Accountability & Finance
The Accountability & Finance beacon includes two evaluation areas: Accountability and Financial Health. Scoring details and the evidence behind each metric are fully detailed in the Rating Methodology Guide.
Accountability
Audited Financial Statements
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.
Audit Oversight Committee
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.
Material Diversion of Assets
Records Retention and Destruction Policy
Website Listed on 990
Charities should have an online presence so that the public can easily find information about their programs, activities, and leadership.
Website Disclosures
Applies to donor-funded charities with $50 million or more in annual revenue.
In addition to providing public information to the IRS, charities are encouraged to make additional key information available to donors via their websites. These additional items include:
- IRS Form 990
- Audited Financial Statements
- Key Staff
- Board of Directors
- Donor Privacy Policy specifying that the organization does not sell or share donor information without the donor’s permission
Loan(s) To and From Related Parties
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.
Financial Health
Programs Expense Ratio
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.
Liabilities to Assets Ratio
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.
Working Capital
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.
Fundraising Efficiency
Applies to donor-funded charities with more than $2 million in annual revenue.
Financially effective charities should be efficient fundraisers, spending less to raise more. We calculate an organization’s fundraising efficiency by determining how much it spends to generate $1 in charitable contributions. We calculate the charity’s average fundraising expenses and total contributions over its three most recent fiscal years and then assign a numeric score based on an established scale.