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.
Defenders does not meet this Standard because in the Alliance's opinion, the audit report for the fiscal year ending September 30, 2010 does not provide an accurate presentation of Defenders’ fund raising and program service expenses.
Defenders provided a copy of its audited financial statements for the fiscal year ended September 30, 2010, which included an auditor's opinion that the statements were prepared in accordance with Generally Accepted Accounting Principles (GAAP). According to the audited financial statements, Defenders incurred joint costs of $9,765,507 for informational materials and activities that include fund raising expenses. Of this amount, $6,668,300 was allocated to program service expenses, $2,226,737 was allocated to administrative expenses, and $870,470 was allocated to fund raising expenses.
Based on an evaluation of sample Defenders appeals, the BBB Wise Giving Alliance disagrees with the allocation of $6,668,300 of direct mail appeals to the program service category. The Alliance is of the opinion that the contents of the direct mail appeals do not substantiate 68% of the cost of direct mail appeals to program service expenses. A significant portion of the content of the appeals could be considered fund raising, as it explains why one should donate to Defenders rather than fulfilling a programmatic or administrative function.
In addition, one sample appeal reviewed by the Alliance did not include a call to action other than to donate to become a member. AICPA Statement of Position 98-2 requires that an appeal include such a call to action in order for the appeal to be eligible for joint-cost allocation.
Depending on how one recognizes Defenders’ direct mail expenses, its fund raising costs could be higher than the 8% of related contributions that was reported and its program services could be lower than the 76% of total expenses also reported by Defenders. Since the Alliance disagrees with Defenders’ joint cost allocations, we are unable to determine whether the organization meets Standards 8 and 9, which address fundraising and program expenses.
Year, State Incorporated: 1947, District of Columbia
Stated Purpose: "to protect all native wild animals and plants in their natural communities."
Note: Defenders' reports in-kind donations in the amount of $1,559,004 during the fiscal year ended September 30, 2010. Included in the amount is legal services ($1,211,779), advertising ($263,428), field conservation ($52,590), human resources services ($24,533), photography services ($2,475), accounting services ($2,200), and renewable energy services ($2,000).
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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
of information and materials provided voluntarily by the charity. The name Better
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©2012 BBB Wise Giving Alliance
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).