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May 31, 2018

Where Does $100 to the Childhood Leukemia Foundation Go?

by Anne Paddock

The Childhood Leukemia Foundation (CLF) is a 501 (c) (3) based in Brick, New Jersey.  Typically, disease-related foundations raise money to award grants for research but not so with CLF, an organization primarily engaged in using professional fundraisers to raise money to provide “wish baskets” and other products for special events. However, only 20% of revenue goes to these projects, so donor beware.

According to the IRS Form 990, CLF raised nearly $3.2 million  in 2016,  most of which ($2.5 million) came from contributions obtained through phone solicitations from four outside companies:

  • Innovative Teleservices of Port Huron, Michigan who raised $1,617,114 and was compensated $1,610,834, netting CLF a paltry $6,280.
  • Midwest Publishing, Inc. of Phoenix, Arizona who raised $682,549 and was compensated $655,362, netting CLF $27,187.
  • Outreach Source of Montville, New Jersey who raised $85,872 and was compensated $24,658, netting CLF $61,214.
  • Jadent, Inc. of Salem, Oregon who raised $71,095 and was compensated $59,915, netting CLF $11,180.

How shameful is it that the four firms listed above raised $2,456,630 and were compensated $2,350,769 – 96% of the funds raised?

Expenses totaled $3.4 million and can be viewed two ways:  by broad category (program expenses, grants, management costs, and fundraising expenses) or by specific line item categories (i.e. compensation-related, office-related, fundraising fees, etc. Both ways are beneficial with the former providing a broad overview and the latter giving the reader more specific information of our revenue was spent.

Expenses By Broad Category

The $3.4 million in expenses were reported in the following categories:

$2,475,000 (or 77% of revenue):  Fundraising Fees

$   673,000 (or 21% of revenue):  Program Service Costs

$  288,000 (or 9% of revenue):  Management Costs

CLF did not award any grants so expenses were limited to the three broad categories listed above. Using the above information, $100 in revenue was spent as follows:

$100:  Revenue

-$ 77:  Fundraising Costs

-$  9:  Management Costs

$ 86: Total Fundraising and Management Costs

$ 14:  Amount Remaining

-$ 21: Program Service Costs

-$  7: Excess Expenses Over Revenue

As illustrated above, CLF spent $107 for every $100 in revenue raised. $77 out of every $100 went to pay fundraisers. If management costs are added, then $86 out of every $100 raised went to cover these two expenses.

Expenses By Specific Line Item Categories

$2,341,000 (or 73% of revenue):  Professional Fundraising Fees

$  457,000 (or 14% of revenue):  Compensation-Related Expenses

$  209,000 (or 7% of revenue):  Products and Events for Kids

$  205,000 (or 7% of revenue):  Legal Fees

$  135,000 (or 4% of revenue):  Other Expenses (no detail provided)

$   67,000 (or 2% of revenue):  Office-Related Expenses

It is important to note the professional fundraising fees are lower than total fundraising costs because the above line item expense is simply the fees paid to professional fundraisers (an allocation for staff, office, etc are in total fundraising costs).

The second highest expense for the organization is compensation-related expenses which totaled $457,000. Although the organization reports 53 individuals were employed in 2016, it appears that many of these were part-time because two individuals – the Executive Director, Barbara Haramis received total compensation of $178,749 and the Chief Operating Officer, Barbara Estelle received total compensation of $111,837 – received a total of $291,000 leaving $166,000 for the remaining 51 individuals.

CLF reported having total assets of nearly $1 million with concentrations in cash (about $500,000) and land, buildings and equipment (about $500,000). Liabilities were limited to accounts payable (about $133,000) leaving a net fund balance of about $850,000, all unrestricted.

SUMMARY

CLF utilizes professional phone solicitors to raise most of the revenue for the organization. Despite the organization being a foundation, CLF did not award grants. Instead, revenue is raised and used to primarily pay for fundraising costs and compensation-related expenses (primarily for the two individuals managing the organization). Of the $3.2 million that was raised in 2016, only about $200,000 was used for events and supplies for the kids who are supposed to benefit.

CONCLUSION

Don’t respond to phone solicitors raising money for this organization. Most of your donation will go to pay the employees of the fundraising company and the overhead costs of running CLF.  Less than 10% of revenue in supplies and events reach the kids.

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

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