Standard 13: Accuracy of Expenses in Financial Statements - Accurately report the charity's expenses, including any joint cost allocations, in its financial statements. For example, audited or unaudited statements which inaccurately claim zero fund raising expenses or otherwise understate the amount a charity spends on fund raising, and/or overstate the amount it spends on programs will not meet this standard.
C4C does not meet this Standard because:
The Alliance disagrees with the organization's allocation of expenses associated with car donation promotion and processing. According to the IRS Form 990 for the fiscal year ended June 30, 2012, the organization incurred costs including marketing, towing, repairs, smog emission fees and other expenses. These costs were allocated to the program expense category. The Alliance believes the cost associated with handling the car donations, preparing them for sale, and other related costs should be allocated as administrative expenses as they are related to the conversion of car donations into cash.
In response to this finding, the organization stated, in part, that:
"It should be noted that the same reporting methodology is followed for C4C's tax reporting; the company underwent an IRS audit several years ago which resulted in 'no change.'"
In July of 2012, Cars 4 Causes was the subject of a Stipulated Amended Judgment in the State of California (CIV219944) in which Cars 4 Causes (C4C), without admitting to any violation of law, were enjoined from engaging in the use of the phrase “free towing” in advertising without explaining that the towing is paid for by C4C or some other entity and “sales of vehicles without current emission control certification by C4C to buyers who are not licensed dealers or licensed vehicle dismantlers under California law.” C4C also was ordered to pay $50,000 for civil penalties, attorney’s fees and costs.
Vehicle Donation Issue
The organization addressed the complaint issue brought to its attention: 1
The organization did not address the complaint issue brought to its attention: 1
(This complaint involved a donor's concern that the proceeds from their donated car's auction were not delivered to the charity of their choice.)
Year, State Incorporated: 1997, California
Stated Purpose: "to support youth education and other charitable causes by giving donors the opportunity to select a charity of their choice to share in the net proceeds realized through the sale of vehicle donations received by the organization and sold through retail and wholesale auction houses, a retail lot and via the internet."
Note 1: Because the Alliance disagrees with C4C's allocation of expenses, we are unable to verify the amounts reported for total Program, Fund Raising, and Administrative expenses. See the Conclusions section of this report for more information.
Note 2: In the above financial summary, "other changes in net assets" represents an increase in unsold vehicles restricted by contributors ($20,447) and the unrecorded differences ($85).
Note 3: For the fiscal year ended June 30, 2011, C4C reported in-kind contributions of $2,413,219 for advertising ($1,779,084), towing ($394,553), repairs ($91,229), smog fees ($90,240), DMV and other fees ($49,874), fuel ($6,585), and cleaning and storage ($1,654).
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own judgment. If the report is about a charity and states the charity meets or does
not meet the
Standards for Charity Accountability, it reflects the results of an evaluation
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Organizations shall have a board of directors that provides adequate oversight of the charity's operations and its staff. Indication of adequate oversight includes, but is not limited to, regularly scheduled appraisals of the CEO's performance, evidence of disbursement controls such as board approval of the budget, fund raising practices, establishment of a conflict of interest policy, and establishment of accounting procedures sufficient to safeguard charity finances.
The organization meets this standard.
Soliciting organizations shall have a board of directors with a minimum of five voting members.
An organization shall have a minimum of three evenly spaced meetings per year of the full governing body with a majority in attendance, with face-to-face participation. A conference call of the full board can substitute for one of the three meetings of the governing body. For all meetings, alternative modes of participation are acceptable for those with physical disabilities.
Not more than one or 10% (whichever is greater) directly or indirectly compensated person(s) serving as voting member(s) of the board. Compensated members shall not serve as the board's chair or treasurer.
No transaction(s) in which any board or staff members have material conflicting interests with the charity resulting from any relationship or business affiliation. Factors that will be considered when concluding whether or not a related party transaction constitutes a conflict of interest and if such a conflict is material, include, but are not limited to: any arm's length procedures established by the charity; the size of the transaction relative to like expenses of the charity; whether the interested party participated in the board vote on the transaction; if competitive bids were sought and whether the transaction is one-time, recurring or ongoing.
Have a board policy of assessing, no less than every two years, the organization's performance and effectiveness and of determining future actions required to achieve its mission.
Submit to the organization's governing body, for its approval, a written report that outlines the results of the aforementioned performance and effectiveness assessment and recommendations for future actions.
Spend at least 65% of its total expenses on program activities.
Spending should be no more than 35% of related contributions on fund raising. Related contributions include donations, legacies, and other gifts received as a result of fund raising efforts.
Avoid accumulating funds that could be used for current program activities. To meet this standard, the charity's unrestricted net assets available for use should not be more than three times the size of the past year's expenses or three times the size of the current year's budget, whichever is higher.
Make available to all, on request, complete annual financial statements prepared in accordance with generally accepted accounting principles. When total annual gross income exceeds $500,000, these statements should be audited in accordance with generally accepted auditing standards. For charities whose annual gross income is less than $500,000, a review by a certified public accountant is sufficient to meet this standard. For charities whose annual gross income is less than $250,000, an internally produced, complete financial statement is sufficient to meet this standard.
Include in the financial statements a breakdown of expenses (e.g., salaries, travel, postage, etc.) that shows what portion of these expenses was allocated to program, fund raising, and administrative activities. If the charity has more than one major program category, the schedule should provide a breakdown for each category.
Accurately report the charity's expenses, including any joint cost allocations, in its financial statements. For example, audited or unaudited statements which inaccurately claim zero fund raising expenses or otherwise understate the amount a charity spends on fund raising, and/or overstate the amount it spends on programs will not meet this standard.
Have a board-approved annual budget for its current fiscal year, outlining projected expenses for major program activities, fund raising, and administration.
Have solicitations and informational materials, distributed by any means, that are accurate, truthful and not misleading, both in whole and in part. Appeals that omit a clear description of program(s) for which contributions are sought will not meet this standard. A charity should also be able to substantiate that the timing and nature of its expenditures are in accordance with what is stated, expressed, or implied in the charity's solicitations.
Have an annual report available to all, on request, that includes: (a) the organization's mission statement, (b) a summary of the past year's program service accomplishments, (c) a roster of the officers and members of the board of directors, (d) financial information that includes (i) total income in the past fiscal year, (ii) expenses in the same program, fund raising and administrative categories as in the financial statements, and (iii) ending net assets.
Include on any charity websites that solicit contributions, the same information that is recommended for annual reports, as well as the mailing address of the charity and electronic access to its most recent IRS Form 990.
Clearly disclose how the charity benefits from the sale of products or services (i.e., cause-related marketing) that state or imply that a charity will benefit from a consumer sale or transaction. Such promotions should disclose, at the point of solicitation: (a) the actual or anticipated portion of the purchase price that will benefit the charity (e.g., 5 cents will be contributed to abc charity for every xyz company product sold), (b) the duration of the campaign (e.g., the month of October), (c) any maximum or guaranteed minimum contribution amount (e.g., up to a maximum of $200,000).