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1/ We’re posting @propublica ‘s audited financials for calendar 2018 today, as we do every year, so this seems a good moment for a mini-rant on the limits of GAAP accounting for non-profit news ow.ly/VwAz50ug1DC
@propublica 2/ As you’ll see, revenue, per the financials, fell 39% YOY, while expenses rose 31%. Yikes, right? But revenues actually received during the year rose to a new high, at roughly $30.2 million. So what’s up?
@propublica 3/ GAAP accounting is good for all sorts of things, but not helpful here. That’s because it places all revenue from multi-year grants in the year the grants are made.
@propublica 4/ So, a 5-year grant for $1 million/year is recorded under GAAP as $5MM in revenue in year 1 (probably against $1 million in expense) and zero revenue in years 2-5, when, in fact, $1MM is received in each of years 1-5, and expenses are likely incurred similarly.
5/ The result is a sliminess in the revenue picture over the years that often is not reflected in real life. We publish audited financials because people want to see them.
6/ But for a much more informative picture of our revenues, look at our annual reports, like this for 2018: assets.propublica.org/propublica-201…
7/ And @ProPublica is in no way unique on this. Ask places what their revenues received were in a particular year if you’re curious—don’t just take the numbers off audited financials, especially without noting this limitation.
“Spikiness”
