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March 12, 2016

Where Does $1 to 4-H go?

by Anne Paddock

Most people know 4-H is a youth development organization but some may not know the national 4-H is administered by the National Institute of Food (NIFA) under the US Department of Agriculture (USDA) – federal government offices.

The national organization is also known as the National 4-H Council which overseas and assists the 3,000 local offices and 110 land-grant universities – universities granted federal land to focus teachings on agriculture, science, and engineering – to administer the organization’s programs. 4-H operates at the state and county level in the United States and although these offices operate independently as separate non-profits, they collectively administer 4-H programs.

The National 4-H Council focuses efforts on fundraising and marketing while administering programs and events, operating the national 4-H Youth Conference Center in the metro Washington area, and supplying books and learning materials for their programs.

Because the National 4-H Council is a 501 (c) (3), this non-profit organization files an IRS Form 990 annually which reports financial information. The most important financial issues to focus on are:

  • Revenue
  • Expenses
  • Executive Compensation
  • Total Employee Compensation
  • Payments to Outside Contractors
  • Fundraising
  • Grants to other Organizations
  • Total Assets
  • Total Liabilities
  • Net Assets

The most recent Form 990 (2013) representing the year ending June 30, 2014 reports the following information:

Revenue

$36 million was collected from four sources:

  • $21.8 million (61% of revenue) came from contributions, grants, and fundraising events;
  • $10.9 million (30% of revenue) from conference center fees and tuition;
  • $2.1 million (6% of revenue) from the sale of program supplies (i.e.books); and
  • $1.2 million (3% of revenue) from gains on the sale of assets, investment income, and rental income.

Expenses

Functional expenses (exclusive of grants to organizations and depreciation) totaled $29 million (81% of revenue):

  • $16.1 million (45% of revenue) was spent on salaries, benefits, pensions, and payroll taxes for 221 employees, of which 22 received more than $100,000 in reportable compensation.
  • $4.2 million (12% of revenue) was spent on program service expenses (no detail provided) and other expenses including bank fees.
  • $3.5 million (10% of revenue) was spent on office, occupancy, IT, insurance, and management/general expenses.
  • $2.2 million (6% of revenue) was spent on travel, conferences,meetings, and conventions (includes 1st class travel and health/social club fees).
  • $1.9 million (5% of revenue) was spent on advertising, promotion,and fundraising.
  • $1.1 million (3% of revenue) was spent on fees for management, legal, accounting, and investments.

Executive Compensation

7 key executives were provided $2.3 million in compensation:

  • Donald T Floyd, Jr., Former CEO:  $609,874
  • Jennifer Sirangelo, CEO:    $373,588
  • Andrew Ferrin, SVP,Chief Strategy Officer:  $275,527
  • Jill Bramble, SVP, Chief Development Officer   $272,809
  • Paul J Koehler, SVP, General Manager  $263,118
  • Joseph P Roche, SVP, Chief Financial Officer $257,838
  • Christina Alford, Executive Vice President   $237,093

Total Employee Compensation

Of the total employee compensation of $16.1 million, $2.3 million was paid to the 7 executives listed above. The remaining $13.8 million was the total compensation for the remaining 214 employees which equates to about $65,000 per employee.

Payments to Outside Contractors

16 independent contractors were paid more than $100,000 in compensation with the largest listed below:

  • Cause Consulting Group, LLC (Cause/Retail Consulting):  $665,025
  • First Pic, Inc. (Consulting):  $545,849
  • Eurest Dining Services (Food Service Contractor):  $342,464
  • Calibre CPA Group, PLLC (Accounting):  $299,545
  • Social Capital Inc.(Fundraising Consulting):  $299,545

Fundraising

4-H has one gala event annually which raised $631,600, of which $561,500 were actual contributions, leaving $70,100 as gross income (note: the IRS requires non-profits to separate actual contributions to better match income and expenses). Because $283,875 was spent on the event, the event shows a loss of $213,775.  Had less been spent on the event, 4-H would have recognized more income. But, the other way to look at this event is to note $631,600 was raised and $283,875 was spent, providing the charity with $347,725.

An additional $837,825 in fundraising expenses is reported as “other expenses” with no further detail provided.

Grants to Other Organizations

4-H made $10.5 million (29% of revenue) in grants to other organizations including 100 educational grants that exceeded $5,000, mostly to universities and 4-H organizations with nearly $4 million (38% of grants) to 13 entities. Many of these recipients turn around and make grants which further dilutes the original donation because the functional expenses (net of depreciation and grants) must be covered by 4-H and the grant recipient before reaching another non-profit whose functional expenses (net of depreciation and grants) must also be paid.

  • $497,514:  University of Illinois Foundation
  • $447,182:  Washington State 4-H Foundation
  • $421,872:  Virginia Polytechnic Institute
  • $325,662:  Oklahoma State University
  • $285,939:  Georgia 4-H Foundation
  • $281,293:  Clemson University
  • $267,540:  Cornell University
  • $264,651:  University of Delaware
  • $262,477:  Maryland 4-H Foundation, Inc.
  • $257,976:  University of Florida
  • $234,128:  University of Nebraska
  • $223,970:  Michigan 4-H Foundation
  • $222,348:  University of Tennessee

Total Assets

The 4-H Council has $35 million in assets, most of which are allocated among five assets:

  • $13.4 million: Cash and Publicly Traded Securities (38% of assets)
  • $ 9.0 million: Land, Buildings, and Equipment  (26% of assets)
  • $ 7.5 million: Pledges Receivable (22% of assets)
  • $ 3.6 million: Accounts Receivable  (10% of assets)
  • $ 1.5 million:  Inventory  (4% of assets)

Total Liabilities

Liabilities total $13.9 million, most of which are accrued benefits and unfunded pension benefits ($5.6 million) and accounts payable and accrued expenses ($5.6 million). The remaining liabilities – $2.7 million – are deferred revenue, mortgages, and agency funds.

Net Assets

The 4-H Council has $21.1 million in net assets (which is $4.2 million less than the prior year-end) because they spent more than they received last year.

How is $1 in Revenue Spent?

Based on the above information, $1 in revenue was spent as follows:

$1.00:  Revenue

-$0.45:  Salaries, Benefits, Pensions, and Payroll taxes

-$0.12:  Program Service Expenses

-$0.10:  Office, Occupancy, IT, Insurance, and Management/General Expenses

-$0.06:  Travel, Conferences, Meetings, and Conventions (includes 1st class travel and health/social club fees)

-$0.05:  Advertising, Promotion, and Fundraising

-$0.03:  Management, Legal, Accounting, and Investment Fees

-$0.81:  Subtotal Functional Expenses

$0.19:  Amount Remaining

-$0.29: Grants to Other Organizations

-$0.10

The organization basically spent 10 cents more of each dollar than they raised.

Bottom Line: The 4-H Council spent more than they raised last year causing assets to decline to about $21 million. With 221 employees, 4-H’s largest expense is for staff with 45 cents of every dollar spent in this category (including $2.3 million to 7 key employees). The organization also spent $4.2 million (12 cents of every dollar) on “program expenses” which are not office, IT, insurance, travel, conferences, accounting, legal, investment, advertising, promotion or fundraising costs. No detail was provided on what these “program expenses” were. With regards to travel, the organization has paid for first class travel and fees for health/social clubs which raises the question:  Is this really necessary?

The financial efficiency of donor dollars should also be questioned because so many of the grants made are to foundations and non-profits that turn around and make grants to other non-profits. Paying three sets of functional expenses (net of depreciation and grants) is simply not an efficient use of charitable dollars.

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