Charity Review

  • Issued: August 2015
  • Expires: August 2017

Arthritis Foundation

Standards Not Met

  • 13

404-872-7100

1330 West Peachtree Street, Suite 100
Atlanta, GA 30309

http://www.arthritis.org/

404-872-7100

1330 West Peachtree Street, Suite 100
Atlanta, GA 30309

http://www.arthritis.org/

Standards Not Met

This organization does not meet one or more of the 20 Standards for Charity Accountability. Click the conclusions section below for more information.

Standards For Charity Accountability

Governance

  1. Board Oversight

    Oversight of Operations and Staff: Standard 1

    Description
    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.

  2. Board Size

    Number of Board Members: Standard 2

    Description
    Soliciting organizations shall have a board of directors with a minimum of five voting members.

    The organization meets this standard.

  3. Board Meetings

    Frequency and Attendance of Board Meetings: Standard 3

    Description
    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.

    The organization meets this standard.

  4. Board Compensation

    Compensated Board Members: Standard 4

    Description
    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.

    The organization meets this standard.

  5. Conflict of Interest

    Conflict of Interest: Standard 5

    Description
    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.

    The organization meets this standard.

Measuring Effectiveness

  1. Effectiveness Policy

    Board Policy on Effectiveness: Standard 6

    Description
    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.

    The organization meets this standard.

  2. Effectiveness Report

    Board Approval of Written Report on Effectiveness: Standard 7

    Description
    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.

    The organization meets this standard.

Finances

  1. Program Expenses

    Program Service Expense Ratio: Standard 8

    Description
    Spend at least 65% of its total expenses on program activities.

    The organization meets this standard.

  2. Fund Raising Expenses

    Fund Raising Expense Ratio: Standard 9

    Description
    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.

    The organization meets this standard.

  3. Accumulating Funds

    Ending Net Assets: Standard 10

    Description
    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.

    The organization meets this standard.

  4. Audit Report

    Financial Statements: Standard 11

    Description
    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.

    The organization meets this standard.

  5. Detailed Expense Breakdown

    Detailed Functional Breakdown of Expenses: Standard 12

    Description
    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.

    The organization meets this standard.

  6. Accurate Expense Reporting

    Accuracy of Expenses in Financial Statements: Standard 13

    Description
    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.

     AF does not meet this Standard because in BBB WGA's opinion, the 2013 audit report does not provide an accurate presentation of AF's fund raising and program service expenses:

    • AF provided a copy of its audited financial statements for the year ended December 31, 2013, 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, LLDF incurred joint costs of $11,431,739 for informational materials and activities that include fund raising expenses. Of this amount, $8,817,913 was allocated to program service expenses, $2,495,275 was allocated to fund raising expenses, and $118,551 was allocated to management and general.
    • Upon review of sample joint-cost allocated mail appeals submitted by AF, BBB WGA found that some of AF's joint-cost allocated appeals did not include a call to action. According to AICPA's Statement of Position 98-2, joint-cost appeals must include a call to action that asks its donors to perform a programmatic activity other than donating. 

  7. Budget Plan

    Budget: Standard 14

    Description
    Have a board-approved annual budget for its current fiscal year, outlining projected expenses for major program activities, fund raising, and administration.

    The organization meets this standard.

Fund Raising & Info

  1. Truthful Materials

    Misleading Appeals: Standard 15

    Description
    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.

    The organization meets this standard.

  2. Annual Report

    Annual Report: Standard 16

    Description
    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.

    The organization meets this standard.

  3. Website Disclosures

    Web Site Disclosures: Standard 17

    Description
    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.

    The organization meets this standard.

  4. Donor Privacy

    Privacy for Written Appeals & Internet Privacy: Standard 18

    Description
    Address privacy concerns of donors by (a) providing in written appeals, at least annually, a means (e.g., such as a check off box) for both new and continuing donors to inform the charity if they do not want their name and address shared outside the organization, (b) providing a clear, prominent and easily accessible privacy policy on any of its websites that tells visitors (i) what information, if any, is being collected about them by the charity and how this information will be used, (ii) how to contact the charity to review personal information collected and request corrections, (iii) how to inform the charity (e.g., a check off box) that the visitor does not wish his/her personal information to be shared outside the organization, and (iv) what security measures the charity has in place to protect personal information.

    The organization meets this standard.

  5. Cause Marketing Disclosures

    Cause Related Marketing: Standard 19

    Description
    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).

    The organization meets this standard.

  6. Complaints

    Complaints: Standard 20

    Description
    Respond promptly to and act on complaints brought to its attention by the BBB Wise Giving Alliance and/or local Better Business Bureaus about fund raising practices, privacy policy violations and/or other issues.

    The organization meets this standard.

Conclusion

Arthritis Foundation does not meet the following 1 Standards for Charity Accountability:

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.

