Where does $1 to the Arthritis Foundation go?
The Arthritis Foundation, Inc. (AF) is a 501 (c)(3) whose mission is to improve the lives of those suffering from arthritis through advocacy (lobbying for access to treatment and medications), program services, community programs, professional education, and supporting research.
Based in Atlanta, Georgia, AF has a national office (a not-for-profit Georgia corporation) and chartered entities (offices in virtually every state which serves local communities) throughout the United States which are separate 501 (c)(3)’s and consequently, file separate 990’s. Beginning in 2014, AF started consolidating the chartered entities into the national office to obtain economies of scale and centralize certain administrative functions.
As with most charities, fundraising is at the core of the organization’s function enabling the organization to carry out its mission. A donation to AF can originate in a variety of ways which greatly impacts how the dollar is spent. For example, a $1 contribution through direct mail will have 80 cents deducted (by Merkle, Inc. – the Baltimore-based marketing company hired by AF), yielding 20 cents of every $1 to AF. In 2015, more than $10 million was collected by Merkle via direct mail and yet only $2 million was provided to AF. If you want your donation dollars to go further, do not respond to direct mail.
A $1 donation made directly to AF in 2015 was spent as follows:
-$0.31: Salaries and Benefits
-$0.14: Office, Occupancy
-$0.14: Other Expenses (Membership, Marketing, Miscellaneous)
-$0.10: To Affiliates (Arthritis Foundation affiliates)
-$0.10: Outside Services (accounting, legal, lobbying, and other)
-$0.04: Travel and Conferences
-$0.83: Subtotal Expenses
-$0.13: Grants to organizations and individuals
$0.04: Amount Remaining (retained by AF in net fund assets)
As illustrated above, the majority of donations are spent on the salaries, benefits, and expenses of the organization with about 13 cents provided to organizations primarily for research grants with the remaining amount retained by the organization in their fund balance (like a savings account).
AF collected $63.8 million in 2015, which came from 8 sources:
- $30.4 million or 48% of total revenue: Contributions/Gifts
- $16.3 million or 26% of total revenue: AF affiliate offices
- $ 5.4 million or 8% of total revenue: Advertising Revenue
- $ 4.5 million or 7% of total revenue: Fundraising Events
- $ 2.5 million or 4% of total revenue: Gains/Rents
- $ 2.3 million or 4% of total revenue: Other (no detail provided)
- $ 1.4 million or 2% of total revenue: Investment Income/Royalties
- $ 1.0 million or 1% of total revenue: Federated Campaign/Govt Grants
AF relies primarily on contributions, affiliate income, advertising revenue, and fundraising events for revenue. The organization participates in all types of fundraising (direct mail, internet, phone, in person, 92 special events, and solicitation of both government and non-government grants) with direct mail being the least beneficial ($10.4 million raised by two direct marketers with $2.2 million provided to AF which equates to about 20 cents of every dollar).
AF spent $60.8 million (net of depreciation) – 96% of revenue – on expenses, most of which fell into five categories:
- $19.5 million or 31% on salaries and benefits
- $ 8.9 million or 14% on other expenses (membership, marketing, miscellaneous)
- $ 8.8 million or 14% on office and occupancy
- $ 6.5 million or 10% to affiliate offices
- $ 6.4 million or 10% for outside services ($3.9 million of which no detail is provided, $1.7 million on accounting)
- $ 2.7 million or 4% for travel and conferences
- $ 8.0 million or 13% on grants to organizations and individuals
The above information draws attention to five issues:
Salaries and Benefits: Nearly $20 million is spent on salaries and benefits for the 297 employees of AF (which equates to an average of $67,000 per employee), of which $2.9 million was allocated among 11 executives:
- $560,792: Ann Palmer, President and CEO
- $251,585: Meagan Fulmer, Chief Development Officer
- $245,780: Amanda Kiskar, National Scientific Director
- $239,343: Cindy McDaniel, SVP, Consumer Health
- $239,244: Karen Larson, Chief Financial Officer
- $228,260: Sandra Mackey, SVP, Marketing and Communications
- $226,730: Wayne Guthrie, SVP, Staff Operations
- $224,906: Sandie Preiss, VP, Advocacy and Access
- $218,854: Marla Davidson, VP, Information Technology
- $188,124: Richard Willis, VP, Strategic Affairs
- $179,241: Elizabeth Phillips, VP, Cause Development
Outside Services: $6.4 million was spent on outside services with $3.9 paid to “other services” and $1.7 million for accounting. No other information is provided for “other services” and $1.7 million for accounting equates to nearly $150,000 per month which appears to be high given the organization has a CFO and staff.
Affiliates: AF received $16.3 million from the affiliate offices yet expensed $6.5 million to affiliates.
Conferences and Travel: AF spent $2.7 million on travel ($1.6 million) and conferences ($1.1 million).
Grants: AF made total grants of $8 million, of which $7.9 million was given in 20 research grants, the 12 largest to the following organizations:
- $4,235,000: Carra, Inc. (Childhood Arthritis and Rheumatology Research Alliance)
- $450,000: NOA, Inc. (Software Start Up Company)
- $377,077: Duke University
- $354,557: Rush University Medical Center
- $318,774: Cleveland Clinic Foundation
- $317,703: University of Iowa
- $270,000: Vanderbilt University Medical Center
- $200,000: NYU School of Medicine
- $200,000: Stanford University
- $135,000: University of Tennessee – Health Science
- $128,862: Baylor College of Medicine
- $114,860: Yale University
The remaining grants totaling about $60,000 were given primarily to affiliate offices of the AF, also for research grants.
Balance Sheet Analysis
AF has total assets of $96.2 million, up from $67 million at the beginning of the year primarily because AF absorbed the Mid-Atlantic and Florida Regions of AF. Assets are concentrated in five areas: cash and publicly traded securities ($57.4 million), a beneficial interest in a perpetual trust ($13 million), pledges receivable ($10.7 million), accounts receivable ($6 million), and lands, building, and equipment ($5.1 million).
Liabilities totaled $27.4 milion, most of which was in split interest agreements/funds held in trust ($13 million), accounts payable ($7.6 million, and grants payable ($6.9 million) leaving net assets of $68.8 million – a $27 million dollar upswing from the prior year as a result of the consolidation of the affiliate offices.
In closing, AF is a non-profit that is consolidating offices. Given that more revenue is spent on staff and office expense (more than 45 cents of every dollar) and less than 13 cents is spent on grants for research, consolidation may yield more funds for research and less for management, fundraising, and programming in the future. Of particular concern is that AF uses Merkle, Inc. for fundraising, and paid them $8 million for $10 million in revenue, netting the organization $2 million. Certainly there are more efficient ways to raise revenue than direct mail through Merkle. Accounting costs at $150,000 per month totaled $1.7 million for the year and executive salaries and benefits were nearly $3 million spread among 11 staff are also notable.
To review the 2015 IRS Form 990 for the Arthritis Foundation, Inc. click here.