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September 8, 2017

Where Does $100 to Feeding America Go?

by Anne Paddock

Feeding America is a 501 (c) (3) whose mission is “to feed America’s hungry through a nationwide network of food banks and engage the country in the fight to end hunger.” With an estimated 42 million people experiencing hunger every day (or 1 out of 8 people), Feeding America seeks to alleviate hunger by procuring and distributing food, creating public awareness and educating the public, lawmakers, and public policy influencers, and conducting research on hunger.

Established in 1988, Feeding America has been around for nearly three decades and has grown substantially through the years. For the year ending, June 30, 2016, Feeding America raised $2.438 billion of which $2.289 billion (94%) were non-cash contributions (i.e. food) and $149 million cash – from contributions ($87 million), program revenue sources ($24 million), royalties ($35 million), and other sources ($3 million). With most contributions being food for distribution to the vast network of food banks across the country, the question that most donors want to know is how the $149 million in cash revenue was spent.

There are two ways to look at how cash revenue was spent: by category (program, management, fundraising, and cash grants) and by specific line item expenses which provides more detail.

Expense Analysis by Specific Line Item

$30 million (20%):  Salaries, Compensation, Benefits, Pension, Payroll Taxes

$11 million (7%):  Other Expenses (no detail provided)

$ 9 million 6%):  Printing and Postage

$ 8 million (5%):  Office, Occupancy, IT, Insurance

$ 4 million (3%):  Travel, Conferences, Professional Development

$ 3 million (2%):  Fundraising, Legal, Accounting, Lobbying, and Investment Fees

$ 3 million (2%):  Advertising

$19 million (13%): Produce and Disaster Relief

$49 million (33%): Cash Grants to 209 non-profits and governmental agencies

$136 million (91%):  Total Expenses

$13 million (9%):  To Fund Balance

$149 million (100%):  Total Expenses and Excess Revenue to Fund Balance

In other words, a $100 cash contribution to Feeding America was spent as follows:

$100:  Cash Revenue

-$ 20:  Salaries, Compensation, Benefits, Pension, Payroll Taxes

-$   7:   Other Expenses (no detail provided)

-$  6:   Printing and Postage

-$  5:   Office, Occupancy, IT, Insurance

-$  3:   Travel, Conferences, Personal Development

-$  2:   Fundraising, Legal, Accounting, Lobbying and Investment Fees

-$  2:   Advertising

-$ 45:  Subtotal of Salaries, Other, Printing, Office, Travel, and Fundraising

-$  13:  Produce Purchase and Disaster Relief

-$ 33:  Cash Grants to 209 non-profits and governmental agencies

-$ 91:  Total Expenses

-$   9:  To Fund Balance (Excess Revenue over Expenses)

$    0

As illustrated above, $45 of every $100 in cash revenue was used to support the expenses of the agency while $46 was spent on cash grants, produce, and disaster relief. Feeding America retained $9 of every $100 and placed these funds in the fund balance. At year-end, the net fund balance had $96 million.

Expense Analysis by Major Categories (Program, Management, Fundraising, Grants)

Using the figures provided on the IRS, the $149 million in revenue was allocated among the following four major categories:

$54 million (36%):  Program Services (including $18 million in produce expenses)

$ 7 million (5%):    Management Expenses

$26 million (17%):  Fundraising Expenses

$49 million (33%):  Cash Grants

$136 million (91%):  Total Expenses

$ 13 million (9%):   Excess Revenue over Expenses: To Fund Balance

$149 million (100%):  Total Expenses and Excess Revenue to Fund Balance

In other words, a $100 cash contribution to Feeding America was spent as follows:

$100:  Cash Revenue

-$ 36: Program Services

-$   5:  Management Expenses

-$ 17:  Fundraising Expenses

-$ 58:  Subtotal Program, Management, and Fundraising Expenses

-$ 33:  Cash Grants to 209 non-profits and governmental agencies

-$ 91:  Subtotal

-$   9:  Excess Revenue over Expenses:  To Fund Balance

$    0

It is important to point out that $18 million of program service expenses were produce purchases (which also equates to the nearly the same amount as revenue received as “food procurement revenue.” This equates to $12 out of every $100 in revenue.

