Embracing Iteration: The Fall Methodology Update

This September, Charity Navigator is thrilled to unveil its revamped Accountability & Finance methodology and updated point allocations for the Culture & Community beacon, providing donors with a more nuanced view of nonprofit effectiveness and organizations. 

 

Key Changes For Accountability & Finance Assessment:

 

Tailored Methodologies for Enhanced Precision

 

Gone are the days of a one-size-fits-all approach for the Accountability & Finance beacon. We're introducing tiered methodologies based on defined nonprofit characteristics, such as total revenue and percentage of revenue received from donors. Larger, donor-funded nonprofits 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. Additionally, we'll account for unique characteristics, like grantmaking and noncash donations, to ensure a well-rounded and accurate assessment.

 

Saying Farewell to Outdated Metrics

 

Embracing progress means leaving behind what no longer serves us. Three outdated financial metrics — administrative expense percentage, fundraising expense percentage, and program expense growth — are being removed. The removal will create a more balanced evaluation process, highlighting metrics that better represent financial health and sustainability. 

 

Saying Hello to New Point Allocation

 

Our commitment to evidence-based evaluations will be reflected in our new method to allocate points within the Accountability & Finance beacon. By closely assessing how each metric influences nonprofit effectiveness and donor behavior, we'll reward organizations that embrace best practices in governance, transparency, and financial health.

 

Adapting to the Pandemic

 

The pandemic brought unprecedented challenges; we will address that directly in this update. If the pandemic substantially negatively impacted an organization’s revenue during 2020 or 2021, then that year’s 990 will be removed from the financial metrics calculated. Our new approach accounts for the pandemic's impact on nonprofit finances, ensuring a fair evaluation without any additional burden on the organizations.  

 

Key Changes For Culture & Community Equity Strategies Assessment:

 

Promoting Equity in the Sector 

 

Based on lessons learned in the first couple of years with our Culture & Community beacon, we are updating how we score organizations’ equity strategies. Hence, it’s more representative of the progress nonprofits are making to promote equity. We assess a nonprofit’s commitment to best practices for equity within its organization and community using Candid's Equity Strategies Checklist, which includes 14 policies, practices, and data collection strategies. 

 

The number of points an organization receives is based on the number of strategies it has adopted. In this update, we are modifying how we allocate points by providing credit to organizations reporting one or more practices, and by scaling the number of points an organization receives for additional practices, all the way up to full credit for having them all.

 

Conclusion: More Accurate and Evidence-Based Ratings Awaits!   

 

With the unveiling of our updated Accountability & Finance beacon methodology and our updated points allocation for the Equity Strategies Checklist portion of our Culture & Community beacon, we're excited to empower nonprofits to show a holistic view of effectiveness like never before. Together, we'll paint a vibrant landscape of possibilities where nonprofits are encouraged to grow, evolve, and make an even greater impact on the world.