News and analysis
August 03, 2012

Charity Navigator Says Aid Groups Can Revise Financial Information

Charity Navigator, one of the nation’s most-prominent watchdog groups, says it doesn’t want to punish nonprofit aid groups whose revenues are shown to be lower since they adopted a more conservative approach to valuing their product donations. The watchdog, which rates charities in part on their financial health, will give organizations the chance to revise past financial statements so they won’t be hurt by plummeting revenues.

Nonprofits can provide Charity Navigator with adjusted Form 990 tax returns from past years that report the groups’ product donations according to the more-conservative methodology. For groups to qualify, audit committees must sign off on the revised financial information and the nonprofits must post it on their Web sites, Charity Navigator says.

Exaggerating Values

Some accountants and nonprofits have complained that Charity Navigator’s offer is impractical and absolves organizations that for years have been exaggerating the value of products they provide in delivering their services.

Some nonprofits say they have adopted a more-conservative methodology for valuing products in response to revised accounting rules; others say the accounting rules never permitted charities to claim the worth of their products at such high values as they did.

Sandra Miniutti, Charity Navigator’s vice president of marketing, says her group consulted with nonprofits that considered the newly adopted approach the most realistic of several that were explored. She says Charity Navigator is not taking a position on whether charities have misstated their revenues in the past.

“We will see in the coming months,” she says, whether any nonprofits take Charity Navigator up on its offer.

“Some have suggested they will not do so because of fear it will prompt IRS review,” she wrote in an e-mail.

If such fears are pervasive, no group may decide a better rating from Charity Navigator is worth the risk, says Ms. Miniutti.