Charity Navigator introduced a new rating methodology in 2016, that includes the following seven financial metrics into its scoring. Because of charity: water’s business model and granting methodology, two of the seven metrics (working capital ratio and liabilities to assets ratio) inaccurately represent charity: water’s financial health, and contribute to the change in our rating.
First, charity: water operates under the 100% model, which dictates the organization maintain two financial business units: one for water projects and one for internal business operations. Charity Navigator consolidates these businesses, making it difficult to assess the true state of charity: water’s financial health and provides an inaccurate rating for the Working Captial Ratio metric.
Second, charity: water ensures 100% of funds are raised prior to signing a water grant, and provides payments to partners once project milestones have been achieved, proving progress of work. While this methodology keeps our partners accountable, it inflates our grants payable figure and treats this as a risk to the business, ultimately impacting our liabilities to assets ratio.