Nonprofit veteran Charles Kolb said he resigned from the board of watchdog organization the Center for Political Accountability in late December because he failed to follow up on his appeals to perform an external audit.
Meanwhile, the president of the Washington, DC-based center said he started conducting such an audit this year after Kolb left, but not because he pushed it.
Kolb told MarketWatch in interviews this week that he’s glad the audit is happening and that he’s “not looking for credit,” even though he issued new criticisms: “The center continues to give lessons for corporate America on transparency and accountability and does not follow the same principles itself.
Kolb, the center’s former treasurer, said he became aware of the lack of external audit last summer while researching Charity Navigator, a nonprofit organization that assesses other nonprofit organizations on criteria such as adhering to best practices in transparency and accountability. He said he thinks an external audit should bolster the center’s low Charity Navigator score and potentially help attract donors, as some of them might look at those scores.
Bruce Freed, president of the Center for Political Accountability, told MarketWatch that the organization is currently in the process of conducting an external audit only because its accountants recommended the audit since its annual budget recently exceeded $1 million. “We’ve always checked with our accountants about this, and that’s the year the center went over $1 million,” Freed told MarketWatch in an interview.
Freed said the center “has always been transparent,” citing its regular filing of Form 990s required for nonprofits and its disclosures of its donors and activities. Additionally, he said the Charity Navigator rating “has always been irrelevant to us.”
“These are all non-issues,” Freed said.
An external expert on nonprofits, Gene Takagi, said that many organizations that are not required to have external audits choose not to do so, and that may be an appropriate decision, even if an audit has many advantages.
“You can see where if you’re going to spend $10,000 to $15,000 on an audit, for a small organization, that means you’re probably cutting back in other areas,” said Takagi, attorney and director of Neo Law Group, which is based in San Francisco and works only with nonprofit and tax-exempt organizations.
Charity Navigator is “certainly a useful rating agency, but should only be seen as one of many considerations for a donor,” he also said. Charity Navigator scores are probably more valid for larger organizations, according to Takagi.
The Center for Political Accountability, which lobbies for better disclosure of corporate political spending, told MarketWatch in June that it was dramatically expanding its efforts to track the progress of public companies, with greater scrutiny prompted by top fund managers on Wall Street.
With its upcoming fall release of CPA-Zicklin Index scores, the center plans to double the number of large-cap companies it analyzes, looking at components of the Russell 1000 RUI Index,
rather than just the S&P 500 SPX,