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February 9, 2016

Where does $1 to the American Heart Association Go?

by Anne Paddock

Heart disease is the number one cause of death in the United States with more than 600,000 people succumbing annually to this preventable and treatable disease in the US. Although advances in medicine have contributed to both an overall decrease in the annual number of deaths (860,000 in 1950) and the number of deaths per 100,000 population (589 sixty-five years ago compared to 170 in 2013) since 1950, the country’s biggest killer is hard to tame. Medical and pharmaceutical research along with information garnered from studies on diet and exercise have greatly contributed to this improvement but we still have a long way to go.

The American Heart Association (AHA) is a non-profit 501 (c) (3) that seeks to educate the public about heart disease and stroke (related to heart disease), CPR, basic life support, advanced cardiac life support, and prevention. Causes, effects, care, research, and prevention are integral aspects of the AHA. Celebrating its 100th year in 2015, the AHA is one of the most recognized and popular charities in the US.

A look at the AHA based on the 2014 (for the year ending June 30, 2015) IRS From 990 reveals the following financial information about the organization:

$780 million in revenue was reported, most of which ($646 million or 83%) came from fundraising, campaigns, contributions. The remaining revenue came from:

  • $52 million (7%) from the sale of inventory and other revenue (the figure was actually $71 million but was offset by losses on fundraisers and a $2 million loss on uncollectibles).
  • $48 million (6%) from investment income, royalties, gains on the sale of assets, and rental income
  • $29 million (3%) from conferences, seminars, and membership dues
  • $5 million (1%) from government grants

Expenses totaled $734 million (exclusive of depreciation, a non-cash expense) or 94% of revenue, categorized as follows:

  • $307 million (39% of revenue) in compensation, pensions, benefits, and payroll taxes. 405 people were given compensation packages in excess of $100,000. $10.5 million was compensation and benefit packages for 19 executives:
  1. Nancy Brown, CEO:                                                            $1,443,427
  2. Rose Marie Robertson, Chief Science Officer:                    $  667,877
  3. Michael Weamer, EVP                                                         $  657,964
  4. Kathleen Rogers, EVP:                                                        $  653,319
  5. Sunder Joshi, CFO/CAO :                                                    $  599,831
  6. Meigan Girgus, Chief Mission Officer:                                  $  588,855
  7. Midge Epstein, EVP:                                                             $  586,359
  8. Leslie Upton, Chief Development Officer:                             $  557,745
  9. Kevin Harker, EVP:                                                               $  551,970
  10. John J. Meiners, EVP – ECC Programs:                              $  492,141
  11. Nicole Sapio, EVP:                                                                $  470,544
  12. David Markiewicz, EVP:                                                        $  470,196
  13. Gerald Johnson, Chief Diversity Officer:                               $  452,440
  14. Jeremy Beauchamp, EVP:                                                    $  425,251
  15. Mark Schoeberl, EVP – Advocacy and Health Quality:        $  407,092
  16. Tanya Edwards, SVP – Field Campaigns:                            $  403,203
  17. Eduardo Sanchez, Chief Medical Officer-Prevention:          $  387,624
  18. Roger Santone, EVP – Technology:                                     $  374,956
  19. Lynne Darrouzet, EVP – Corp Sec/Gen Counsel:                $  331,515
  • $153 million (19% of revenue) was spent on office, information technology, and occupancy.
  • $63 million (8% of revenue) was spent on other expenses (no further detail was provided).
  • $46 million (6% of revenue) was spent on travel,conferences, conventions, and meetings.
  • $11 million (2% of revenue) was spent on legal, accounting, lobbying, investment fees, and insurance.
  • $5 million (1% of revenue) was spent on professional fundraising and advertising.
  • $149 million (19%) was spent on grants to organizations and individuals (425  501 (c) (3)’s and 61 other organizations are listed as receiving more than $5,000), most of which were grants to domestic and government organizations. The largest recipients were for research:
  1. University of Alabama at Birmingham:  $6,513,946
  2. University of Iowa at Iowa City:  $5,377,167
  3. Mass General Hospital:  $4,371,646
  4. University of Colorado:  $4,073,776
  5. Medical College of Wisconsin:  $4,035,984
  6. Emory University:  $4,015,860
  7. Northwestern University:  $3,435,918
  8. Medical University of South Carolina:  $3,339,735
  9. Children’s Hospital – Cincinnati:  $2,769,512
  10. University of Pennsylvania:  $2,727,576
  11. John Hopkins University School of Medicine:  $2,602,170
  12. Brigham & Women’s Hospital:  $2,595,532

Although research grants comprised the largest donations, AHA made hundreds of smaller grants for defibrillators, monitors, and emergency equipment upgrades to medical centers, fire districts, and health centers.

