ICYMI: Charity Navigator Changed Its Rating System

July 5, 2016       The NonProfit Times      

More than 2,100 of 8,000 organizations evaluated by Charity Navigator, or about 27 percent, had their ratings change due to a new ratings system activated on June 1. There is no change, however, to its embattled stand on joint allocation cost.

No changes were made to the Glen Rock, N.J.-based nonprofit’s metrics for accountability and transparency, which comprise the other half of a charity’s rating. The new metrics introduce a Liabilities to Assets Ratio and “better capture an organization’s financial efficiency and capacity by allowing for higher scores in program expenses, removing the volatile primary revenue growth metric,” according to Charity Navigator President and CEO Michael Thatcher.

Ratings still range from 0 to 4 stars but 27 percent of the 8,000 nonprofits assessed — approximately 2,160 charities — will receive new star ratings. Only 49 charities earned perfect scores of 100.

Ratings improved by one star for 19 percent of charities examined — about 1,520 — under the new system. There was a one-star reduction for 8 percent, approximately 640 organizations. Fourteen charities had their rating increase by two stars and only two nonprofits – Law Enforcement Legal Defense Fund and National Police Defense Foundation – had a two-star rating decrease.

About 390 charities with an overall four-star rating dropped to three stars and of those, 80 were the result of a new Form 990, not the change in methodology. On the other hand, 698 nonprofits with an overall three-star rating increased to a four-star rating.