Where Does $100 to the Entertainment Industry Foundation Go?

The Oscar buzz is front and center in the news media so it seems only natural to address philanthropy within the entertainment industry. The Entertainment Industry Foundation is a 501 (c) (3) based in Los Angeles, California whose mission is to coordinate the philanthropy of the entertainment industry.

Established more than 75 years ago in 1942, the Entertainment Industry Foundation (EIF) is primarily engaged in raising funds and making grants and has been referred to as the “United Way of the entertainment industry” by some.  So, the questions of interest include:

• How much did EIF raise?
• How much did EIF give out in grants?
• Were the grant recipients organizations that conducted programs or organizations that primarily awarded grants (thus, adding another layer of overhead costs)?
• Where does $100 to the EIF go?

The IRS Form 990 (2016) reports the following key pieces of information:

• EIF raised $60.3 million most of which came from fundraising events ($35.9 million) and contributions, gifts and grants ($24.2 million).
• The organization spent about $1.4 million more than they raised which was covered by net fund assets which had $74.5 million at year-end (almost all of which was temporarily restricted).
• Expenses were $61.7 million which can be viewed two ways:  by broad category (grants, program, management, and fundraising) or by specific expenses category (i.e. compensation, travel, etc).  Both are beneficial with the broad category giving an overall summary of how revenue is spent and the specific expense category providing the reader with more detail of how revenue is spent.

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

$60.3 million:  Revenue

-$  7.4 million (or 12% of revenue):  Program Expenses

-$  5.8 million (or 10% of revenue):  Management Expenses

-$  5.5 million (or 9% of revenue):  Fundraising Expenses

-$18.7 million (or 31% of revenue):  Total Program, Management, and Fundraising Expenses

 $41.6 million:  Amount Remaining

-$43.0 million (71% of revenue):  Grants

-$ 1.4 million: Covered by Net Fund Assets

Using the above information, $100 in revenue was spent as follows:

$100:  Revenue

-$ 12:  Program Expenses

-$ 10:  Management Expenses

-$  9:  Fundraising Expenses

-$ 31:  Total Program, Management, and Fundraising Expenses

 $ 69:  Amount Remaining

-$ 71:  Grants

-$  2:  Amount Covered by Net Fund Assets

As illustrated above, EIF spent $31 out of every $100 in revenue on program, management, and fundraising expenses leaving $69 out of every $100.  The organization awarded $71 out of every $100 in grants, the shortfall of which was covered by the net fund assets of the organization.

Expenses by Specific Category

$60.3 million:  Revenue

-$ 7.0 million (or 12% of revenue):  Salaries, Benefits, Pensions, and Payroll Taxes

-$ 5.3 million (or 9% of revenue):  Other Fees for Services (no detail provided) and Other Expenses (no detail)

-$ 2.2 million (or 3% of revenue):  Fees for Services (legal, accounting, and fundraising)

-$ 1.9 million (or 3% of revenue):  Office, Occupancy, Insurance

-$ 1.5 million (or 2% of revenue):  Electronic Media, Public Relations and Publicity, Subscriptions and Permits

-$  .8 million (or 1% of revenue):  Travel

-$18.7 million (or 31% of revenue:  Total Specific Category Expenses

 $41.6 million (or 69% of revenue):  Amount Remaining

-$43.0 million (or 71% of revenue):  Grants

-$1.4 million:  Amount Covered by the Net Fund Assets

Based on the above, $100 in revenue was spent as follows:

$100:  Revenue

-$ 12:  Salaries, Benefits, Pensions, and Payroll Taxes

-$ 9:  Other Fees for Services (no detail provided) and Other Expenses (no detail)

-$ 3:  Fees for Services (legal, accounting, and fundraising)

-$ 3:  Office, Occupancy, Insurance

-$ 2:  Electronic Media, Public Relations and Publicity, Subscriptions and Permits

-$  1%:  Travel

-$31:  Total Specific Category Expenses

 $69:  Amount Remaining

-$71:  Grants

-$  2: Amount Covered by the Net Fund Assets

As illustrated above, $31 out of every $100 was spent on organization expenses with the highest category compensation related expenses ($7 million or $12 out of every $100). EIF reported a total of 74 employees which means the average compensation was about $95,000.  However, 20 individuals received more than $100,000 with the most highly compensated individual the President and CEO, Lisa Paulsen who received $500,582 followed by Ed Rada, the COO who received $401,139. EIF reports having a discretionary spending amount which is used for auto allowances for certain key staff, which is reported as taxable income.

Finally, it is important to consider the grant recipients.  $43 million in grants were awarded in 2016. 82 organizations received grants greater than $5,000 for “general program support” with the 5 largest recipients receiving $33 million (77% of grant revenue):

• $27.2 million:  American Association for Cancer Research
• $ 1.5 million:  Donorschoose.org
• $ 1.5 million:  Feeding America
• $ 1.5 million:  V Foundation for Cancer Research
• $1.3 million:  Food Research and Action Center

The American Association for Cancer Research, Donors Choose, the V Foundation for Cancer Research, and the Food Research and Action Center are organizations whose major function is to award grants which means a donation to EIF has both EIF’s overhead and the grant recipient’s overhead deducted before being granted to another organization. For instance, EIF deducts $31 out of every $100 in revenue with the remainder used for grants. If the grant recipient is also engaged in making grants, then they also deduct their program, management, and fundraising costs before they award grants so the original donation is diluted even further.  It is entirely conceivable that $60 out of every $100 in revenue to EIF is used for program, management, and fundraising costs and that $40 ends up going to the ultimate research grantees. For donors who want their charitable dollars to go further, make donations to organizations that do not make grant awards to organizations that make grant awards.

It is also important to note that the largest grant recipient above – the American Association for Cancer Research pays its CEO nearly $800,000 annually and pays for First Class Travel.

To read the IRS Form 990 (2016), click here.