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The team from Charity Navigator, the nation's largest independent charity evaluator and leading donor advocate, shares their thoughts on emerging nonprofit-sector issues and offers tips to better inform your intelligent giving decisions.

Monday, October 31, 2016

Metric Mondays #6: Audited Financial Statements

Welcome back! Last Metric Monday, we discussed Loans to or From Related Parties. This week, we will be diving into one of our Accountability and Transparency metrics: Audited financials prepared by an independent accountant with an audit oversight committee.

This particular metric is derived from an organization's most recent Form 990. Specifically, Part XII, page 12, line 2b. Audited financial statements offer important information about the financial accountability of an organization. They are usually prepared by an independent accountant with oversight from an audit committee. This process helps bridge the gap between the management of the organization and the independent accountant, who is simply reviewing the finances and then issuing an opinion based off its findings.

We believe that this metric is a critical piece of transparency for a donor to see. In short, it will show a potential donor that this organization is having its finances reviewed with an unbiased opinion about the charity's current and future standing. Failure to comply with this metric will result in a 15 point deduction on the Accountability and Transparency scoring. Very rarely, when an organization loses credit for this metric, they explain it is a mistake on their 990 and in return, they have their audit posted on their website. The charity will receive partial credit during this scenario.  

To learn more about our Accountability & Transparency metrics, check out our Accountability & Transparency Methodology.

1 comment:

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