Other important information reported on the IRS Form 990 for the year ending June 30, 2016 is summarized as follows:

The organization has 224 employees, 87 of whom received compensation greater than $100,000.

The 15 highest compensated employees were:

  • $479,015: Mathew Knott, President
  • $338,247: Maura Daly, SVP Communications
  • $354,150: Paul Henrys, CFO and Treasurer
  • $305,367: Johanna Vetter, Chief Marketing Officer
  • $303,276: William Thomas, Chief Supply Chain Officer
  • $297,991:  Lisa Davis, SVP Government Relations
  • $265,003: Leah Ray, SVP Development
  • $262,124:  Daphne Logan, SVP Human Resources
  • $221,691:   Ronald Martin, VP Financial Reporting/Budgeting
  • $219,533:  Lisa Jericho, SVP Information Technology
  • $219,018:  Daniel Krohm, VP Strategic Initiatives (received a severance payment of $72,429)
  • $217,508:  Daniel Nisbet, VP Development
  • $215,782:  Robert Aiken, Former CEO July to May, 2015
  • $207,022:  Kevin Lutz, SVP Information Technology (received a severance payment of $92,468)
  • $178,058:  Andrea Yao, Secretary

As listed above, a total of $4.1 million in compensation was provided to 15 employees (which equates to an average of $273,000).

Feeding America spent $744,815 on lobbyists to influence public opinion and legislative bodies.

Feeding America participates in various types of fundraising including direct mail, phone, mail, internet, government, and non-government grant, and in-person solicitations.  The highest paid fundraisers include:

  • Thompson, Habib, and Denison (Lexington, MA):  Raised $16.3 million and were compensated $940,310, (6%) netting Feeding America $15.3 million (94%).
  • Paradysz/PMX Agency (NY,NY):  Raised $7.2 million and were compensated $247,400 and $469,319 (list fee and shipping costs) for a total of $716,719 (10%) netting Feeding America $6.5 million (90%).
  • M & R Strategic Services  (Washington, DC):  Raised $2.1 million and were compensated $41,766 (2%) netting Feeding America $2 million (98%).
  • Charity Dynamics (Austin, TX):  Raised $97,444 and were compensated $19,020 (20%) netting Feeding America $78,424  (80%).
  • Telefund (Boston, MA):  Raised $8,209 and were compensated $18,273 costing Feeding America $10,064.
  • The Stelter Company (Des Moines, IA):  Compensated $19,503 for acquisitions services.
  • MDS Communications (Mesa, AZ):  Raised $445,538 and compensated $572,215 costing Feeding America $126,677.
  • Social Capital (Chicago, IL):  Compensated $625,008 for strategy services.

It is important to note that Feeding America paid Telefund and MDS Communications more than they raised for the organization.

The five most highly compensated contractors include:

  • Innerworkings (Chicago, IL):  $5.1 million for printing/production
  • PlusMedia (Danbury, CT):  $1.7 million for marketing/advertising
  • PMX Agency formerly Paradysz: (NY, NY):  $1.3 million for marketing/advertising
  • Thompson, Habib, and Denison (Lexington, MA):  $1.3 million for consulting/research
  • Blackbaud (Charleston, SC):  $1.2 million for consulting/hosting

As illustrated above, $10.6 million was spent for the five highest paid contractors, most of which were compensated for marketing/advertising, consulting, and printing services. Contractors paid less than $1.2 million are not listed (although Social Capital of Chicago, IL was compensated $625,008 for “strategy services.”

In conclusion, it is important to note that Feeding America is primarily engaged in the procurement and distribution of food to food banks. Most donations (94%) are non-cash contributions so although cash revenue is only 6% of total revenues, the actual dollar amount – $149 million – is substantial so it is important to look at how the funds are used. Program and management expenses are expected to be high because the organization is so involved in supply chain logistics of moving non-cash contributions to food banks.

Depending on how expenses are viewed, approximately $30 cents of every $100 is spent on program and management expenses while about $17 is spend on fundraising. About $33 is given in cash grants to food banks while $12 is spent on fresh food procurement, leaving about $9 for savings (placed in fund assets).

The organization has $95 million in net fund assets – a notable amount of funds primarily in liquid assets.

To review the IRS Form 990 (2o15) for the year ending June 30, 2016, click here.

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