From the Wall Street meltdown, to the foreclosure crisis, to the rising unemployment rate, our economy has taken a turn for the worse. As a result, charities are bracing for the fact that many Americans will have less money to give this year. How can you tell if your favorite charity is prepared to deal with a dip in contributions?
Take a close look at the charity’s working capital ratio as displayed on its Charity Navigator ratings page. Often referred to as a ‘rainy day fund,’ this metric helps illuminate how vulnerable a charity is to changes in giving patterns. Those with 6 months to a year’s worth of working capital are well positioned to sustain their programs while those with very limited working capital are at risk. The good news is that 60% of the charities we’ve reviewed have at least 6 months of working capital on hand. The bad news is that 9% of the charities have less than a month’s worth and thus are at risk of having to cut programs or staff.