overhead expense ratio and downplays results. That’s right – what you pay your CEO is more important to Charity Navigator that the impact your organization creates!
Well, even Charity Navigator is waking up and “getting with the program” by making significant changes to their current system. Currently under development, the new system will move the needle from considering overhead and other financial metrics as the only input to counting towards only 33% of a nonprofit’s rating.
The nonprofit’s effectiveness and results will account for 50% of the new rating.
The 50% contribution will be based around the following six questions:
- What is the charity’s commitment to reporting results?
- How does the charity demonstrate the demand for its services?
- Does the charity report its outputs (what it does)?
- Does the charity report its outcomes (defined as the identifiable differences that it makes through its work)?
- What is the quality of evidence for reported results?
- Does the charity adjust and improve in light of its results?
The new rating system will not be fully implemented for two years. Time for even the most transparent-lacking organizations to get their house in order.