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March 2, 2017


Where does $100 to Operation Smile Go?

by Anne Paddock

Operation Smile is a non-profit 501 (c) (3) that provides corrective surgery to children and young adults in developing countries who are born with cleft lip, cleft palate or other facial deformities. Established in 1982, Operation Smile was founded by Dr. William Magee,Jr.  (a dentist and plastic and craniofacial surgeon) who serves as the organization’s Chief Executive Officer and his wife Kathleen McGee, who serves as the organization’s President. Their daughter, Kristie Porcaro also serves as the SVP of US and Global Philanthropy of Operation Smile.

The 2015 IRS Form 990 (2015) for the year ending June 30, 2016 reveals the organization collected $61.5 million, most of which were contributions, including $4.4 million of non-cash contributions. Operation Smile spent $42.5 million or 69% of revenue on program service expenses, $7 million (11% of revenue) on management expenses, and $16 million (26% of revenue) on fundraising. In total the organization spent $65.5 million (excluding depreciation) or about $4 million more than they collected – and were able to because they had $32.3 million in their net fund balance at the beginning of the year and which was reduced to $27.1 million at year-end.

A donation of $100 was spent as follows:

$100:  Donation

-$ 26:   Fundraising Costs

-$ 11:    Management Costs

 $ 37:    Subtotal Fundraising and Management Costs

 $ 63:   Amount Remaining

-$ 69:   Program Costs

– $  6:   From Net Fund Balance to Pay Costs over and above revenue collected

 $   0

In order to fully understand how a donation is spent, the expenses need to be analyzed outside of the broad classifications of program, management, and fundraising because within the three categories are expenses that may not be direct program expenses. For instance, $9.9 million was spent on “public awareness” and $2.4 million in unexplained “other” expenses in the program category  So, another way to look at the way $100 was spent is to look at the specific costs:

$ 100:  Contribution

-$  37:   Public Awareness, Professional Fundraising, and Advertising

-$  20:   Salaries, Pension, and Other Benefits

-$  14:   Grants to Foreign and Domestic Organizations

-$  10:   Mission Supplies

-$  10:   Travel

-$   6:   Office Expenses

-$   6:   Other Expenses (unexplained)

-$   2:   Legal, Accounting

-$   1:   Interest, Insurance, Bad Debt Expense

-$106:  Total Expenses

As illustrated above, the organization had to rely on funds in their fund balance to meet the excess money spent on expenses. For every dollar collected, Operation Smile had to use 6 cents from their fund balance to meet expenses.

The IRS Form 990 (2015) also reveals the following:

  • The seven mostly highly compensated staff were provided nearly $1.8 million and include the founder and CEO, Dr. William Magee ($549,134), his daughter, the VP of US and Global Philanthropy, Kristie Porcaro ($184,527), the COO, Ernest Zinn ($284,497),the Chief Program Strategist, Richard Vander Burg ($236,189), the VP of Finance, Kimberly Getz ($157,265), the Senior VP of Medical Affairs, Ruben Ayala ($183,388), and the SVP of Ent App and Tech, Christopher Bryant ($152,107).
  • Operation Smile allows the CEO (Dr. William Magee), President (Kathleen Magee), COO, and Chief Program Strategist to upgrade to Business or First Class Travel. For domestic flights more than 5 hours, upgradeable fares may be purchased and for travel more than 8 hours internationally, Business Class fares may be purchased for the above persons in said positions.
  • Operation Smile used MDS Communications, a telemarketing firm in Meza, Arizona for fundraising. MDS Communications raised $1.6 million and retained $1.3 million (81%), providing about $300,000 ($19%) to Operation Smile. Russ Reid Company of Pasadena, California was also used by Operation Smile to fundraise. They collected $25.6 million, retained $1.4 million (6%) , giving $24.2 million (94%) to Operation Smile. E-mail marketing by a company named M & R resulted in $975,000 in revenue. $165,000 (17%) was retained by M & R with the remainder, $810,000 (83%)  to Operation Smile.
  • The highest paid contractors were:  Russ Reid ($1.6 million) for fundraising counsel, MDS Communications, Inc. ($605,000) for tele-fundraising services, Merkle Response Services ($440,000) for keying and caging, Strategic Fundraising ($407,000) for tele fundraising services, and Blackbaud ($382,000) for consulting services related to fundraising.
In summation, fundraising and public awareness costs take $37 out of every $100 donation to Operation Smile, leaving $63 to the organization. Another $6 is taken for other expenses which are unexplained leaving $57.  Of additional concern is that the CEO receives more than a half million dollars in compensation (and he appears to work outside the organization as a surgeon and educator) and that he and his wife, the President (who does not take a salary according to the IRS Form 990) fly Business and First Class in accordance with the organization’s rules. Their daughter is also employed by the organization (and paid nearly $200,000) to work in philanthropy. And, finally the organization appears to heavily compensate telemarketing firms for fundraising. For donations made directly through these firms, a portion of the donation which appears to range from 11% – 94% is taken with the proceeds then given to Operation Smile.
To read the IRS Form 990 (2015 for the year ending June 30, 2016) click here.
To read an update:  Where Does $100 to Operation Smile (2018), click here.
  1. Jul 12 2020

