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The team from Charity Navigator, the nation's largest independent charity evaluator and leading donor advocate, shares their thoughts on emerging nonprofit-sector issues and offers tips to better inform your intelligent giving decisions.

Monday, March 30, 2009

Is Your Charity Prepared To Weather The Economic Storm?

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.

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