Tuesday, October 23, 2012

Watchdog Barks Louder On Cost Allocation Issues - TheNonProfitTimes

Watchdog Barks Louder On Cost Allocation Issues - TheNonProfitTimes: Charity Navigator, in Glen Rock, N.J., decided to tweak its rating system and consider joint allocation costs entirely as fundraising expenses. Joint allocation costs, under certain guidelines and criteria in accounting standards, allow a portion of certain materials to be split between program expenses and fundraising expenses.

In cases where joint costs are extreme, Charity Navigator President & CEO Ken Berger said it would affect the rating of a charity, but probably fewer than a dozen organizations. “It’s the extreme outlier cases, where you have 30, 50 -- sometimes 80 percent -- in joint allocation. Unless the charity can show us something that really justifies this, many times it’s smoke and mirrors. It really is many times fundraising expense under the guise of education. It doesn’t really pass the smell test,” said Berger.

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