    You may want to read up on St. Jude (which is actually 2 organizations: ALSAC for fundraising and St. Jude (the hospital). St. Jude’s actually spends about $29 out of every $100 on fundraising and then puts about $21 out of every $100 in their general fund, leaving about $50 out of every $100 (although the most recent year this number was $44) for the hospital. The hospital spends about $43 out out of that $50 and puts $7 in their general fund. Here are some summaries of St. Jude/ALSAC with information taken directly from the Form 990’s the organizations submitted to the IRS:

  2. H.C Pulido
    Jul 11 2020

    I truly appreciate appreciate all your organization does for the children of the WORLD but your expenses on fundraising and administrative far out do the actual funds going to children so this far we have decided to continue supporting St. JUDE great place to donate not such a large chunk of ADMINISTATIVE AND WINING AND DINING

  3. Rodney Allard
    Jul 3 2020

    It is shameful they take money from people that are often not in a place to guve but care for others as it is often the less fortunate that give and the greedy and gluttonous people use it for them selve and their friends. If they cared the money would go to the people they are advertising they are helping rather than using their images to exploit them. Just shameful parents and the daughter.

  4. Monika Bartelt
    Jun 7 2020

    Sorry to read all this comments .It really hold me back to give money for 1 child’s operation
    what was 2 years a.go 250.–US $ .
    I would like to get an answer.

  5. Cheryl tate
    Mar 8 2020

    Everyone’s comment before mine says it all. But every time I see their commercial, I go to the web sight. Each time see the greed of the founders of the organization. Some children have received surgery, but not enough for this organization to prosper more.

  6. Feb 14 2020

    Operation Smile does not break down “surgery costs” as these can be defined many ways (are surgery costs the doctor time and supplies or are surgery costs also the upfront organization planning costs, travel, medical supplies, and followup?). The organization breaks out travel costs, staff costs, travel, supplies, etc. All I can do is report the information Operation Smile reported to the IRS.

    Operation Smile does not appear to be affiliated with a specific religious group but you can check by going to their website. Operation Smile appears to simply be a non-profit tax-exempt 501 (c) (3) organization.

  7. Stacy Travis
    Feb 14 2020

    Out of $100 how much goes towards the surgery???
    (u explained the $ amount of other things, but I didn’t catch the amount for the surgery)

    Is it related to a Christian organization? (what is it related to?)

  8. betty jeffrey
    Jan 31 2020

    I am with the rest of the people who commented above. It touched my heart so I gave twice, thinking I was helping these poor childred, only to find out after researching, internet, I am coating the pockets of scamers, that is not way Jesus taught us to help the poor. SHAME ON YOU AND YOUR FAMILY. ASK GOD FOR FORGIVENESS AND GIVE BACK WHAT YOU HAVE STOLEN FROM PEOPLE LIKE US, AND HELP THESE POOR FAIMILIES YOU

  9. Jim
    Nov 12 2019

    The executives are making a lot of money.

