Ire & Irony

There was plenty of both ire and irony on display during lunch on the 2nd day of the DC Nonprofit Conference. Charity Navigator (CN) President and CEO Michael Thatcher (just 6 months into his position) delivered his plan for the future of Charity Navigator. The program book promised a “frank conversation” and it did not disappoint.

As somewhat of a novice to the challenges facing nonprofit fundraisers, I was surprised at the tone of the room, both during his discussion and the terse Q&A session that followed. That is, until I met Kevin Gaschler Sr., Director of Membership Programs at Ducks Unlimited, who summed up the ire quite simply by saying “The cost of fundraising counts against you.”

In the Charity Navigator rating system, this is true.

Established on the premise of providing donors with information about governance and financial practices at more than 8,000 nonprofits, Charity Navigator currently calculates its ratings based on two factors: Financial Stability and Accountability & Transparency.

Herein lies the ire: one of 4 factors that determine an organization’s Financial Stability score is Fundraising Expenses. The cost of strategists, manpower, paper, printing, and of course postage, can have a negative impact on a charity’s overall score (additional expenses including administrative and programmatic expenses also factor into this score).

The irony is this: Direct Mail, though costly (due in part to postage), consistently proves itself to be one of the most effective ways to reach and convert donors. Also ironic is that Charity Navigator itself is a nonprofit organization seeking donations to continue its operations and expansion. That means it too will incur fundraising expenses.

Further fueling the ire in this irony, Charity Navigator is not itself “Charity Navigator rated,” a point brought up during the Q&A session and deftly deflected by Mr. Thatcher, saying he would “bring these concerns to the next board meeting.”

Fundraisers left the lunch frustrated, but there is hope, and it lies in the future of Charity Navigator’s CN3.0 rating program. This initiative seeks to develop a system that includes three dimensions of a charity’s operations that “an informed charitable giver/social investor needs to consider when selecting a charity to support.” Those dimensions are: Financial Health, Accountability & Transparency, and Results Reporting.

In 2013 Charity Navigator began collecting results reporting data via a series of questions regarding “the logic behind their programs, the measures or indicators they were using to assess progress, any third-party organizations that might have validated their achievements, and the degree to which they listen and utilize the opinions of those they serve.” (charitynavigator.org)

After collecting this anecdotal data from more than 3,000 charities, CN decided to reexamine its approach to obtaining and evaluating reporting data, with the belief that “most organizations are not yet truly working on a results basis and are not equipped to provide the kind of reporting we were seeking.”

The challenges CN faced early on present an opportunity for fundraisers to leverage results data to not only fundraise, but improve overall Charity Navigator scores. By integrating results data and highlighting successes year-over-year in your current direct mail/marketing plans, you can avoid increasing fundraising costs while providing the data that will be needed to increase your CN score.

There’s no telling how long it will be before CN 3.0 is up and running, or when Charity Navigator will post its own rating, but in the meantime organizations can be confident that their good works will speak for themselves, and that we’ll continue following these developments to keep you informed on the future of the nation’s largest charity evaluator.