Wise Giving Wednesday - Building Trust Part 13
Annual Financial Statements
When people are asked about a charity’s “transparency,” the most likely response is whether the charity makes its financial statements available. Although BBB WGA believes that true transparency, as reflected by the broad scope of our 20 BBB Charity Standards, means much more than just access to financial statements, it is nevertheless a fundamental part of charity accountability. BBB Charity Standard 11 calls for soliciting organizations to make available to all, on request, complete annual financial statements prepared in accordance with generally accepted accounting principles (GAAP). When the charity’s income exceeds $500,000, these statements should be prepared by an outside auditor (i.e., Certified Public Accountant). If the charity’s income is less than this, the standard identifies other, lower cost, alternative financial presentations.
I want to point out some very key aspects of this standard. One is that despite the popularity of the IRS Form 990 due to its availability on the Internet, BBB WGA has always used the charity’s audited financial statement as the preferred source for the financial part of its accountability assessments. This preference, in part, recognizes that audit reports have a greater deal of reliability than the Form 990, are more comparable since they are based on recognized accounting rules (GAAP), and incorporate some income items (i.e., donated services and unrealized gains and losses on investments) that are not allowed to be included as part of revenue in IRS Form 990. In other words, audited financial statements provide a more complete financial picture of the organization.
As noted above, we recognize the vital importance of generally accepted accounting principles (GAAP) in helping to ensure the objectivity and consistency of financial information being used in our evaluations and resulting reports. If BBB WGA finds a significant inconsistency with GAAP based on the auditor’s opinion or BBB WGA’s analysis, the subject charity will not meet this standard. And, the specific reason will be explained in our report.
On a separate note, as part of our Building Trust Video Series we are pleased to provide a video that features Joseph H. Haggerty, Executive Vice President and Chief Operating Officer of United Way Worldwide (a BBB Accredited Charity). Joe provides a brief overview of United Way activities and explains what they do to help strengthen donor trust.
We are always working with charities to publish or update reports for donors. Visit Give.org or local BBBs to check out any charity before giving. Our recently evaluated charities include:
Finally, remember to let us know by going to https://give.org/ask-us-about-a-charity1/ if you are interested in seeing a report on a charity not on the list and we will do our best to produce one.
H. Art Taylor, President & CEO
BBB Wise Giving Alliance