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August 31, 2017

Where Does $100 to the American Diabetes Association Go?

by Anne Paddock

The American Diabetes Association (ADA) reported the receipt of $181 million in revenue in 2015, which primarily came from 5 sources:

  • $135 million (75%) from contributions, gifts, and grants;
  • $32 million (18%) from subscriptions, registrations, sale of materials, and booth rentals,
  • $5 million (3%) from advertising income;
  • $5 million (3%) from royalties; and
  • $4 million (2%) from other sources.

During the same year, the ADA reported expenses of $183 million (net of depreciation) – $2 million more than the organization took in. Because the organization had $89 million in net fund assets, they were able to cover the excess expenses.

If you made a $100 donation to the ADA in 2015, how was that contribution spent? According to the IRS Form 990 (2015), there are two ways in which to look at how revenue was spent: by looking at the four categories in which the organization classifies expenses:  program, management, fundraising, and grants; or by looking at the line item expense, with the later providing more detail:

$100:  Donation

-$ 37:  Salaries, Benefits

-$  15:  Office, Occupancy, Supplies, IT, etc

-$  14:  Printing, Postage

-$   6:  Other Expenses (including fees for services undefined)

-$   5:  Travel and Conferences

-$   2:  Fees for Services (defined)

-$   2:  Advertising

-$ 81:  Subtotal Line Item Expenses

$  19:  Amount Remaining

-$ 20:  Grants to Domestic and Foreign Organizations

-$101: Total Amount Spent

As illustrated above, ADA spent $101 for every $100 in revenue raised in 2015 (the organization raised $181 million in cash revenue and spent $183 million, leaving a shortfall of $2 million).

If expenses are viewed by category (program, management, fundraising or a grant), then the $100 was spent as follows:

$100:  Contribution

-$ 54:  Program Expenses

-$ 22:  Fundraising Expenses

-$   5:  Management Expenses

-$ 20:  Grants

-$101:  Total Amount Spent

Both ways of looking at how revenue was spent show that only 20 cents of every dollar is given in grants (most of which is given to the American Diabetes Association Research Foundation who distributed approximately 16 cents of that 20 cents or 83% of each dollar (per the 2015 IRS Form 990). The remaining dollars were used for program, fundraising, and management expenses.

For an organization that has been working for 75 years faced with a 350% increase in diabetes (primarily Type 2) in the last 30 years, it is unclear if the organization is underfunded or focusing their efforts ineffectively (i.e. not promoting diets such as a whole grain low-fat plant-based diet) to prevent or reverse Type 2 because the numbers are going the wrong way.

The IRS Form 990 (2015) submitted by the ADA also reveals the following information about salaries, fundraising expenses, travel expenses, and grants:

Salaries and Compensation

The ADA employed 1,539 employees in 2015 and reported $66 million in compensation costs (37% of revenue). 83 employees were provided more than $100,000 in compensation.

The top (19) highly compensated individuals were reported to be:

  • $522,096:  Greg Elfers, Chief Field Development (departed 8/7/15: 7 months and 1 week)
  • $502,088:  Deborah Johnson, Chief Executive Officer (departed 10/31/15)
  • $419,212:    Robert Ratner, Chief Scientific and Medical Officer
  • $371,849:   Kevin Hagin, Chief Executive Officer (beginning 6/1/15:  7 months)
  • $368,960:  Andrea Maddox, SVP, Eastern Key Markets (departed 11/6/15)
  • $285,522:  Jane Chiang, SVP Medical and Community Affairs
  • $284,690:  Shereen Arent, Chief Advocacy Officer
  • $269,588:  Lon Stevens, SVP Key Markets West (departed 11/3/15)
  • $256,766:  Rodney Sampson, SVP ITS and Special Technical Officer
  • $236,276:  Nancy Stinson-Harris, VP Corporate Alliance (departed unspecified date)
  • $230,883:  Rhonda Lees, VP Legal Affairs (departed 8/8/15)
  • $221,270:   Lois Witkop, SVP Marketing Communications (departed 11/6/15)
  • $222,470:  Tamara Darsow, VP Research Programs
  • $192,487:  Kate Giblin Rooper, VP Campaign Development
  • $189,627:  Travis Heider, Executive Director
  • $189,577:   Linda Cann, VP Professional Education
  • $189,525:  Jeanette Flom, VP Eastern Division (beginning 10/20/15:  2 months, 11 days)
  • $184,448:  Charlotte M Carter, SVP Financial Services
  • $175,856:  Kathryn Croskey, VP Mid-Markets West (departed 10/2/15)

