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March 15, 2018

Where Does $100 to the Children’s Hospital Foundation Go?

by Anne Paddock

The Children’s Hospital Foundation (CHF) serves as the fundraising arm for the Children’s National Medical Center (also known as the Children’s Hospital) in Washington, DC.  Typically non-profits post revenue and four types of expenses (program, grants, management, and fundraising) but CHF reports the revenue from fundraising and the costs associated with the fundraising and the grants awarded. The Children’s Hospital reports the revenue collected (primarily from patients and insurance) and the costs of the programs and management.

The Children’s Hospital raised $1.062 billion in 2016, of which $1.045 billion was from patient and program services meaning 98% of revenue comes from patients (including insurance) and program services. Although there appears to be a shortfall of about $17 million, the Children’s Hospital also collected $35 million from contributions, a grant from CHF, government grants, investment income, parking, and lab income which was partially offset by a $18 million loss on investments.  The bottom line is that 98% of the income of the hospital came from patients (including insurance) and program services.

Expenses for the Children’s Hospital were $1.037 billion (not including depreciation) which means the hospital was self-sustaining. Even if the hospital was not self-sustaining, the organization had $534 million in net fund assets at year-end (all of which were unrestricted).

The IRS Form 990 (2016) reports CHF raised $71.3 million from four sources:

  • $51.1 million:  Contributions, Gifts, and Grants
  • $ 7.5 million:  Fundraising Events ($8.5 million less $1 million in fundraising event losses)
  • $ 9.2 million:  Investment Income
  • $ 3.5 million:  Gain on the sale of assets

Expenses totaled $47.8 million and were reported as follows:

  • $10.8 million (15% of revenue):  Salaries, Benefits, Pensions, and Payroll Taxes
  • $  3.9 million (5% of revenue):  Overhead (no detail provided)
  • $ 3.2 million (4% of revenue):  Other Expenses (no detail provided)
  • $ 2.0 million (3% of revenue):  Fees for Services (Fundraising and Legal)
  • $1.9 million (3% of revenue):  Office, IT, and Occupancy
  • $ .9 million (1% of revenue):  Travel and Conferences
  • $  .5 million (1% of revenue):  Advertising and Promotion
  • $23.2 million (32% of revenue): Subtotal Expenses (to manage the foundation and do fundraising)
  • $24.6 million (35% of revenue:  Grants
  • $47.8 million (67% of revenue):  Total Expenses

In summary, CHF raised $71.3 million, spent $23.2 million managing the foundation and conducting fundraising, gave $24.6 million in grants, and placed the remaining $23.5 million in net fund assets.

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

$100:  Revenue

-$ 15:   Salaries, Benefits, Pensions, and Payroll Taxes

-$  5:   Overhead

-$  4:  Other Expenses (no detail provided)

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

-$  1:  Travel and Conferences

-$  1:  Advertising and Promotion

-$  32:  Subtotal Expenses (to manage the foundation and do fundraising)

$  68:  Revenue Remaining

-$ 35:  Grants

$ 33:  Revenue Remaining:  To Fund Balance

As illustrated above, CHF used 32% of revenue or $32 out of every $100 in revenue, to manage the foundation and conduct fundraising. $35 out of every $100 raised was awarded in grants and $33 million was added to the net fund balance which had a balance of $447 million at year-end.

In closing, the following comments are noteworthy:

  • CHF spent $32 out of every $100 reported on overhead, much of which is undefined. $3.9 million in “overhead” should be detailed as should the $3.2 million in “other” expenses.
  • CHF reports no employees and no individual that made more than $100,000 in total compensation and yet $10.8 million was spent on salaries, benefits, pensions, and payroll taxes.
  • The 990 reports CHF lost about $1 million on fundraising events. Specifically, CF reports $1.2 million in “other direct expenses” (no other detail provided) which are not rent or facility costs, food and beverage or entertainment.
  • Of the $24.6 million in grants awarded, $14 million was to the Children’s Hospital (an affiliated organization) and $10.3 million was to the Children’s Research Institute (also an affiliated organization).

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

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