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October 18, 2017

Where Does $100 to the American Heart Association Go?

by Anne Paddock

The American Heart Association (AHA) is one of the most popular and recognized non-profits in the United States with enormous public support as evidenced by the $830 million raised last year.   That the AHA also has nearly a billion dollars in their net fund balance is also noteworthy.

By most accounts, this organization is a magnet for public contributions and an expert at raising and saving money.  But, are they accomplishing their mission, which is to build healthier lives, free of cardiovascular disease and stroke? With heart disease the number one cause of death in the United States for decades, one has to wonder if all the contributions to the AHA are really helping to prevent and reverse heart disease?

The AHA is a 501 (c) (3) organization and, as such files an IRS Form 990 which details revenue, expenses, executive compensation, assets, liabilities, grants, fundraising, payments to contractors and more.  The most recent IRS Form 990 filed (2015) reflects the operating period from July 1, 2015 to June 30, 2016.

There are two ways to look at expenses:  by looking at four broad categories of expenses (program, management, fundraising, and grants) or by looking at specific line item expenses which provides more detail.  Both ways tell the reader about the organization.

For the year ending June 30, 2016, the AHA reported total revenue of $830 million and $800 million in expenses (not including the non-cash expense of depreciation).

Expenses by Category (Program, Management, Fundraising, Grants)

$474 million (or 57% of revenue):  Program Expenses

$ 61 million (8% of revenue):   Management Expenses

$ 95 million (11% of revenue):   Fundraising Expenses

$170 million (20% of revenue):  Grants

$800 million (96% of revenue):  Total Expenses

Based on the above information, a  $100 donation was spent as follows:

$100:  Revenue

-$ 57: Program Expenses

-$  8:  Management Expenses

-$ 11:  Fundraising Expenses

-$ 76:  Subtotal of Program, Management, and Fundraising Expenses

-$ 20:  Grants

-$ 96:  Total Expenses 

$    4:  Amount Remaining: To Fund Balance

$     0

Expenses by Specific Line Item

$339 million (41% of revenue):  Salaries, Compensation, Benefits, Pension, Payroll Taxes

$151 million (18% of revenue):  Office, IT, Occupancy

$ 53 million (6% of revenue):  Travel, Meetings, and Conferences

$ 13 million (2% of revenue):  Accounting, Legal, Fundraising Fees, and Investment Fees

$  7 million (1% of revenue):  Advertising and Promotion

$ 67 million (8% of revenue):  Other Expenses (no detail provided)

$630  million (76% of revenue):  Total Salaries, office, Travel, Fees, Advertising, and Other

$170 million (20% of revenue):  Grants

$800 million:  Total Expenses

$ 30 million:  Revenue not spent, To Fund Balance

Based on the above information, a $100 donation was spent as follows:

$100:  Revenue

-$ 41:  Salaries, Compensation, Benefits, Pension, Payroll Taxes

-$ 18:  Office, IT, Occupancy

-$  6:  Travel, Conferences, Meetings

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

-$  1:  Advertising and Promotion

-$  8:  Other Expenses (no detail provided)

$ 76:  Subtotal Line Item Expenses

-$ 20:  Grants

-$ 96:  Total Expenses

$   4:  Amount Not Spent – To Fund Balance

As illustrated above, the single largest category of line item expenses is compensation for employees (including nearly $2 million to the CEO and $6.5 million to 12 senior management employees) followed by $151 million in office expenses.  Only $20 of every $100 goes towards grants.  $67 million in other expenses with no detail provided begs the question: what did the AHA spend $67 million on and why isn’t more money given in grants?

The IRS Form 990 also reports the following information:

AHA uses a variety of fundraising methods including mail, internet, e-mail, phone, and in-person solicitations along with government and non-government solicitation for grants, and fundraising events.  Infocision Management Corporation (IMC) of Akron, Ohio raised $5.4 million through telemarketing and was compensated $3.4 million (63 cents of every $1) netting AHA $2 million or 37 cents of every $1. If you want your charitable dollars to go further, do not make a donation through solicitations made by IMC on behalf of the AHA.

Insurance Auto Auctions raised $273,505 through the auto donation program. They were compensated $62,161 (23 cents of every $1) netting AHA $211,344. If you want your auto charitable donation to go further, sell the car yourself and then make the donation.

AHA conducted the Dallas Heart Ball, the Dallas Heart Walk and 7,733 other fundraising events that raised $310 million. After deducting $291 million in donations, AHA recognized $19 million in income from the fundraising events.  AHA spent $32 million on non cash prizes, rental facilities, food and beverages, entertainment and other expenses, netting a loss of $13 million on fundraising events.

Grants totaled $170 million. In the United States, the AHA gave 557 grants greater than $5,000, most of which were for defibrillators and monitors, research, emergency equipment, childhood obesity initiatives, and anti-tobacco advocacy.

AHA pays for health club dues for certain senior management employees.

The five highest compensated independent contractors include:

  • $5.6 million:  Freeman Expositions, Inc. of Dallas, Texas for audio video services
  • $4.9 million:  Slingshot, LLC of Dallas, Texas for digital media
  • $2.8 million:  Daniel J Edelman of Chicago, Illinois for public relations
  • $2.6 million:  Infocision Management Corp of Akron, Ohio for telemarketing
  • $2.1 million:  Brigham and Women’s Physician Organization of Boston, Massachusetts for editorial services

In conclusion, most revenue is spent on supporting the organization and its programs. About $20 of every $100 goes to grants for research, equipment, and obesity and anti-tobacco initiatives. The organization spent $67 million on expenses that are not detailed on the tax return.  Infocision Management kept $67 dollars of every $100 they raised for AHA. The questions to ask yourself as a donor include:

  • Do you think the AHA is accomplishing their mission (“to build healthier lives, free of cardiovascular disease and stroke”) with the $800 million the organization raises and spends annually?
  • Is the AHA working to prevent and reduce heart disease by promoting unpopular lifestyle choices (i.e. whole grain low-fat plant-based diets) instead of promoting popular foods that contain cholesterol and saturated fats?
  • Are 13 executives worth $8.5 million annually?

If any of your answers are maybe or no, then consider making donations locally to non-profits that need emergency equipment, defibrillators and monitoring equipment, research, and to organizations that address the cause and reduction of heart disease through programs that educate the population on the heart benefits of whole grain low-fat plant-based diets.

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

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