Accountability & Finance

Audited financial statements provide important information about a charity’s financial accountability and accuracy. An independent accountant should prepare them. In cases where an audit is not feasible, organizations should have their independent accountant complete a financial review or compilation.

We expect charities with over $2 million in total revenue to complete an audit. For those with revenue between $1 and $2 million, we expect them to have an audit or a review or compilation. For those with less than $1 million in revenue, this metric is not applicable.

We expect charities with over $1 million in total revenue to complete an audit.

For larger organizations, we also expect them to have an audit oversight committee that is responsible for choosing the independent accountant and responsible for overseeing the needed financial documentation.

A diversion of assets — any unauthorized conversion or use of the organization's assets other than for the organization's authorized purposes, including but not limited to embezzlement or theft — can seriously call into question a charity's financial integrity. We review the charity's most recent Forms 990 to see if the charity has reported any diversion of assets. 

This policy establishes guidelines for the handling, backing up, archiving, and destruction of documents. These guidelines foster good record-keeping procedures that promote data integrity. Here, we report that the charity indicates the existence of this policy on its Form 990.

Charities should have an online presence so that the public can easily find information about their programs, activities, and leadership.

Applies to donor-funded charities with $2 million or more in annual revenue.

Avoiding loans to or from key officers, staff, or board members ensures that charitable funds remain dedicated to the organization's mission. This practice prevents real or perceived conflicts of interest and signals that the organization maintains strong financial security. Here, we report if the charity indicates any outstanding loans to or from "disqualified persons" as disclosed on their tax filings.

Charities advance their missions through the delivery of programs and services. While administrative expenses are an essential part of operations, the proportion of resources devoted to programs provides insight into how funds are allocated.

For this metric, we calculate the charity’s average program expense percentage over its three most recent fiscal years and assign a numeric score based on an established scale.

Managing total liabilities in relation to total assets ensures an organization's long-term solvency and financial sustainability. This balance ensures that donations are directed toward the charitable mission rather than primarily servicing debt or other obligations. Here, we report the ratio of a charity's liabilities to its assets to help donors assess its overall financial capacity compared to its peers.
 
We calculate a charity's ratio of liabilities to assets by comparing the organization's total liabilities to total assets in the most recent tax year analyzed. Then we assign a numeric score based on an established scale.

Applies to donor-funded charities with more than $2 million in annual revenue.
 
Maintaining sufficient liquid reserves ensures that charities can survive economic downturns and sustain vital programs. This financial stability allows organizations to expand their impact rather than facing service cuts during revenue gaps. Here, we report how long a charity can sustain its operations without new revenue by calculating the ratio between working capital and average total expenses.