The DMA Nonprofit Federation sent a letter to Charity Navigator stating its concerns with Charity Navigator’s standards for measuring charities that no longer take longstanding accounting standards into consideration. The joint letter includes major organizations who oppose Charity Navigator’s online statement that nonprofit organizations can provide an accurate measure of an organization’s financial performance by ignoring accepted accounting principles.
"Instead, nonprofit organizations should continue to adhere to Generally Accepted Accounting Principles (GAAP), including the use of joint cost allocation. In fact, the AICPA Statement of Position (SOP) 98-2 accounting guidance explicitly documents joint cost allocation methodology as an accurate and fair presentation of a nonprofit’s use of funds for activities that include a fundraising appeal, with costs divided between fundraising, public education, and management & general.
Furthermore, we do not endorse Charity Navigator’s reliance on simplistic financial ratios for evaluating a nonprofit’s activities and mission accomplishments," said the DMANF in its letter.
The DMANF provided a position statement with its letter.
Charity Navigator, through its CEO Ken Berger, responded to our letter. In Berger's reply he does not indicate a desire to make a change or to meet with us, but points to their current standards that he believes are justifiable. We are studying the response and plan to communicate further with Charity Navigator.