 AF does not meet this Standard because in BBB WGA's opinion, the 2013 audit report does not provide an accurate presentation of AF's fund raising and program service expenses:

  • AF provided a copy of its audited financial statements for the year ended December 31, 2013, 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, LLDF incurred joint costs of $11,431,739 for informational materials and activities that include fund raising expenses. Of this amount, $8,817,913 was allocated to program service expenses, $2,495,275 was allocated to fund raising expenses, and $118,551 was allocated to management and general.
  • Upon review of sample joint-cost allocated mail appeals submitted by AF, BBB WGA found that some of AF's joint-cost allocated appeals did not include a call to action. According to AICPA's Statement of Position 98-2, joint-cost appeals must include a call to action that asks its donors to perform a programmatic activity other than donating. 

Arthritis Foundation meets the remaining 19 Standards for Charity Accountability.

Purpose

  • Year, State Incorporated

    1948, Georgia

  • Stated Purpose

    "to improve lives through leadership in the prevention, control and cure of arthritis and related diseases."

Programs

AF reports that it funds research that has restored mobility in patients. The organization also advocates for healthcare policies that improve the lives of the people with arthritis. By partnering with families, AF is able to provide information and operate programs that promote its mission. Furthermore, the organization produces a variety of resource guides and brochures on topics involving arthritis, ranging from tips for confronting common problems faced by persons with arthritis to symptoms associated with different forms of the disease. In addition to articles on matters such as fitness, travel, and financial planning, "Arthritis Today", the Foundation's bi-monthly magazine, offers reports on breaking developments in research and conveys announcements of new treatments. AF aims to reduce the number of people suffering from arthritis-related physical activity limitations by 20 percent by 2030. Some ($8,817,913 or 11%) of the organization’s programs are conducted in conjunction with fund raising appeals.

For the year ended December 31, 2013, AF's program expenses were:

Research 9,429,117
Public health education 41,482,698
Professional education and training 2,275,419
Patient and community services 24,744,744
Total Program Expenses: $77,931,978

Governance & Staff

  • Chief Executive

    Ann Palmer, President and CEO

  • Compensation*

    $163,981

  • Chair of the Board

    Daniel T. McGowan

  • Chair's Profession / Business Affiliation

    Chair

  • Board Size

    32

  • Paid Staff Size

    478

*2013 compensation includes annual salary and, if applicable, benefit plans, expense accounts, and other allowances. John H. Klippel was the President and Chief Executive Officer of AF through September of 2013 and received compensation of $498,913 in 2013. Ms. Palmer took over as President during September of 2013.

Fund Raising

Method(s) Used:

AF incurred joint costs of $11,431,739 for informational materials and activities that included fund raising materials. Of those costs $8,817,913 was allocated to program expenses and $2,495,275 was allocated to fund raising expenses.
Fund raising costs were 14% of related contributions. (Related contributions, which totaled $83,441,492, are donations received as a result of fund raising activities.)

Tax Status

This organization is tax-exempt under section 501(c)(3) of the Internal Revenue Code. It is eligible to receive contributions deductible as charitable donations for federal income tax purposes.

Financial

The following information is based on AF's audited financial statements - combined - for the year ended December 31, 2013.

Source of Funds
Bequests/planned giving 24,461,991
Special events 21,553,174
Direct response marketing 12,915,886
Other non-operating activities 12,691,875
Conferences, sales, other revenue, gains and losses 9,437,003
Corporate contributions 8,852,437
Investment returns for operations 5,186,952
Contributed goods and services 4,871,480
Personal contributions 4,149,097
Foundations 2,524,189
Government grants 1,687,657
United Way 913,513
Federated Campaigns 749,260
Other contributions 501,317
Memorials 261,491
Total Income $110,757,322
  • Programs: 78%
  • Fundraising: 12%
  • Administrative: 10%
Total Income $110,757,322
Program expenses 77,931,978
Fundraising expenses $12,031,057
Administrative expenses $10,449,949
Other expenses $0
Total expenses: $100,412,984
Income in Excess of Expenses 10,344,338
Beginning Net Assets 148,048,367
Other Changes In Net Assets -725,137
Ending Net Assets 157,667,568
Total Liabilities 28,118,054
Total Assets 185,785,622

Note 1: In the above financial section, "other changes in net assets" represents return of donor contributions, change in valuation in split interest agreements, net change in pension liabilities. Note 2: For the year ended December 31, 2013, AF reported in-kind income of $4,895,988 including supplies and materials ($2,792,414), professional services ($1,928,658), and research grant application reviews ($174,916).

An organization may change its practices at any time without notice. A copy of this report has been shared with the organization prior to publication. It is not intended to recommend or deprecate, and is furnished solely to assist you in exercising your 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 Business Bureau is a registered service mark of the Council of Better Business Bureaus, Inc.

This report is not to be used for fund raising or promotional purposes.