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March 20, 2016

Where does a donation to Kars4Kids Go?

by Anne Paddock

Kars4Kids, Inc. (Kars4Kids) is a 501 (c) (3) national organization dedicated to the educational, material, emotional, and spiritual needs of Jewish children and their families. Specifically, Kars4Kids appears primarily to be the fundraising entity for another 501 (c) (3) organization called Oorah, Inc., based in Lakewood, New Jersey (with the same business address as Kars4Kids) although they also fund other programs – school placement, tuition assistance, summer camp, holiday food and gift packages, parent education and counseling. Oorah, Inc. is a 501 (c) (3) organization that provides Jewish children and their families with youth and family programming, education and studies, and community outreach.

The most recent IRS Form 990 (2014) reveals Kars4Kids received $34.8 million in non-cash contributions which are reported to be primarily cars and other vehicles ($33.1 million or 95% of revenue) with the remaining revenue ($1.7 million or 5% of revenue) from real estate, clothing, and household goods. The organization uses third-party towing companies and auction houses to tow, evaluate, sell, or scrap donated vehicles. The value of the vehicles is based on the sales price (although the sales price appears to be net of the towing and other costs).

Kars4Kids employs 108 people (with none receiving more than $100,000 in compensation from this organization) and spent nearly half the money raised on advertising and promotion last year, as illustrated below in the summary of reported functional expenses (net of grants and depreciation) of $17 million (49% of revenue):

  • $13.9 million: Advertising and Promotion  (40% of total revenue)
  • $ 2.5 million: Salaries, Compensation, and Payroll Taxes  (7% of total revenue) which equates to an average of $23,148 per employee
  • $ 0.6 million:  Legal, Accounting, Office, IT, Licenses, Insurance, Bank Charges, etc.  (2% of total revenue)

After accounting for the above expenses, Kars4Kids had $17.8 million, of which $13.8 million (or 40% of total revenue) was given in grants and contributions to domestic organizations, most of which – $13 million (of which $12.7 million was cash) or 37% of revenue – was granted to Oorah, Inc. The remaining $0.8 million appears to have been grants of less than $5,000 (since only grants greater than $5,000 need to be listed).

The remaining revenue – $4 million or 11% of the total revenue reported – was not spent, which resulted in Kars4Kids increasing their net assets from less than a half million dollars to $4.4 million at year-end.

Based on the above information reported by Kars4Kids, each $1 in revenue was used as follows:

$1.00:  Revenue

-$0.40: Advertising and Promotion

-$0.07:  Salaries, Compensation, and Payroll Taxes

-$0.02:  Legal, Accounting, Office, IT, Licenses, Bank Charges, etc.

-$0.49:  Subtotal Functional Expenses

 $0.51:  Revenue Remaining

-$0.40:  Grants to domestic organizations (primarily Oorah, Inc.)

$0.11:   Amount Not Spent and added to Fund Balance

In summary, Kars4Kids raises money by focusing advertising and promotion on vehicle donation. They then take these vehicles and sell them raising funds for grants to other organizations – primarily Oorah, Inc. The bottom line is that for every dollar in revenue, 40 cents was used for advertising and promotion which raises the question: is there a more financially efficient way to raise donations? Only 7 cents was spent on staff while 2 cents was used for operating expenses. 37 cents of every dollar was granted to Oorah, Inc. while 3 cents was for smaller grants. 11 cents was left unspent which strengthened the organization’s balance sheet.

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