Elsewhere online
June 21, 2016

‘Fast Accounting’ Can Skew Picture of a Charity’s Finances

Barron’s Penta spotlights types of “accounting chicanery” that nonprofit watchdog groups say can mask excessive fundraising or administrative expenses and that donors should look out for in vetting potential beneficiaries.

The wealth and personal-finance magazine says nonprofit accounting is marked by lax oversight and minimal disclosure rules and cites examples of prominent charities that count thrift-store operations or fundraising costs as program expenses, among other “fast accounting moves.”

The article suggests donors consult independent auditors’ reports on a charity’s finances — which some states require nonprofits to submit — as well as an organization’s Form 990 filings and that they dig deeper into reported “joint costs” and “gifts in kind” that can inflate a group’s estimates of revenue and mission spending. Such accounting practices are legal and widely used in the nonprofit world, but “donors need to be aware of such tactics and incorporate them into their decision making,” the magazine writes.