  10. john TAYLOR
    Oct 22 2019

    these people make a very good living and vacation on you’r dollar this is shame and disgrace. maybe and i hope God has a special place for people of this character

  11. Capt. Hook
    Sep 29 2019

    Sad that people who sacrifice to give to supposedly non-profit charities and expecting that their hard earned money in most cases is not going to those who are hurting and need help but most is going to profit others who seem to live very luxurious life styles. It hurts good people and Godly people who want to help these little ones with their problems and then see that more money is profiting those who don’t need it. God will be the judge of these people profiting in the end but those who sacrifice to give must be careful where they send their hard earned money in most cases.

  12. Ruth Johnson
    Sep 19 2019

    It is unbelievable to me that the top officers of this charity can pay themselves such an exorbitant salary. I don’t even know how they can justify, even to themselves, receiving that amount in compensation. I will not be donating to their charity—EVER. I also plan on telling others I know who donate to charities to NEVER donate to these greedy administrators. I am thankful for this website that provides us this information so we can make informed decision as to where we donate our hard-earned money.

  13. Ellen Alpart
    Sep 1 2019

    Disgusted by leaders of operation smile…we gave every year and to read of the compensation given to their leader who is also a surgeon working on jis own,his daughter and first class travel etc…They tug at our heartstrings and need to be exposed for their greed for such worthwhile
    poor children…beyond disgusting!

  14. David
    Aug 14 2019

    I really want to continue giving the a great cause, but I can’t, from looking at 81% of contribution go into the fundraiser’s pocket.

  15. Laura from Toronto Ontario Canada
    Aug 12 2019

    I was duped once, twice but not a third time. If the founders/snr mgmt give up 50% of his Salary or bonus I will go on power saving so I could give more..

  16. M. Wong
    Jun 16 2019

    This is a very good cause and senior management deserves accolades for their accomplishment, but on the other hand, this is not a commercial business. I hope that senior management can show even more compassion for those helpless kids by cutting their own salaries by 50%

  17. CFS
    May 19 2019

    Never fails to frustrate persons that will contribute to the health of needed children, but greedy individuals like the founders of this organization only look at self enrichment in the name of the needed. The poor and dissadvantaged children are the ones that pay the price of this greedy SOBs. I planned to contribute to the welfare of the hildren but not to the exessive salaries of the top two individuals and the extravagant cost of fundrising. God bless the children and bring his justice over the greedy.

  18. Jane, Richard Kruszelnicki
    Apr 14 2019

    We have been paying for 4 cleft pallet operations each year for many years now. Finding out that most of the money is going for administration costs, leaves me very dissappointed and angry. I am ready to opt out, unless you will prove to me where my money is spent otherwise. It is suppose to heal children, not fill Ceo’s pocket and his families as well. Charity is charity, no less by any means. Stop abusing this wonderfull cause. If your inpiration is to do charity work,
    Then try to remember the golden rule, charity begins at home.
    Yours truly,

    Jane and Richard Kruszelnicki Edmonton, Alberta, Canada

  19. Mary Shidaker
    Feb 9 2019

    I watched the ad for operation smile last November/December. I have seen this program before but for some reason I got online and gave! No questions asked!! A few days later I went online to find out where my money actually went. I could kick myself for being duped. I give to another organization where 86% of what I give go to the children or their community. I will not be giving to this organization again after learning how the founders and others are benefiting financially.

  20. Dec 9 2018

    I fully agree with Valerie: I have given a couple of times, but no more. My heart goes out to these unfortunate children. Wish someone else would take up the cause who are not driven by power and money but want to make a real difference with as much as 85% going towards the cause.

  21. Valerie
    Nov 14 2018

    I really wanted to give money to those poor children I saw on TV, my heart goes out to them. However, when I read that only a fraction of my donation would actually go to them I held back. I don’t understand any person saying they are giving their expertise to help out needy people and all the while lining their own pockets instead. This to me is not a charity. A charity gives to needy people not take from them.

  22. Regina
    Jul 23 2018

    Greed in non profit organizations such as this have made me wary about giving. Extravagant fundraising is not what should be a first priority from funds donated.

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