In summary, of the $780 million in revenue, $734 million was spent, leaving $46 million (6%) which is one of the reasons, the AHA’s total assets increased from $1.248 billion to $1.291 billion dollars (most of which are in public traded securities) at year-end. Liabilities – primarily grants payable – increased from $385 million to $403 million which resulted in the net assets/fund balance increasing from $864 million to $888 million. The bottom line:  AHA has close to a billion dollars in assets, most of which are in publicly traded securities. 

To put the above in perspective, $1 in revenue was used as follows:

$1.00:  Revenue

-$0.39: Employee Compensation, Benefits, Pensions, and Payroll Taxes

-$0.19: Office, Information Technology, and Occupancy

-$0.08: Other Expenses (no detail provided)

-$0.06:  Travel, Conferences, Conventions, Meetings

-$0.02:  Legal, Accounting, Lobbying, Investment Fees, and Insurance

-$0.01:  Professional Fundraising, Advertising

-$0.75: Subtotal Functional Expenses

 $0.25: Amount Remaining

-$0.19:  Grants to Organizations and Individuals

$0.06:  Amount Unspent

Other interesting points include:

The AHA has 3,966 employees. With $307 million spent on compensation, benefits, pensions, and payroll taxes, the average per employee is $77,407 annually.

136 independent contractors received more than $100,000 in compensation. The five most highly compensated organizations were:

  • Infocision Management Corp (telephone marketing): This company collected $5.9 million dollars but was paid about $3 million dollars by AHA, allowing AHA to net about $3 million dollars. Basically, any phone contribution resulted in a 50 percent donation to AHA, with the remaining funds paid to the telemarketing company. Want your dollars to go further? Don’t make a donation to the AHA via a telemarketing call (or direct mail). Direct mail donor marketing efforts were less successful with Strategic Fundraising Inc., who was paid $235,151 for collecting $255,958, netting $20,807 for AHA (in other words: 8 cents of every dollar collected through this organization went to AHA).
  • Daniel Edelman, Inc. (public relations): AHA paid $2.4 million to this firm.
  • Brigham & Womens Physicians Organization (editorial services):  AHA paid $2.1 million to this organization.
  • Oracle America, Inc (database and IT services):  AHA paid $1.7 million to this corporation.
  • Advertising Council:  AHA paid $1.7 million to this council. The council contributed $70 million in advertising materials (no further detail provided) to AHA.

Fundraising events (7,145 events including the Dallas HeartBall and the Dallas HeartWalk produced gross income of $22.5 million. After deducting $33.9 million spent on non-cash prizes, rent/facility costs, food and beverages, entertainment, and other direct expenses, the fundraising events ended up costing AHA $11.5 million – however, this is net of contributions gained from the events, which totaled $302 million (note: the IRS makes organizations match the income and expenses of the events but without including the contributions).

In summary, the AHA is a very well endowed non-profit organization with nearly a billion dollars in assets (mostly publicly traded stocks). The organization raised $780  million dollars last year and spent $734 million, of which $149 million (19% of revenue) was given in grants to organizations and individuals – primarily for research. $585  million was spent on programming, management, and fundraising with the largest portion ($307 million) on staff compensation (with $10.5 million for 19 key executives) for the 3,966 employees. The remaining $279 million was spent on office, IT, occupancy, other expenses, travel, conferences, fundraising, etc.

It is important to point out that a large portion of staff are allocated to programming costs which involves public and professional education, although further detail is not provided on the Form 990. And, yet there are still millions and millions of dollars spent on office related and other expenses (also not detailed on the 990).  Telemarketing and direct mail are not high revenue sources for the AHA. In fact, telemarketing efforts result in 50 cents on the dollar to AHA and direct marketing 8 cents on the dollar.

If you want your donation dollars to go as far as possible, consider donating directly to one of the 425  501 (c) (3)’s listed on the 990 that received grants from the AHA or look to your local community for organizations and centers that need emergency cardiac care equipment.

Click here to review the IRS From 990 (2014).

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