As illustrated above, $5.5 million in compensation was provided to 19 individuals.  It is also interesting to note that there were many staff departures from ADA in mid-to-late 2015 which may have been related to the decline in revenues (in 2014, total revenue reported was $14 million higher at $195 million) although the specific reasons are not noted on the IRS Form 990.

Payments related to additional pension benefits are grossed up.

Fundraising Expenses

The ADA spends a lot of money on fundraising. In 2015, the organization reports spending 22 cents of every dollar on fundraising which translates to $40.5 million in 2015.

The ADA raised $56.7 million from fundraising events in 2015, of which $47.9 million were contributions that did not involve consideration or exchange, leaving $8.8 million in gross income. The ADA spent $8.8 million on non-cash prizes, facility costs, food and beverages, facility costs, entertainment, and other expenses for a net gain of zero.

In 2015, the ADA paid Infocision Management Corporation of Akron, Ohio $1.7 million for raising $3.2 million, netting the ADA $1.5 million or about 47 cents of every dollar that Infocision Management Corporation raised. Unless you want nearly half of your contribution to go to Infocision Management Corporation, don’t make a donation through this professional fundraiser.

Robbins Kersten Direct, Inc. was paid $600,000 for raising $20.1 million, netting ADA $19.5 million.

Automotive Recovery Services (ARS) was used for advertising, acquisition, and disposal of vehicles donated to ADA. In 2015, the value of the vehicles was $698,383. ARS was paid $338,723 (48 cents of every dollar), leaving $359,660 (52 cents of every dollar) to ADA. If you are considering donating a vehicle to the ADA, think twice unless you want nearly half of your donation to go to the company paid to dispose of it.

NNM Marketing was paid $168,000.

The IRS Form 990 also reports payments to the above four vendors :  “Additional payments to these vendors include the following consulting fee related to programmatic content $1,684,000, printing $213,000, postage and shipping cost $66,000, marketing expense of $135,000 and total data processing $5,000.”

Travel Expenses

In 2015, the ADA reported spending more than $3 million on travel and $6.1 million on conferences, conventions, and meetings for a total of $9.1 million.

The IRS Form 990 reports the ADA paid for companion travel for the Chief Executive Officer.

Grants

The ADA gave $36 million in grants – almost all of which ($35.7 million) went to the American Diabetes Association Research Foundation who then distributed 83 cents of every dollar collected (or $29.6 million from the ADA).

Other Information

The ADA paid $50,000 to LYFECHANNEL, Inc (a company affiliated with the brother of CFO Deborah Johnson). – a digital patient care program that brings together patients, their primary physician, extended care providers and dedicated team of nurses, counselors and dietitians that will re-write the care for people living with diabetes and elevate the impact of great self-management. Deborah Johnson departed ADA on 10/31/15.

Summary

In conclusion, the ADA is a non-profit 501 (c) 3 that spends most of the money raised on programs (54 cents of every dollar) followed by fundraising (22 cents of every dollar), grants (20 cents of every dollar) and management (5 cents of every dollar). A labor intensive organization with 1,539 employees, the ADA spent the largest portion of revenue on compensation and benefits for staff, including $5.5 million to 19 highly compensated employees. Only 20 cents of every dollar is given in grants and of that 20 cents, only 16 cents is further granted to outside organizations.

In 2015, the organization experienced a $14 million drop in revenue ($195 million in 2014 to $181 million in 2015) which equates to a 7% decline from year-to-year, which may have contributed to the high turnover in highly compensated individuals. With Type 2 diabetes exploding in the United States, you have to ask yourself if the ADA is greatly underfunded or ineffective in preventing and reversing Type 2?

To read the IRS Form 990 (2015) for the ADA, click here.

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