The NY BBB Charity Accountability Program was founded in 1986 with a mission to increase public accountability on the part of New York area charities and encourage wise giving on the part of New York residents. One of the ways we accomplish this is by producing and publishing reliable, easy-to-read reports on Metro New York charities. The NY BBB Charity Review Program promotes the BBB Standards for Charity Accountability, which were developed with professional advice from representatives of the nonprofit community. The Standards provide a generally accepted framework for nonprofit management in four essential areas of operation:
Overall, the Standards encourage each charity to provide information voluntarily about the organization's purposes, programs, finances and governance. The Standards emphasize clear disclosure in fundraising solicitations, and stress that donated funds should be used for the purposes stated in solicitations. While all charities must necessarily incur costs in fundraising, the Standards state that those costs should not exceed a reasonable proportion of the group's total income or public contributions to the charity. Further, the Standards emphasize the necessity of careful controls over fundraising activities, including assurance that fundraising is conducted without excessive pressure. Finally, an adequate governing structure is deemed essential to the efficient management of a charity.
Each year, NY BBB Charity Accountability Program reviews hundreds of financial statements, tax filings, annual reports, solicitations, direct mail pieces and benefit information from nonprofit organizations throughout the Metro New York area. This information is used to determine whether a charity meets our Standards. We then produces a report with our determination and a summary of the charity's mission, activities, governance and key financial information.
How Charities are Selected for Review by NY BBB Charity Accountability Program
There are more charities in our area than NY BBB Charity Accountability Program can possibly review. So how do we decide which charities to cover?
First, we listen to potential donors from the general public. When a donor contacts the BBB to ask for information on a charity in our area that is not currently in our database, we add that charity to our list. The charity is then asked to complete a Charity Profile Questionnaire as well as provide us with additional supporting documents. Based on this information we generate a charity report.
In addition, NY BBB Charity Accountability Program staff members monitor newspapers, magazines and television in our area. We focus our attention on the organizations most likely to be soliciting money from individual donors, companies and foundations in our area. A charity can also come to us voluntarily and request a charity review. Once a review is completed, the report is published on our website.
How Often are Charities Reviewed by BBB?
Charity reports are generally valid for two years, after which time the organization is re-evaluated and a new report is generated. During the interim year, each organization is asked to review the information presented in its report and provide details of any significant changes. If there have been significant changes in the organization’s staffing, major programs, or financial health during the year, its report is updated and republished on our website.
What Information is Contained in a Charity Report?
Except in rare cases, every report contains the following subsections discussed below.
Each Charity Report provides the donor with the most current information on an organization’s legal name, address, phone number and fax number, as well as the email address and website of those organizations that indicate them. In some cases, when charities have telephone hotlines, TTY communication lines (for the hearing impaired) or multiple addresses, BBB will include this information alongside the primary contact information.
BBB uses the materials it receives from the organization to determine whether or not the organization meets BBB’ 20 Standards for Charity Accountability. Click here to see the complete Standards, and click here to see the Implementation Guide created to assist the donor in understanding how the Standards are applied.
Based on this evaluation, a charity may Meet or Not Meet one or more of the BBB Standards. In some cases, we are Unable to Determine whether the charity meets all or any of our Standards. Finally, there are some organizations for which there is No ranking. These indications are described in detail below.
Meets All Standards: If a charity meets all 20 of the BBB Standards, the evaluation section of the report will say that the charity “meets all BBB Standards for Charity Accountability.”
Does Not Meet All Standards: A charity may fail to meet one or more of the Standards. The specific Standard and an explanation of the circumstances that lead BBB to determine that the organization did not meet the Standard(s) will appear in the report. All charities are given the opportunity to provide further explanation of the circumstances they believe have led them to not meeting the Standard(s) in question. If an explanation has been provided by the organization, it will be included in the report proceeded by the words “Organization’s Response.”
Donors must determine for themselves the importance of any charity’s deviation from the Standards.
Unable to Determine: For various reasons BBB may be unable to determine whether the organization meets one or more of the Standards. In these cases, both the Standard and the reason why we were unable to determine the organization’s compliance is included in the report.
Informational: Some organizations are not evaluated against the BBB Standards because they are too new, or receive less than 10% of their total support and revenue from public donations or grants. In this case BBB does not apply the Standards. We report on these organizations because donors have requested information about them, and the report is generated for informational purposes only.
Purpose & Programs
This section of a charity report briefly details a charity's mission and central activities. It is important to note that some organizations may provide services or be involved with activities not listed in this section due to space constraints. BBB strives to remain neutral when discussing an organization’s operations, and so this section is an objective summary of the organization’s activities. We are not advertising the organization or its services, but providing the donor with a general description from which he or she may gain perspective on the organization’s size, capacity and main programs.
This section of the report provides the donor with the name of the organization’s highest ranking paid employee, when there is one, as well as the size of the organization’s staff, including paid employees and volunteers. Some organizations have no paid employees. This section also notes the name and employer of the Chairman, President, or Director of the organization’s Board of Directors or Board of Trustees. Various organizations use different titles. Regardless of the title, the person identified is the person directing the charity’s outside governing board, the head of which has specific duties and obligations under the law. This section also details the number of the organization’s board meetings and average board attendance. Donors should check that the board meets regularly and with that the meetings are well attended.
