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April 5, 2018

Top Ten Financial Tips to Know About St. Jude’s

by Anne Paddock

St. Jude’s is one of the most popular non-profit organizations in the country because the charity’s mission appeals to donors:  they treat and help children with cancer and other life threatening illnesses. But, before making donations, donors should understand that St. Jude’s is actually two organizations:

  • St. Jude Children’s Research Hospital, Inc. (Hospital)
  • ALSAC – St. Jude Children’s Research Hospital, Inc. (ALSAC)

ALSAC stands for the American Lebanese Syrian Associated Charities and “exists for the sole purpose of raising funds and building awareness to support the current and future needs of St. Jude Children’s Research Hospital, Inc” while the Hospital treats and helps the children along with their families. The Hospital has a beneficial interest in the assets of ALSAC but the organizations are separate non-profit 501 (c)(3) entities with specific functions: ALSAC raises funds while the Hospital provides the treatment.

Over the past 6 years, ALSAC reported the following information (in millions) on the IRS Forms 990 (2011-2016):

Year                                 2011        2012         2013         2014        2015         2016

Revenue Raised            $814        $870        $976        $1,120        $1,182     $1,260

Revenue to Hospital     $375        $442        $488        $  530        $  589        $  807

% to Hospital                   46%          51%         50%        47%         50%          64%

Fundraising Costs         $242       $262       $278         $  307        $  342        $  375

% to Fundraising            30%        30%         28%          27%           29%           30%

Revenue Kept                $197        $166        $210        $  283        $  251         $  78

% Revenue Kept               24%          19%         22%         26%           21%          6%

Net Fund Assets          $2,381      $2,454    $2,769     $3,299      $3,452       $3,424

Ten key financial points are summarized as follows:

  1. ALSAC gave/granted the Hospital about 50% of the revenue raised (or about $50 out of every $100 raised) from 2011-2015. For example, of the $814 million in revenue raised in 2011, $375 million was given to the Hospital.
  2. ALSAC used the other 50% of revenue raised for fundraising and to build the net fund balance. Approximately 29% of the revenue raised annually was used to cover the fundraising costs at ALSAC, which were $375 million in 2016. The remaining revenue was placed in the net fund balance which caused the balance to grow from $2.3 billion in 2011 to $3.4 billion in 2016.
  3. Many people wonder why ALSAC historically (2011-2015) retained between $166-$283 million a year from the revenue raised, until 2016.  One reason is the hospital reported they need to keep 1.5 years of operating costs in case the $375 million they spend every year fundraising doesn’t raise funds (seems highly unlikely).  The annual operating cost of the hospital is about $800 thousand which means ALSAC would need $1.2 billion to keep the hospital running for 1.5 years if fundraising dried up in any given year.  In 2016, ALSAC reported $3.4 billion in the net fund assets, $2.5 billion of which was unrestricted.
  4. In 2016, ALSAC gave a record $807 million to the hospital, which represented $64 out of every $100 raised.  ALSAC still spent $30 out of every $100 raised on fundraising costs so only $78 million or $6 out of every $100 raised was retained.  Clearly, this is a positive sign that the two organizations (ALSAC and the Hospital) are willing to help more sick children and their families rather than continue to add $200-$300 million annually to their savings. And, yet the question has to be asked?  Why aren’t more children being helped?  Does ALSAC really need $3.4 billion in savings?
  5. Operating costs for the Hospital are about $800 thousand a year with 80% of the funds coming from ALSAC, 10% from patient care (i.e. insurance, etc), and 10% from government grants, other contributions, licenses, patents, cafeteria, vending, and other sources described as “CHGME/CHCA.”  Unlike many other children’s hospitals like Washington National  Medical Center  in Washington, DC who are able to cover operating costs with patient revenue including insurance reimbursement, the Hospital (St. Jude’s) relies on contributions from the public so that children who cannot afford care receive it.
  6. ALSAC used two fundraising solicitation firms (Infocision Management Corp of Akron, Ohio and MDS Communications Corp of Mesa, AZ) who raised $5.4 million but were compensated $5.25 million, netting ALSAC less than $200,000 ($167,965 to be exact).  Infocision and MDS are minor players in the fundraising for ALSAC and the hospital and yet those who donated $5.4 million would probably not be happy that most of their donation did not go to the hospital and was instead kept by Infocision or MDS.
  7. Total compensation costs for the 1,517 individuals at ALSAC were $127.1 million which equates to an average compensation of $84,000. However, 256 individuals received more than $100,000 in compensation with the most highly compensated individuals listed below:
  • $774,092:  Richard C Shadyac Jr, CEO and Ex-Officio Director
  • $492,564:  Emily S Greer, Chief Administrative Officer
  • $473,418:  Jeffrey T Pearson, Chief Financial Officer
  • $472,515:  Emily Callahan, Chief Marketing Officer
  • $456,654:  Robert Machen, Chief Information Officer
  • $426,670:  Sara Hall, Chief Legal Officer
  • $405,835:  George Shadrout, Chief Strategy Officer
  • $377,688:  Martin Hand, Chief Donor Officer

8.  Total compensation costs for the 4,549 individuals at the Hospital were $426.3 million which equates to an average compensation of $94,000. However, 674 individuals received more than $100,000 in compensation with the most highly compensated individuals listed below:

  • $1,329,316:  William E Evans, Faculty (Former President and CEO)
  • $1,132,999:  James Downing, President and CEo
  • $  921,495:  Larry Kun, SVP Clinical Director
  • $  804,618:  Leslie L Robison, Chair
  • $  799,538:  Thomas E Merchant, Chair
  • $  775,764:  Andrew Davidoff, Chair
  • $  748,582:  James I Morgan, Chair
  • $  728,284:  Ching-Hon Pui, Chair
  • $  601,339:  Richard Gilbertson, EVP, Director Cancer Center
  • $  525,685:  Michael C Carnavios , Former SVP and CFO
  • $  496,681:  Mary Anna Quinn, EVP, Chief Admin Officer
  • $  411,318:  Charles M Roberts, EVP, Director Cancer Center
  • $  210,271:  Carlos Rodriquez-Galindo, EVP, Chair

9.  ALSAC reports having an investment of $925 million in Central America and the Caribbean.

10. The Hospital reported having nearly $4 billion in net fund assets at year-end, of which $3.4 billion were the net fund assets of ALSAC.

To read the IRS Form 990 (2015) for ALSAC for the year ending June 30, 2016, click here.

To read the IRS Form 990 (2015) for the Hospital for the year ending June 30, 2016, click here.

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