Where Does $100 to the American Cancer Society Go?

The American Cancer Society (ACS) is a non-profit 501 (c) (3) based in Atlanta, Georgia. With 6,679 employees in 2016, the ACS focused on awarding grants, advocacy, education and service. Every year, ACS files a Form 990 – a rather lengthy tax return that provides all kinds of financial information about the organization – which is beneficial to the public and donors.

Many donors often wonder “if I gave $100 to a non-profit, how is that $100 spent?” Readers will find the answer to that question and more in this post. Specifically, there are five areas covered:

• Revenue and Expenses
• Grants
• Fundraising
• Independent Contractors
• Assets, Liabilities, and Net Fund Assets

REVENUE AND EXPENSES

In 2016, ACS raised $813 million (of which $48 million were non-cash contributions – primarily clothing, cosmetic kits which were donated by the cosmetic industry, securities that were sold, wigs, guest rooms, real estate, etc).  Most revenue ($780 million or 96% of revenue) derived from contributions, gifts, and grants including fundraising events.

Expenses totaled $849 million (not including depreciation) and can be viewed two ways: by broad subject categories (Grants, Program Services, Management, and Fundraising) or by specific line item categories (i.e. compensation-related, office-related, grants, travel and conferences, etc). Both ways provide valuable information with the former providing an overview and the later providing specific information on where revenue was spent.

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

The $849 million in expenses were reported in the following four (4) categories:

• $464 million (or 57% of revenue):  Program Services
• $171 million (or 21% of revenue):  Grants
• $166 million (or 20% of revenue):  Fundraising Expenses
• $ 48 million (or 6% of revenue):  Management Expenses

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

$100:  Revenue

-$ 21:  Fundraising Expenses

-$  6:  Management Expenses

-$ 27: Subtotal:  Fundraising and Management Expenses

$ 73:  Revenue Remaining

-$ 57: Program Services

-$ 20: Grants

-$ 77: Subtotal:  Program Services and Grants

-$  4:  Amount Over

As illustrated above, ACS spent $104 for every $100 in revenue, the overage ($36 million or $4 for every $100 received) of which was covered by the organization who had $1.1 billion in net fund assets at year-end.

Expenses by Specific Line Item Category

The $849 million in expenses were reported in the following specific categories:

• $456 million (or 56% of revenue):  Compensation-related Expenses
• $171 million (or 21% of revenue):   Grants
• $103 million (or 12% of revenue):  Office-related Expenses (office, occupancy, IT, insurance)
• $ 38 million (or 4% of revenue):  Advertising and Promotion
• $ 30 million (or 4% of revenue):  Fees for Services (no detail provided)
• $ 23 million (or 3% of revenue):  Travel and Conferences
• $ 13 million (or 2% of revenue):  Printing
• $ 12 million (or 2% of revenue:  Fees for Services (management,accounting, legal, investment, fundraising)
• $  3 million (or 0% of revenue:  Medals and Recognition

As illustrated above, the organization’s largest expense is compensation-related. $456 million (or $56 our of every $100 in revenue) was spent on the 6,679 employees, which equates to an average compensation of $68,000. However, 368 individuals received more than $100,000 in compensation with the highest compensation given to the former COO, Gregory P Bontrager, who received more than $2.3 million, followed by the outgoing SVP for Field, Joseph C Cahoon who received nearly $1 million.

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

$100:  Revenue

-$ 56:  Compensation-related Expenses

-$ 12:  Office-related Expenses

-$  4:  Fees for Services (no detail provided)

-$   3:  Travel and Conferences

-$  4:   Advertising and Promotion

-$  2:  Printing

-$  2:  Fees for Services (accounting, legal, management, investment, and fundraising)

-$ 83: Subtotal:  Organization Expenses

-$ 17:  Revenue Remaining

-$ 21:  Grants

-$   4:  Amount Over

As illustrated above, compensation-related expenses took $56 out of every $100 in revenue, followed by $12 out of every $100 for office-related expenses.

