This indicator measures the financial capacity of large, established public charities and nonprofits in the Dallas area as compared with 25 other major metropolitan areas.  This indicator reports an overall financial health score, as well as individual data points.  Measures of financial capacity include median assets, median revenue, and median contributions of area charities and nonprofits.  Also important as a measure of financial health is fundraising efficiency, defined as the median amount of funds spent (on events and development personnel) per $1 raised.  The median pay for CEOs of area charities and nonprofits is also reported.  Overall scores are computed by assigning a component score of 0 to 10 in each of the following seven performance categories: Program Expenses, Administrative Expenses, Fundraising Expenses, Fundraising Efficiency, Primary Revenue Growth, Program Expense Growth, and Working Capital Ratio.  The maximum score is 70.  Individual charities and nonprofits are awarded four stars (Exceptional) for a score of more than 60, three stars (Good) for a score of 50 to 60, two stars (Needs Improvement) for a score of 40 to 50, one star (Poor) for a score of 25 to 40, and zero stars (Exceptionally Poor) for a score of less than 25.

The data are provided by Charity Navigator.  Charity Navigator specializes in evaluating large public charities and nonprofits.  To be included in Charity Navigator’s analysis, a charity or nonprofit must have been in operation at least 4 years, receive more than $500,000 in public support from individual donations, and file an IRS Form 990.  Some explicitly religious organizations, such as individual churches or the Salvation Army, are exempt from filing the IRS Form 990 and as such are not included.  However, broadly defined faith-based organizations not affiliated with a particular church and not requiring religious conversion as a condition of services are likely to be included.  Private foundations and other organizations that receive the majority of their funding from only one individual, family, or corporation are also excluded from the analysis.  Note that Charity Navigator does not assess every charity that meets these minimum guidelines. 

Why is this indicator important?
Adequate funding of charities and nonprofits is crucial to their survival and continued quality, expansion, and innovation.  The more efficient an organization is at raising funds, the more money it can spend on its programs.  Moreover, good fundraising efficiency can help an organization raise more funds, as most potential donors want their contributions to be used on program expenses that will have the greatest and most beneficial impacts. 

Nonprofit CEO pay scales can be a controversial issue.  Some donors may feel that more highly paid CEOs take funding away from programs, whereas other donors may feel that more highly paid CEOs reflect a commitment on the part of the charity to recruit talented leaders, and that competitive pay is a necessary part of that goal.  Of course, both can be true, and individual givers are encouraged to make their own determination of whether or not an organization’s CEO receives “reasonable” compensation.  Although Charity Navigator reports median CEO pay, it does not factor this item into its overall score directly.  Instead, it bundles CEO pay into overall administration and management expenses (one of the seven categories mentioned above) and awards a component score based on the percentage of total expenses used for administrative overhead, with a lower score being a better score.
 

How are we doing?
According to Charity Navigator’s 2005 Metro Market Study, Dallas area charities and nonprofits are some of the least financially healthy in the country.  In some instances, scores for financial health of Dallas area charities and nonprofits have gotten worse as compared with scores in 2003. 

• Dallas area charities earned a median overall score of just 46.98 in 2005, equivalent to a two-star “needs improvement” rating, and the worst median overall score among all 25 metro areas surveyed.  In 2003, it ranked 13th out of 20, with a median overall score of 55.49.
• In most categories of nonprofit financial health, Dallas area charities ranked between 20th and 25th out of 25.
• Dallas charities and nonprofits tracked by Charity Navigator had a median revenue of $4.9 million in 2005, among the smallest of the cities surveyed.
• Dallas area charities are some of the slowest growing in the nation, ranking 20th in both growth of revenues and program expenses.
  • Median annual growth in revenues for Dallas area charities was 2.2%.
  • Median annual program expense growth (expansion) was 5.2%. 

• Dallas area charities are more inefficient than their counterparts in other cities, spending more money while making less money than charities in other cities.
• Median fundraising expenses were 8.3% in Dallas, ranking 24th out of 25.
• Median administration expenses were 12.1%, also ranking 24th out of 25.
• Dallas charities ranked 25th out of 25 in fundraising efficiency, spending 13.6 cents per $1 raised in contributions.  In 2003, Dallas ranked 19th out of 20, spending 11 cents per $1 raised.  

• Median CEO compensation in Dallas was lower than that of many cities (including Boston, Phoenix, and San Francisco, among others) in the study; at $122,191, it ranked 9th lowest of the 25 areas studied.  This is a significant decrease from the 2003 median of $173,186.
• The average CEO compensation among the 4,257 large public charities and nonprofits tracked by Charity Navigator was $148,477, and the median was $113,513.  On average, CEO compensation accounted for about 3.4% of an organization’s functional expenses. 
• Faith-based charities account for 26% of large Dallas area charities surveyed by Charity Navigator.  This is more than any other city in the United States except Colorado Springs, CO.  This is particularly significant, given that Charity Navigator excludes individual churches and other explicitly religious organizations claiming an exemption through the IRS Form 990.