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MAKING THE MOST OF YOUR CHARITY
NAVIGATOR RATING
October 8, 2020
Today’s Agenda
• Introductions
• Charity Navigator’s Encompass Rating System
• The criteria and metrics behind your score
• How to get your non-profit in better financial shape and
improve your score
• What your score means and how to make the most of
your rating
Michael Thatcher, President & CEO of Charity Navigator
• Introductions
• Overview of Encompass Rating System
• The criteria and metrics behind your score
• How to improve your non-profit’s score
• How to make the most of your rating
• Questions & Answers
Meet Today’s Presenters
• Introductions
• Charity Navigator’s Encompass Rating System
• The criteria and metrics behind your score
• How to get your non-profit in better financial shape and
improve your score
• What your score means and how to make the most of
your rating
Michael Thatcher, President & CEO of Charity Navigator
Todd Polyniak, CPA
Partner
Sax LLP
Al Traverso, CPA
Partner
Sax LLP
Michael Thatcher
President & CEO
Charity Navigator
Kevin Scally
Chief Relationship Officer
Charity Navigator
charitynavigator.org/encompasssaxllp.com
OVERVIEW OF THE
ENCOMPASS RATING SYSTEM
● Ratings expansion: increase of 9,000 to more than 160,000 ratings.
● Holistic system: four beacon system to evaluate nonprofit effectiveness.
● Numeric ratings: scored from 0-100 based on available data.
● No effect on star ratings: Star rated charities are not affected by this new system.
● Agile methodology: iterative process for ratings development (like software development).
Encompass Rating System (beta V1)
“Give with Confidence”
90out of 100
Finance & Accountability
Impact & Results
Leadership & Adaptability
Community & Culture
Analysis:same for every rated charity
Metrics & Data: fluctuating
methodology
● Constituent Voice
● DEI
● Reputation
● People/HR
● Volunteerism
● Current star-rated Financial Score
● Financial Health (OHC)
● Leadership
● Organizational Strategy
● Programmatic response to crisis
● Program Results
● Program Strategy
● Program Reporting Transparency
90out of 100
90out of 100
90out of 100
90out of 100
● 150,000+ previously unrated organizations
○ Median Age: 24yrs
○ Median Size: $504K Total Expenses
● Criteria: 501(c)(3) nonprofits with three consecutive years of e-filed IRS Form 990s
● No action required to be rated
Who received their first-ever Charity Navigator rating?
Encompass Rating System
Our Motivation & Processfor Developing the Encompass Rating System
● Criteria in CN 2.1 limits pool of nonprofits: Smaller, newer nonprofits weren’t equipped with a rating
● Hesitation to give: Despite our efforts, donors assume the absence of a rating is risky.
● Donors need assurance: Prior to the Encompass launch, only 9,000 nonprofits were rated by Charity Navigator
A limited number of rated organizations creates information gaps for donors
● Data
○ Automated IRS 990s
○ Partners
○ Building Capabilities
● Brand
● Demand
● Experience
● Agile Methodology and Mindset
What assets do we have to enable new ratings?
Collaboration to Uplift the Nonprofit Sector
Consultative Council of Nonprofits
Charity Navigator Nonprofit Advisors
300+ nonprofit leaders
NonprofitRatings Expert Group
Impact partners /
data providers
25 nonprofit leaders from a wide spectrum of backgrounds & identities
Board members & external experts
Guidestar by Candid, ImpactMatters,
Global GivingClassy
● Financial impact
● Timing of datafeed from the IRS
● Ongoing surveying of nonprofits
● 72% suffering financially● 54% have already cut back on
programs● 56% have seen an increase demand in
programs
● Dedicated workstream for issuing a
ratings adjustment in 2021
● Four beacon system supplements
financial data
Adjusting ratings for
COVID-19’s effect on
financials
THE CRITERIA AND METRICS
AND HOW TO IMPROVE YOUR SCORE
Methodology for Finance & Accountability Beacon
• Program Expense Ratio (Average of last three 990s)
• Independent Audit or Financial Review
• Board Composition
• Liabilities to Assets (Per the most recent 990 filed)
• Website listed
• 25 points
• 25 points
• 25 points
• 15 points
• 10 points
_______________
• 100 points total
• Program expense ratio > 70%
• NFP above $1mil in revenue, expected to have audit
• Three or more board members, with >50% independent
• Liabilities to assets < 50%
• List website on 990
Encompass at Work
● Revenue size - $16,000,000● Asset size - $15,000,000● Score - 100
• Program Expense $14 mil / $15mil 93% 25
• Independent Audit Yes audit Q12a, Part IV 25
• Board Composition >50% Independent 25
• Liabilities to Assets $4.5mil / $64 mil 15
• Website listed Listed on 990 10
● Revenue size - $16,000,000● Asset size - $17,000,000● Score - 35
• Program Expense $14mil / $17mil 82% 25
• Independent Audit No audit Q12a, Part IV -0-
• Board Composition No outside board -0-
• Liabilities to Assets $23Mil / $11mil -0-
• Website listed Listed on 990 10
Low Score Scenario – What can NFP do?
• Program Expense Double check allocations
• Independent Audit Charitable registration requirements
• Board Composition Are they just being left off
• Liabilities to Assets Grants receivable and deferred
• Website listed List it. Why wouldn’t you
• Revenue size - $16,000,000
• Asset size - $17,000,000
• Score - 35
• Program Expense $14mil / $17mil 82% 25
• Independent Audit No audit Q12a, Part IV -0-
• Board Composition No outside board members -0-
• Liabilities to Assets $23Mil / $11mil -0-
• Website listed Listed on 990 10
Review of an Organization’s Accounting policies and review of the 990 is key to proper scoring
HOW TO MAKE THE
MOST OF YOUR RATING
Benefits for Nonprofits and Donors
Scale
Flexibility
Comprehensiveness
Better Storytelling
● Over 70% of Encompass rated NPOs received a “Give with Confidence” score.
● A passing score grants access to a toolkit, including the promotional seal
● An Encompass rating can help NPOs raise much needed funds.
Help your organization leverage their Encompass rating
Share the news...
A Powerful Trust Indicator
Accessing Your Rating Toolkit
We invite you to highlight your Encompass rating in your own marketing materials.
We have some guidelines for how you use our brand and reference Charity Navigator and the Encompass Rating System so that we are consistent across all mediums.
A Powerful Trust Indicator
A Powerful Trust Indicator
A Powerful Trust Indicator
Questions & Answers
• Introductions
• Charity Navigator’s Encompass Rating System
• The criteria and metrics behind your score
• How to get your non-profit in better financial shape and
improve your score
• What your score means and how to make the most of
your rating
Michael Thatcher, President & CEO of Charity Navigator
Todd Polyniak, CPA
Partner
Sax LLP
Al Traverso, CPA
Partner
Sax LLP
Michael Thatcher
President & CEO
Charity Navigator
Kevin Scally
Chief Relationship Officer
Charity Navigator
charitynavigator.org/encompasssaxllp.com