Arthritis Foundation Statement on Joint Cost Allocation
February 08, 2013
The Arthritis Foundation meets the highest standards of good governance and business practices and follows rules established by the Financial Accounting Standards Board (FASB) for allocating joint costs, which are subject to scrutiny by our third party auditors.
Joint cost allocation is a generally accepted accounting principle in the U.S. and is used for preparing functional allocation of expenses that are reported in audited financial statements and submitted to the IRS on nonprofit income tax returns (Form 990).
Charity Navigator, one of several independent evaluators, has unilaterally determined to ignore these principles set forth by FASB and has recalculated functional expenses without regard to joint cost allocation. Because Charity Navigator’s standards are not subject to audit and do not have the same safeguards or public input allowed by the FASB standard setting process, the Arthritis Foundation will continue to focus on achieving financial transparency and meeting the standards of FASB.
In addition, we meet the standards of the Better Business Bureau and the National Health Council for charity accountability. We strive to wisely invest every dollar donated by those with a common stake in finding a cure for arthritis, a disease with an annual $128 billion impact on our national economy.
The issue of joint cost allocation goes to the heart of the Arthritis Foundation’s mission. Our role as a patient advocacy organization requires us to educate people about arthritis and its impact on the public and individual arthritis patients. We perform this education and outreach in many ways. When we combine public education with solicitations for donations, we divide up the costs between fundraising and public health education in a way specified by FASB’s standards.
Our audited financial statements are available online at (http://www.arthritis.org/about-us/financials).