CharityWatch Analysts perform an in-depth analysis of charities' audited financial statements and IRS tax filings, and often review other documents such as state filings, annual reports, and fundraising contracts during their evaluations. Below are select notes that CharityWatch believes may be of interest to donors.
Any time an Analysts' Note refers to a charity's Audited Financial Statements or IRS tax form, CharityWatch encourages interested donors to obtain a copy of the referenced documents so that they may view the information in context. Please contact the charity directly to request a copy of any referenced document. Charity tax forms and audits may also be obtained from a number of online databases. For a list of sources, please visit our LINKS page.
|CharityWatch's rating of Children's Defense Fund (CDF) is for the 501(c)(3) public charity entity (tax ID# 52-0895622).|
The rating does not include the related Children's Defense Fund Action Council, which is a 501(c)(4) tax-exempt, social welfare organization, even though the Action Council is consolidated in the CDF audited financial statements for the year ended December 31, 2016. CharityWatch does not provide a separate rating for the Children's Defense Fund Action Council at this time due to its relative small size.
CharityWatch issues separate ratings for 501(c)(3) & 501(c)(4) organizations, even when their financial activities are included together in a consolidated audit, due to their differing tax treatments under the IRS tax code. For more information on this topic, please see our sections on Types of Non-Profits, Tax Status, and Treatment of Related Organizations, which can be found in "Criteria & Methodology" under the "About Us" navigation header.
|According to the Children's Defense Fund (CDF) consolidated audit of December 31, 2016 (Note 18, Going concern evaluation):|
"Management has evaluated conditions and events, in the aggregate, regarding CDF's ability to meet their financial obligations as they become due within one year from the date of these [audited] consolidated financial statements. Management's evaluation considered only relevant conditions and events that are known and reasonably knowable at the date the financial statements were available to be issued.
"CDF showed significant improvements in operations this year, going from a decrease of net assets of $4,202,880 in 2015 to a decrease in net assets of $8,178 in 2016. This change was driven by a $2,053,226 increase in revenues and a $2,141,476 decrease in expenses. Despite this year's improved results, CDF does not have sufficient liquid assets to cover the needed liquid amounts for line of credit collateral, current liabilities, current maturities of debt, permanently restricted net assets, and temporarily restricted net assets. The line of credit is secured by investments held at the same financial institution that holds the line of credit. The line of credit has a low probability of being called based on the investments held as collateral.
"In addition, CDF continues to have significant investment in real property. The building has been appraised at $15,200,000 and the fair market value is expected to be significantly higher than this appraisal based on updated square footage calculations and sales offers received. ...CDF's management is in active negotiation with a potential buyer for CDF's national headquarters building. Management believes the plan to sell the building within the next year is probable and that the cash in excess of expenditures of locating a new office will be sufficient to cover its deficiencies in liquidity compared with its financial obligations, contractual restrictions, and donor restrictions.
"The management team of CDF is confident that current plans to strengthen CDF's internal systems in 2017 and beyond and to continue to grow and diversify the organization's revenue base will result in continued improvements in our external results for programmatic impact as well as for financial performance."
|According to the Children's Defense Fund consolidated audit of December 31, 2016 (Note 6, Pledges receivable and concentration):|
"... Total foundations and corporation revenue...includes one grantor constituting 13% and 21% of the amounts for the years ended December 31, 2016 and 2015, respectively."
|According to the Children's Defense Fund (CDF) consolidated audit of December 31, 2016 (Note 19, Contingency and subsequent event):|
"In January 2016, then amended in March 2016, a complaint was filed against CDF and another organization which asserted claims against CDF for disgorgement and constructive trust. The plaintiff sought return of charitable contributions made to CDF from the estate of the plaintiff's relative. CDF filed a motion to dismiss the complaint, but the motion to dismiss was denied in October 2016. CDF appealed the decision but was denied at the Georgia Court of Appeals and the Georgia Supreme Court. CDF then entered into negotiations with the plaintiff which resulted in a settlement agreement with the plaintiff for $150,000 which the Georgia Superior Court accepted on May 22, 2017.
"At December 31, 2016, CDF accrued expenses of $150,000 related to this matter..."