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June 14, 2018

How Revenue is Spent at the School Nutrition Foundation

by Anne Paddock

The School Nutrition Foundation is the “sister organization of the School Nutrition Association” focused on obtaining resources for “education, professional development, scholarships, and research in school nutrition.” One is a 501 (c) (3) – the School Nutrition Foundation (SNF) and one is a 501 (c) (4) – the School Nutrition Association (SNA), the major difference being the former accepts tax-deductible donations while the later is a professional association (donations are not tax deductible).

It is important to note the SNA is a self-supporting organization able to cover their operating expenses with membership income, conference fees, and advertising income. Although the SNF is looked upon as the “philanthropic” arm of the SNA), the SNF has historically provided very little revenue (about $90,000 in 2016) to SNA. Instead, the SNF uses the revenue they receive to cover their own operating costs and make grants.

The Form 990 (2015 for the year beginning August 1, 2015 and ending July 31, 2016) submitted to the IRS by the SNF reports the following key information:

Total revenue was $875,000, most of which came from contributions, gifts, grants, and fundraising, although the organization reports $800,000 in revenue because they made an adjustment for special event expenses (it is unclear why SNF didn’t expense fundraising expenses instead of netting them out of revenue). For purposes of this analysis, total revenue of $875,000 will be used.

Expenses totaled $795,000 (although the income statement on the 990 reports expenses were $675,000. The difference is because the organization had $100,000 in special event expenses that were not listed although an adjustment to net worth was made, and because the organization listed $20,000 as a negative expense – it is unclear why SNF did this).

Expenses can be viewed two ways:  by broad category (i.e. grants, program services, management, and fundraising) and by specific line-item category (i.e. compensation-related, office-related, travel and conferences, grants, etc). Both are beneficial with the former providing a broad overview while the latter provides a more detailed look at how revenue is spent.

Expenses by Broad Category

The $795,000 in expenses (90% of revenue) were reported in the following categories:

  • $297,000 (or 34% of revenue):  Management Expenses
  • $265,000 (or 30% of revenue):  Program Services Expenses
  • $100,000 (or 11% of revenue):  Fundraising (special event)  Expenses
  • $133,000 (or 15% of revenue):  Grants

As illustrated above, the largest expense was for management (although the organization reports having no employees. It appears that SNF uses employees of SNA, the “sister” organization that operates out of the same address). Program Service expenses appear to be “special public education and awareness efforts” to increase breakfast participation in schools and to help pay for infrastructure and equipment costs at 5 pilot schools.

15% of revenue was awarded in grants:  $91,542 was awarded to the SNA “to support public awareness, and $41,000 was divided among 93 individuals for scholarships.

No fundraising costs were reported although $100,000 in special event expenses were reported in notes with an adjustment to revenue on the reconciliation.  In addition, SNF reported $189,000 in revenue from fundraising on the income statement (but with no corresponding expenses). In addition, two  fundraisers resulted in gross receipts of $231,000. After deducting contributions of $189,000, gross income from these events was $42,000.  After spending $44,000 on food and beverages and $55,000 on “other direct expenses,” a loss of $57,000 was reported. It is unclear why all the revenue and expenses are not clearly communicated on the 990.

$80,000 remained unspent and placed in the net fund assets which had a balance of $3.8 million at year-end.

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

 $100:  Revenue

-$ 34:  Management Costs

-$ 30:  Program Services Expenses

-$ 11:  Fundraising Costs

-$ 75:  Total:  Management, Program Services, and Fundraising Costs

$ 25:  Revenue Remaining

-$ 15:  Grants

$ 10:  Amount Remaining:  To Fund Balance

As illustrated above, $45 out of every $100 in revenue was spent on management and fundraising costs while $45 out of every $100 was spent on program services and grants.

Expenses by Specific Line Item Category

The $795,000 in expenses (90% of revenue) were reported in the following categories:

  • $233,000 (or 26% of revenue):  Fees for Services (legal, accounting, and other)
  • $218,000 (or 25% of revenue):  Compensation-Related Expenses
  • $100,000 (or 11% of revenue): Fundraising (Special Event Expenses)
  • $ 86,000 (or 10% of revenue):  Office-Related Expenses
  • $ 25,000 (or 3% of revenue):  Travel and Conferences
  • $133,000 (or 15% of revenue): Grants

As illustrated above, the highest expense was for Fees For Services which includes $117,000 to a Elizabeth Campbell of Morgan, Angel and Associates in Washington, DC for work related to a grant from Walmart, followed by Compensation-Related Expenses.

As previously mentioned, the 990 reports SNF has no employees and yet, $218,000 was expensed for compensation-related expenses (i.e. compensation, salaries, wages, pensions, benefits, and payroll taxes) which appears to be payments to SNA as reimbursement for labor supplied from their employees. The CEO, Patricia Montague was compensated $38,000 by SNF but also received nearly $400,000 from SNA (this is not reported on the SNF 990 but is reported on the SNA 990).

In summary, $662,000 or 75% of revenue was spent on organizational expenses while 15% of revenue was spent on grants.

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

$100:  Revenue

-$ 26:  Fees for Services

-$ 25:  Compensation-related Expenses

-$ 11:  Fundraising (Special Event) Expenses

-$ 10:  Office-Related Expenses

-$  3:  Travel and Conferences

-$ 75: Total Organization Expenses

$ 25: Revenue Remaining

-$ 15: Grants

$ 10:  Amount Remaining:  To Fund Balance

As illustrated above, most revenue is spent on organizational costs with very little going towards grants.

To read the SNF IRS Form 990 (2015), click here.

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