President & CEO's Report for March 2013
March 5, 2013
In my last report, I announced the launch of CN 3.0 and I promised to use future reports to provide more information about the various elements of the new Results Reporting dimension. This month, I’d like to focus on the first element which is called Alignment of Mission, Solicitations and Resources. It has two primary purposes.
Element One: Alignment of Mission, Solicitations and Resources
We determine if the charity's funding solicitation materials (on a donations page, public financial reports, or for the first year the charity is reviewed only - materials sent to CN) are in accordance with how it allocates its resources as per the program expenses break out on the most recent Form 990. All subsequent rating elements are evaluated for each individual program area until at least 60% of overall program expenses are represented.
The first, is to follow-up on an issue that has often bedeviled charitable givers/social investors. That is the issue that charities will sometimes promote one program area in their fundraising materials, when in fact most of the donations are being used for something else. For example, an organization may claim it provides direct services when in fact it spends most of its time and money on advocacy. We have long cautioned donors about this problem and advised them to investigate to make sure their money is not just going to a cause that sounds like their interest area, but really does the specific work that they are interested in supporting. Now, via Element One within the new Results Reporting dimension, Charity Navigator is doing the investigating for donors. Our analysts start by looking at the IRS Form 990 on page 2, where a charity is required to indicate how much of their program expenses are allocated to each of their major program areas. Then that information is compared to the solicitation pages on the charity’s web site to be sure that it is emphasizing the same major program areas as reported on its Form 990. The only exception we foresee is if a particular program is entirely paid for by some other sources (such as government or foundation funding). Although it will be a few years before we issue star ratings based on how charities perform in this new dimension, we anticipate that if a charity is significantly misinforming the public through its solicitations that it may result in a 0-star rating for the charity.
The second reason to consider this information (from the Form 990), is because identifying the primary program areas that the charity works in is a critical first step in conducting our Results Reporting analysis. We need to know this breakdown to determine how many different programs we will be evaluating on the other four elements of Results Reporting. Specifically, we will be evaluating the charity’s major programs that account for at least 60% of its annual program expenses. We believe that the most high performing charities conduct robust Results Reporting in all their primary program areas, not just one or two. The best example of element one that reflects this analysis (within the first three charities that we showcased when we launched Results Reporting) is the Alliance for Children’s Rights which has three primary program areas - Adoption (15.8%), Education (33.8%) and Next Step (26.5%) which total 76.1% of program expenses for the organization.
To learn more about Element One of Results Reporting read page 6 of our Concept Note
We are also pleased to welcome our newest employees. First, we have two new Associate Program Analysts -Ann Cannella and Lindsey Struck - who will be helping us meet our goal of increasing the number of charities we rate from 6,000 to 10,000 while continuing to update (annually) all the charities already in our database. And Steven Caron has just joined us in the newly created position of Communications and Development Associate. He comes to us through Atlas Corps, a fellowship program that brings fellows from around the world to serve in American nonprofit organizations. Please join us in welcoming them all to Charity Navigator!
All the best,