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Wednesday, October 6, 2021

Encompass By the Numbers: What the Ratings Reveal

Authored by Moustafa Elshaabiny, Senior Software Engineer, and Stephen Rockwell, Chief Ratings Technology Officer at Charity Navigator, who leads the team of charity analysts, program specialists, and development engineers that launched the new Encompass rating methodology and criteria.

The Encompass Rating System reached an important milestone last month, transitioning out of beta and into its own as an evaluation system of nonprofit organizations. Over the last 18 months developing Encompass, the Charity Navigator team heard from thousands of donors who made it clear that they want to make a difference with their contributions. Encompass helps donors assess the impact and community benefits that an organization provides, and the likelihood that the organization will sustain impact into the future. Encompass will evolve and mature over time via three release cycles each year. Our plan is to share a “by the numbers” post after each release, so that interested parties can see how the number of ratings within the overall system and each beacon are scaling. We may also explore other points of interest in the aggregate.


Overall Ratings

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The Encompass Rating System now rates 187,110 nonprofit organizations. 68% of nonprofits receive a passing score of 75 or higher, earning a “Give With Confidence” attribute from Charity Navigator.   

When the Encompass project began, then as it does now, Charity Navigator rated 8,594 organizations through the Star Rating System. As we expand our reach to rate over 200,000 nonprofit organizations over the next year, we will bring these two systems together. An important first step to this process was to ensure that Star-rated organizations can now earn the Encompass beacons on Leadership & Adaptability, Impact & Results, and Culture & Community. Let’s dig into the numbers of around beacons.  


Leadership & Adaptability

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738 nonprofit organizations have earned our most recently-launched Leadership & Adaptability beacon. Each organization shared its vision and the strategies it commits to for achieving this vision by submitting data to us via our Nonprofit Portal. 90% of nonprofits that submitted this data received an Encompass overall score of 75 or above, and almost all of them received a passing score for the Leadership & Adaptability beacon.  

Culture & Community

We received valid responses from 10,915 nonprofit organizations to the Culture & Community beacon questionnaire. Similar to the Leadership and Adaptability beacon, the majority of organizations that submitted this data were more likely to receive a higher Encompass overall score, and all of them received a passing score for the Culture & Community beacon.

Impact & Results

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1,142 nonprofit organizations were currently eligible for our Impact & Results beacon. Of these organizations, 87% received a passing score for the beacon, and 83% received an Encompass overall score of 75 or higher and earned the “Give With Confidence” attribute.

Finance & Accountability

Out of our four beacons, the Finance & Accountability beacon has the most organizations scored. 68% of nonprofit organizations that were eligible, received a passing score for the beacon. Nonprofit organizations that earned the Finance & Accountability beacon showed a more even overall Encompass score distribution compared to the other three beacons, with 17% scoring between 60-74, 30% scoring between 75-89, and 38% scoring between 90-100. The latter two groups, a total of 126,773 nonprofit organizations, received the “Give With Confidence” attribute. We used the latest tax returns released from the IRS as the main data sources to calculate the Finance & Accountability score. Over 95% of these  tax returns were for either 2020 or 2019 tax years.


Closer Look

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Taking a closer look at the Encompass scores, it is worth noting some of the correlations between the size of nonprofit organizations and their respective score. We define the organization's size by using the reported revenue dollar amount from the Form 990 we used to issue the Encompass rating. Organizations that report more than $1M in revenue are considered large organizations, those that report less than $1M but more than $250,000 are considered medium organizations, and organizations that report less than $250,000 are considered small organizations. Of all the Encompass-rated nonprofit organizations, we recognize 72,206 as large, 60,167 as medium, and 54,660 as small. Large and small organizations were more likely to receive passing scores compared to medium-sized ones, with large being most likely to pass. While we expected to see some performance differences between large, usually well-resourced, organizations compared to medium and small sized ones, our team is working on some changes to the Encompass Rating System’s methodology that we hope will create more parity among the different size groups. Another way that small and medium-sized organizations can improve their overall Encompass score is by submitting the data needed to earn the Leadership & Adaptability and Culture & Community beacons - this can be provided via Charity Navigator’s Nonprofit Portal and the How We Listen section of their GuideStar by Candid profiles respectively.

As of this version of Encompass, version 4, the Finance & Accountability and Impact & Results beacons remain the biggest factors in determining an organization’s overall Encompass score. Failing to earn either of them lessens the organization’s chance of earning a “Give with Confidence” attribute. However, of the more than 80% of the 31,582 nonprofit organizations that received an Encompass score, between 60-74 could earn enough points to bring their overall score to a passing 75 or higher if they submit the data required to earn the Leadership & Adaptability beacon (10 points). In fact, all of them could earn a passing score, if they also submitted the data to earn the Culture & Community beacon (5 points).


                         
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Authored by Moustafa Elshaabiny and Stephen Rockwell, Charity Navigator.

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