Standard 4: Compensated Board Members - 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.
AKS does not meet this Standard because:
- 2 out of 5 board members are indirectly or directly compensated. One member is a paid staff member and one is the father of a staff member.
Standard 11: Financial Statements - 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.
AKS does not meet this Standard because:
- It states it does not have audited financial statements for the year ended September 30, 2013.
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.
AKS does not meet this Standard because, in the Alliance's opinion, the unaudited financial statements for the fiscal year ending September 30, 2013 do not provide an accurate presentation of AKS's expenses.
AKS solicits the public for the donation of clothing and other household items, then sells the donated in-kind items to raise funds that are in turn granted to other kidney-related charities. In fiscal year 2013, AKS reported revenue from the sale of donated items net of the cost of merchandise sold (1,652,678). In this case, cost of merchandise sold represented the salary for individuals soliciting for in-kind donations ($1,516,828), payroll taxes ($131,316), and telephone expenses from telemarketing activities ($4,534). In the Alliance's opinion, these costs should not be netted out of the amount received for the sale of in-kind items, but should instead be allocated as fund raising expenses.
In response, AKS stated that:
"AKS solicits and receives only non-cash donations, and only through its own employees. The Alliance charity standards evaluate a number of non-economic factors, all of which AKS satisfies. Based on the accounting method that is used by AKS’s accountants, which is in conformity with the IRS standards, AKS did not report any fundraising expenses in fiscal year 2013. NKS’s total funds donated to the National Kidney Foundation, Inc. in 2013 were $428,088. In the opinion of AKS, all income is derived from the sale of merchandise, and therefore, all costs should be considered cost of sales, not fundraising expenses. AKS believes the cited issue with the Alliance Standard 13 is a result of AKS' non-cash donation structure, and not a reflection on the effectiveness of the organization."
Since the Alliance disagrees with the way these costs were netted out of revenue rather than reported as expenses, the Alliance was unable to verify the amount allocated as fundraising expenes. In additioan, the program expense ratio could be significantly lower than the 79% reported in its 2013 unaudited financial statments. Because of this, the Alliance is unable to verify whether AKS meets Standards 8 and 9.
Standard 14: Budget - Have a board-approved annual budget for its current fiscal year, outlining projected expenses for major program activities, fund raising, and administration.
AKS does not meet this Standard because, when the organization provided 2014 budget information, it indicated that the budget:
- Did not identify total projected fund raising expenses.