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.
Nonprofit organizations have specialized audit, tax and operational needs that require specialized service. Armanino has been committed to the nonprofit sector since 1953, and we now work with more than 500 nonprofit clients. This hands-on experience gives our staff of CPAs and former CFOs a deeper understanding of the issues nonprofits face, so we’re able to meet their needs and help them fulfill their missions in the most efficient, cost-effective way possible.