Where Silicon Valley Community Foundation Spends Revenue

The Silicon Valley Community Foundation (SVCF) is one of the largest (in terms of dollars) donor-advised community foundations in the country, second only to the Bill and Melinda Gates Foundation, according to the NY Times. Never heard of it?  Me neither until the New York Times printed an article (“Inside a Silicon Valley Charity, A Toxic Culture Festered“) about the organization’s “toxic culture” caused by the chief fund-raiser who allegedly bullied her staff while the foundation’s chief executive ignored complaints because her success at raising funds made him look good.

Based in Mountain View, California, SVCF was established in 2007 but was put on the map when Mark Zuckerberg donated a significant portion of his wealth to the organization which led to other successful entrepreneurs to donate large portions of their wealth to the foundation. These donations catapulted the foundation from a local community foundation to a national superstar awarding more than $1 billion in grants annually while building a strong fund balance.

The most recent IRS Form 990 is 2016 and reflects the year ending December 31, 2016. Although a bit dated, the information is still helpful and provides a glimpse into revenue, expenses, and grants.

REVENUE AND EXPENSES

In 2016, SVCF reported $1.9 billion in revenue (up from $1.5 billion the year before), most of which came from 2 sources:

• $1.3 billion:  Contributions, Gifts, and Grants
• $0.6 billion:  Gains from the Sale of Securities

Expenses totaled $1.35 billion and can be viewed two ways: by broad category (Program Services, Grants, Management, and Fundraising) or by specific line item category (i.e. compensation-related, office-related, grants, etc). Both are beneficial with the former providing an overview and the latter providing more specific detail of how revenue was spent.

Expenses By Broad Category

The $1.35 billion in expenses were reported in the following categories:

• $1.295 billion (or 68% of revenue):  Grants
• $     24 million (or 1.5% of revenue):  Program Services
• $     28 million (or 1.5% of revenue):  Management Costs
• $       3 million (negligible):  Fundraising Costs

The cost of run the organization was about $55 million in 2016 – a relatively small amount given the amount of revenue raised ($1.9 billion) and the amount spent on grants ($1.296 billion) in 2016.

In other words, every $100 in revenue received was spent as follows:

$100:  Revenue

-$ 68:  Grants

-$   3:  Management, Program, and Fundraising Costs

-$  71:  Total Costs

$  29:  Amount Remains:  To Fund Balance

As illustrated above, SVCF spent $68 out of every $100 received on grants. Management, Program, and Fundraising costs totaled $3 out of every $100, leaving $29 of every $100 to the fund balance which had $6.5 billion at year-end.

Expenses by Specific Line Item Category

The $1.35 billion in expenses were reported in the following specific line item categories:

• $1.296 billion:  Grants
• $    18 million:  Compensation-Related Expenses
• $    25 million:  Fees for Services (primarily investment management fees)
• $      6 million:  Office-Related Expenses
• $      6 million: All other expenses (i.e. advertising, travel and conferences, etc)

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

$100:  Revenue

-$ 68:  Grants

-$   1:  Compensation-Related Expenses

-$   1:  Fees for Services *primarily investment management fees)

-$   1:  Office Related Expenses and Other Expenses

-$ 71:  Total Expenses

$  29:  Amount Remaining:  To Fund Balance

GRANTS

The foundation’s primary purpose is to raise funds and award grants for a variety of purposes:  education, building communities, supporting families, environment, art and culture, religion, science, health and more.

With the exception of $13 million, $1.283 billion in grants were made to organizations in the US. 2,802 grants greater than $5,000 were awarded, 2,551 of which were other non-profits while the remaining 251 were other types of organizations.  The largest grant awards were to the following entities:

• $550,000,000: Chan Zuckerberg Biohub, Inc. (medical research science center) in Palo Alto, CA for health
• $ 34,000,000: Just Leadership USA (dedicated to cutting US correctional population) of NY, NY for building communities
• $ 26,505,920:  Charter School Growth Fund (venture capital fund) in Broomfield, CO for education
• $ 24,575,000:  Startup Education (grant making org started by Zuckerberg and Chan) in Mountain View, CA for education
• $ 24,999,973:  Goldman Sachs Philanthropy Fund (a donor-advised fund) of NY, NY for general support
• $ 21,000,000:  Two River Theater Company of Red Bank, NJ for Arts and Culture
• $ 20,021,000:  Summit Public School in Redwood City, CA for education
• $ 12,142,450:  KIPP Bay Area Schools (free public charter schools) of San Francisco, CA for education
• $ 11,087, 000:  Conservation International of Arlington, VA for environment
• $ 10,000,000:  Rockefeller Philanthropy Advisors, (guiding philanthropy) in NY, NY  for general support

As listed above, many of the grants were to organizations that make grants which appears to be an inefficient way to distribute charitable funds if you want to avoid paying another layer of program, management, and fundraising costs.

EXECUTIVE COMPENSATION

SVCF employed 233 individuals in 2016 at a total cost of $17.7 million, which equates to an average compensation of $76,000. However, 46 individuals received more than $100,000 in compensation including the ten most highly compensated individuals:

• $949,179:  Emmett D Carson, CEO and President
• $433,178:  Mari Ellen Loijens, Chief Business Development and Brand Officer
• $412,602:  Jennifer Holleran, Executive Director of Start-Up:  Education
• $384,575:  Paul Velaski, COO and CFO
• $301,847:  Erica Wood, Chief Community Impact Officer
• $270,948:  Gabrielle Miller, Pres and CEO of Raising a Reader National
• $255,136:  Neerav Kingsland, Managing Director of Hastings Fund
• $244,374:  Bert Feuss, SVP of Investment
• $234,732:  Rebecca Dupras, VP of Development
• $183,871:  Misti Sangani, Chief Donor Exp and ENGMT Officer

Of the ten most highly compensated individuals, 6 are women and 4 are men.  It is also important to note that one of the biggest responsibilities of the foundation is to manage the assets (primarily securities). This function appears to be “farmed out” as evidenced by the list showing the 5 most highly compensated independent contractors:

• $4.8 million:  Iconiq of San Francisco, CA for investment management
• $1.9 million:  Cerberus ICQ Offshore Loan Opportunities of New York, NY for investment management
• $1.6 million:  Prime Finance Partners of San Francisco, CA for investment management
• $1.3 million:  Soroban Opportunities Cayman Fund Ltd for investment management
• $1.1 million:  Iconiq Strategic Partners II-B of San Francisco, CA for investment management

Investment income ($62 million) and the gain from the sale of securities ($584 million) less the unrealized loss on investments ($197 million) equates to a gain of $449 million on $6.1 billion in assets (the balance at the beginning of the year), which equates to a 7.4% gain in 2016.

It is also important to note SVCF paid for first class travel for the CEO and President when he traveled across the country or internationally.

Mari Ellen Loijens, Paul Velaski, and Erica Wood received $125,000, $75,000, and $25,000, respectively of non-taxable retirement benefits from SVCF in 2016.

ASSETS, LIABILITIES, and NET FUND BALANCE

In 2016, SVCF reported $7.2 billion in assets at year-end, most of which were in publicly traded securities. Liabilities were $777 million, most of which were grants payable leaving $6.5 billion at year-end, $6.3 billion of which was unrestricted.

CONCLUSION

SVCF is one of the largest community foundations in the country. With two focuses: raising money and awarding grants, SVCF raised $1.9 billion and awarded nearly $1.3 billion in grants (many to organizations affiliated with donors) in 2016 which represented 68% of what the organization collected. Consequently, the foundation has accumulated $6.5 billion in net fund assets.

To read the IRS Form 990, click here.