This section outlines an organization’s major fundraising activities. Donors should note the number of activities and fundraising methods used by an organization. Both these factors can affect the amount of money an organization spends on fundraising. Some organizations ask that BBB inform donors that they do not use telemarketers or direct mail solicitations. Such statements will appear in this section of the report. If donors are contacted either by phone or by mail by persons using the organization’s name or a similar sounding name, the donor should contact the organization directly.
This section also shows the percentage that fundraising expenses represent of related contributions. This number indicates how much of every donated dollar goes into raising that dollar. Related contributions include, but are not limited to, private contributions, grants from foundations or corporations, revenue from special events, government grants, indirect support, and federated giving.
This section contains information on the organization’s tax status. Most organizations reviewed by BBB have been ruled tax-exempt by the IRS and are classified as “501(c)(3) organizations.” Donations to 501(c)(3) organizations are tax deductible to the extent allowed by law. Donations to some non-501(c)(3) organizations, such as veterans organizations, may also be tax deductible. If an organization is not tax exempt or BBB knows that donations are not tax deductible, it will be noted in this section.
This section presents the financial analysis conducted by BBB. It includes information on the organization’s total support and revenue; the percent of total expenses spent on the organization’s program services, management and general expenses, and its fundraising activities; as well as information on what percent of related contributions are spent on fundraising. Finally, this section indicates how much the charity had left after expenses or how much its expenses exceeded its income for the fiscal year. The information contained on the financial worksheet of each report is derived from the organization’s audited financial statements and/or its IRS Form 990.
When analyzing a charity’s finances, BBB uses the standard accounting notation for negative numbers and places them in parentheses. For example, if the organization earned $50 during the year, but spent $100, the deficit figure would appear as (50) on the worksheet.
The first section of the worksheet contains information about the organization’s total support and revenue. Support and Revenue is defined as revenue from any source earned during the fiscal year. For our purposes, Support and Revenue includes unrestricted contributions, government support, program revenue, interest and other revenue, as well as restricted contributions and interest, pledges and bequests, and permanent endowments.
A donor should look at the sources of the charity’s support and revenue. It is considered sound financial management to have a number of different sources of income, including, but not limited to, contributions, program revenue and interest earnings.
Other sources of income include:
Indirect Support/Federated Giving: These are funds contributed to a charity through another organization, such as the United Way, the United Hospital Fund or the Combined Federal Campaign.
Special Events: Organizations often hold special events to raise money. BBB records the revenue earned from these events under Special Events. This figure is a gross figure unless otherwise indicated. The only expenses that BBB nets from Special Events revenue are those associated with the direct benefit provided to the donor (such as the value of the dinner or the entertainment.)
Government Support (non-contract): This revenue is derived from State, Local and Federal government grants and is considered public support. This is not revenue derived from Government Contracts in which the charity is paid a fee for its services. This form of Government Revenue (contract) is included in program revenue.
Unrealized Gains are the increase in value of the organization’s investment assets. These gains are only “paper gains” as the organization has not sold the assets. As such, these gains do not represent funds available for spending, and may change in value before the organization chooses to convert the assets into cash through sale.
All of this is totaled and labeled Total Support and Revenue. Total Support and Revenue is the revenue from all sources, available and unavailable.
The second section of the financial analysis outlines the organization’s expenditures, broken down by Program Services, Management and General Expenses and Fundraising.
To the right of the dollar figures for expenses you will find the following percentages:
An additional Fundraising percentage is given:
It may be helpful to think of this percentage as the amount of each donated dollar spent to obtain that dollar. If an organization’s fundraising expenses represent 20% of related contributions, it’s as if $0.20 of each $1.00 raised from the public is being spent on fundraising.
Year End Figures
Following the accounting of expenses, you will find Excess (Deficit) of Total Support & Revenue over Total Expenses. This amount reflects the Total Support & Revenue, both available and unavailable, left over after all expenditures. If the amount of Total Expenses exceeds the amount of Total Support & Revenue the amount will be a deficit and will be noted in parentheses.
Although some circumstances may cause a charity to exceed its income in a particular year, organizations should not consistently overspend. Continuously running a deficit may lead to financial instability and may be a sign of mismanagement or other internal crisis. Donors should seek an explanation from the charity as to why expenses exceeded income and what management is doing to address any problems.
The final section of the financial analysis notes the organization’s total Assets and Liabilities at the end of the fiscal year being analyzed. Assets include cash, accounts and grants receivable (money due to the charity), inventory, prepaid expenses, real estate, property and equipment owned by the charity. Liabilities include accounts payable (money the charity owes), accrued salaries and payroll taxes, notes and loans payable and long-term debts. In general, an organization’s assets should be greater than its liabilities. If they are not, a donor may wish to have the organization explain the conditions that have led to this situation.
The final figures included on the worksheet are the Fund Balances for the end of the fiscal year being analyzed and for the fiscal year preceding it. In general, donors should note whether or not the organization is gradually increasing its fund balance over time. This means that the organization is consistently bringing in more money than it is spending. While nonprofits cannot earn a “profit” that benefits its directors, members or affiliates, a prudent organization ends the year with a surplus.
Donors must decide for themselves the importance of any variation from the Standards by weighing the relative importance of the variation against the organization's total performance. Charity reports are written solely to assist donors in exercising their own judgment. We also recommend that donors specific concerns about a charity’s performance direct those questions to the Executive Director of the organization, before they make up their mind to give.