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April 1, 2018

Where Does $100 to the American Association for Cancer Research Go?

by Anne Paddock

The American Association for Cancer Research  is actually two (2) affiliated organizations:

  • The American Association for Cancer Research, Inc. (AACR):  a 501 (c) (3) based in Philadelphia that is primarily engaged in three activities:  awarding research grants, scientific awards, fellowships, and career development, conducting annual meetings, special conferences and educational workshops for members and non-members, and the publication of journals.
  • The American Association for Cancer Research Foundation (AACRF):  a 501 (c) (3) based out of the same office as AACR that is primarily engaged in raising funds for AACR.

Because AACRF is a major source of revenue for AACR, both organizations need to be analyzed to understand the inflow of revenue and the outflow of expenses.

AACRF

According to the IRS Form 990 (2016) AACRF raised $49 million which primarily came from contributions, gifts, and grants (although AACR did pay AACRF a $1.5 million fee). AACRF spent $4.1 million on management and fundraising expenses ($2.3 million on compensation related expenses, nearly $1 million on fees to non-employees, and about $800,000 on occupancy, IT, travel, conferences, advertising, and office), which basically means that a $100 donation to AACR had $8 deducted out to cover overhead before granting AACR the remaining $92. $43.9 million was provided to AACR.

AACR

AACR raised $87.7 million in 2016 which primarily came from AACRF ($43.9 million), annual meetings and special conferences and educational workshops ($19 million), the publication of journals ($18 million), and membership fees ($4 million).

Expenses can be viewed two ways:  by broad category (program, grants,

Total expenses in 2016 were reported to be $84.5 million (96% of revenue) and can be viewed two ways:  by broad category (i.e. grants, program, management, and fundraising) or by specific expense (i.e. compensation-related, travel and conferences, office, etc). Both ways are beneficial with the later providing the reader with more detail.

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

Expenses ($84.5 million) by broad category are broken down into four categories;

  • $41.6 million (47% of revenue):  Program Service Expenses
  • $35.8 million (41% of revenue):  Grants
  • $  5.6 million (6% of revenue):  Management Expenses
  • $  1.5 million (2% of revenue):  Fundraising Expenses

Although AACR relies on AACRF to raise about half of the organization’s annual revenue, AACR is also engaged in fundraising, as evidenced by the $1.5 million in reported expenses listed above.

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

$100:  Revenue

-$  47:  Program Service Expenses

-$    6:  Management Expenses

-$    2:  Fundraising Expenses

-$ 55:  Total Program Service, Management and Fundraising Expenses*

$ 45:  Amount Remaining

-$ 41:  Grants

$   4:  Amount Remaining:  To Net Fund Assets

*If the $4.1 million in management and fundraising expenses incurred by AACRF were included in this analysis, then the total program service, management and fundraising expenses would be about $59 out of every $100 in revenue.

It is important to note AACR added the unspent revenue (about $3 million) to the net fund assets which had a balance of about $73.5 million at year-end.

AACR Expenses by Specific Expense Category

Expenses ($84.5 million) by specific expense category are summarized as follows:

  • $35.8 million (41% of revenue):  Grants
  • $19.5 million (22% of revenue):  Salaries, Benefits, Pensions, and Payroll Taxes
  • $12.2 million (14% of revenue):  Travel and Conferences
  • $ 4.8 million (5% of revenue):  Office, IT, Occupancy, Insurance, Etc
  • $ 4.1 million (4% of revenue):  Printing/Production
  • $ 3.2 million (4% of revenue):  Advertising and Promotion
  • $ 3.1 million (4% of revenue):  Other Fees for Services and Miscellaneous Expenses
  • $ 1.5 million (2% of revenue):  Payment to Affiliate
  • $ 0.3 million (less than 1% of revenue):  Legal and Investment Fees

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

$100:  Revenue

-$  22:  Salaries, Benefits, Pensions, and Payroll Taxes

-$  14:  Travel and Conferences

-$   5:  Office, IT, Occupancy, Insurance, Etc

-$   4:  Printing/Production

-$   4:  Advertising and Promotion

-$   4:  Other Fees for Services and Miscellaneous Expenses

-$   2:  Payment to Affiliate

-$ 55:  Subtotal

$ 45:  Amount Remaining

-$ 41:  Grants

$   4:  Amount Remaining:  To Fund Balance

In reviewing the information above and additional information in the IRS Form 990 (2016), it is important to note the following key points:

AACR awarded $35.8 million (or $41 out of every $100 in revenue) in grants with 23 recipients (no detail provided) awarded $27.1 million (an average of $1.2 million each) for research grants.  16 recipients were given $3.4 million (an average of $212,500 each) for career development awards, 24 recipients were awarded $3 million (an average of $125,000 each) for pre and post doctoral fellowship, 16 recipients were awarded $235,000 (an average of $15,000) in scientific awards, and 367 recipients were awarded $507,000 (an average of $1,400 each) travel awards (possibly to conferences and seminars).

AACR had 204 employees that received total compensation of $19.5 million, which equates to about $96,000 each. However, 42 individuals received more than $100,000 in compensation with the most highly compensated individual the CEO, Dr. Margaret Foti who received $845,678 ($761,110 from AACR and $84,568 from AACRF) followed by Michael Stewart, the CFO who received $353,517 ($335,841 from AACR and $17,676 from AACRF).

AACRF reported no employees but reported $2.3  million in compensation-related expenses including $327,907 to the Executive Director, Mitchell Stoller.

Both the CEO of AACR, Margaret Foti and the Executive Director of AACRF, Mitchell Stoller fly first class “in order to accommodate business travel schedules and facilitate ongoing business transactions” which doesn’t make sense because if economy seats are available, the question arises:  why not fly economy so that more funds can go to research?

And, finally in closing, it is important to address the flow of funds hypothetically if both affiliated organizations were combined with regards to grants.  AACRF raised $49 million in 2016, and spent $4.1 million on management and fundraising costs. They then gave $43.5 million to AACR (which is really $42 million if the $1.5 million fee AACR paid to AACRF was netted out).  From the $42 million, AACR used $35.8 million (about 85% of the amount received) to award grants, using the remaining $6.2 million (15% of the amount received) for other expenses.

In other words, $100 in revenue given to AACRF had $8 deducted to cover the foundation’s management and fundraising costs, leaving $92.  15% of that $92 (or $14 out of every $100 in revenue) was used for AACR expenses , leaving $78 for grants.

But, in reality, AACR spends about $41 out of every $100 of revenue on grants with the remaining on various program, management, and fundraising expenses and specifically on compensation, travel and conferences, office, printing, advertising, and fees for services (that appear to be printing, audio visual, exhibit and conference services).

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

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

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