Nonprofit Blog

Welcome to the Nonprofit Blog hosted by the professionals at Armanino, CPAs & Consultants. This blog is set up to inform nonprofit organizations of trends, rule changes, best practices and free educational offerings that we have built to support nonprofit organizations. Our professionals bring you their insights from an accounting and organization perspective to help nonprofits reach their goals. We support our clients with advice, direction and best practices.

Thursday, March 14, 2013

Charity Navigator Cracking Down on Allocation of Expenses

Posted by Armanino Nonprofit Team

We all know the IMMENSE role an organization’s financial statements and 990 play when telling the financial story of an organization.  Prospective donors and creditors want to fund and work with organizations that are efficient, liquid, stable, operating machines and they use key performance metrics to gauge those attributes.  One key metric has always been the amount of program expense, or another way to say it, how much of every dollar that goes into the organization goes right back to funding its mission.

Recently Charity Navigator has begun to challenge certain nonprofits and the validity of its program expenses. This has been a hot topic at many organizations, but now is front and center after getting lots of press when the like of Anderson Cooper at CNN takes a deeper dive.

As nonprofit professionals we support the allocation of joint expenses to the 3 functional expense groupings for a nonprofit – program, general and administrative and fundraising.  What we do STRESS is that you revisit your allocations and ensure that they are supportable.  Are they in line with industry standards? Are estimates being used reasonable? Does your statement of activities portray an accurate look into your overall operations?

As it turns out, people are watching.


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