After almost 10 years of operation, charity evaluation website Charity Navigator has implemented the first major change to its rating system. Until this September, its ratings assessed only the financial performance of charities, but now they also assess accountability and transparency. This new dimension specifically evaluates the governance and ethical practices of charities, as well as how open they are with information they provide to their stakeholders.

Over 40 per cent (660 out of approximately 1,500) of charities that had previously gained the top four stars in Charity Navigator’s financial health rating system have slipped down the ratings since the launch of CN2.0, as the organization is calling its updated service. However, 330 formerly lower rated charities are now getting four stars, so the net decline is 20 per cent.

Moreover, the exercise itself appears to have been a beneficial one as far as charities adopting good practice is concerned. In the past couple of months, says Charity Navigator CEO Ken Berger in a recent blog post, ‘we have heard from at least a couple of charities a day informing us of improvements they have made to their practices to comply with our Accountability and Transparency performance metrics’.

There are still ‘many, many nonprofits that have barely started down the road to meeting best practices on governance, ethics and openness to the public’, he writes. But overall he is upbeat, concluding that ‘there is evidence that many organizations are embracing best practices and moving toward greater transparency with their stakeholders’.

Charity Navigator defines accountability as ‘an obligation or willingness by a charity to explain its actions to its stakeholders’, and transparency as ‘an obligation or willingness by a charity to publish and make available critical data about the organization’. It gathers its data on these heads from the IRS Form 990 and from a review of the organization’s website.

Charity Navigator is committed to continuously improving its rating. Next up is CN3.0, which will rate the quality of reporting of charity results. Stay tuned.

For more information
http://www.charitynavigator.org
http://www.kenscommentary.org/2011/09/cn-20-more-knowledge-more-good.html