GRANTS

The ACS awarded $171 million in grants, $149 million to domestic organizations, $20 million to domestic individuals, and $2 million to foreign organizations.  342 grants greater than $5,000 were awarded with the 12 highest recipients listed as follows:

• $34.8 million to the American Cancer Society Action Network (a 501 (c) (4) to support ACS
• $ 4.6 million to the Regents of the University of Colorado for Research
• $ 4.1 million to the University of Texas MD Anderson Cancer Center for Research
• $ 3.5 million to the University of Maryland for Research
• $ 3.0 million to the University of Pittsburgh for Research
• $ 2.8 million to the Regents of the University of Minnesota for Research
• $ 2.6 million to Duke University for Research
• $ 2.6 million to Johns Hopkins University for Research and Cancer Control
• $ 2.4 million to the Regents of the University of California for Research
• $ 2.3 million to the University of Chicago for Research
• $ 2.2 million to the NYU School of Medicine for Research
• $ 2.0 million to Indiana University for Research and Tobacco Control

The largest grant was given to an affiliated organization – the American Cancer Society Action Network” to support the American Cancer Society.  Most of the other grants were to support research.  A total of $66.9 million was awarded to the 12 organizations listed above.

Of the $20 million in grants to individuals:

• 60,472 individuals received a total of $5 million in both cash and non-cash grants (average grant of $83)
• 46,929 individuals received $11.6 million in cosmetic kits (average value of $247)
• 3,262 individuals received cash and non-cash grants for wigs worth $1.8 million (average grant of $552)

FUNDRAISING

The ACS uses all types of fundraising – mail, e-mail, telephone, in-person, internet, and special event fundraising along with the solicitation of grants from the government and other organizations.  The 10 highest paid fundraisers were:

• Caswell Zachary Grizzard was compensated $901,435 for planned giving strategy.
• Charity Dynamic, a General Development Consultant,  raised $2.020,246 and was compensated $123,420, netting ACS $1,896,826.
• Defilippo and Associates raised $326,070 and was compensated $50,071 for fundraising recruitment, netting ACS $275,999.
• Dini Spheres, Inc. raised $2,065,983 and was compensated $76,000, netting ACS $1,989,983.
• M & R Strategic Services raised $2,045,155 and was compensated $543,850, netting ACS $1,859,305.
• Merkle Group, Inc. raised $38,435,165 (though direct mail) and was compensated $3,015,870, netting ACS $35,419,295.
• PMX Agency, LLC raised $5,912,075 (through direct mail) and was compensated $1,030,460, netting ACS $4,881,615.
• The Fund Development Group raised $1,356,074 and was compensated $25,131, netting ACS $1,330,943
• X’s and O’s of Success, LLC, a fundraising consultant, raised $805,763 and was compensated $99,730, netting ACS $706,033.
• Social Capital, Inc., a fundraising consultant, was paid $125,000.

The 10 organizations listed above raised $53.3 million, were compensated $6 million, netting ACS $47.3 million.

ACS also conducted 441 fundraising events that produced gross receipts of $431.6 million. After subtracting $384.4 million of contributions, the gross income from these events totaled $47.1 million. ACS spent $47.1 million on facility costs, prizes, food and beverages, entertainment, and other direct expenses ($17.7 million – no detail provided). So, these events did not raise any additional funds beyond the contributions.

INDEPENDENT CONTRACTORS

The five highest paid independent contractors were:

• $3,015,870: Merkle, Inc. of Baltimore, MD for professional fundraising
• $1,497,013:  Fisher Bioservices, Inc. of Boston, MA for lab services
• $1,249,526:  Neudesic LLC of Irvine, CA for tech consulting
• $1,210,709:  ADP, Inc of Augusta, GA for payroll services
• $1,139,884:  Forty Four LLC of Atlanta, GA for media consulting

ASSETS, LIABILITIES, AND NET FUND ASSETS

ACS reports $1.7 billion in assets as of the end of 2016, with nearly $1 billion in publicly traded securities and cash.  $321 million is in the beneficial interest in trusts while $233 million is in land, buildings, and equipment.

Liabilities totaled $582 million with the two largest liabilities $288 million in accounts payable and $201 million in grants payable.

At year-end, ACS had $1.1 billion in net fund assets, of which $499 million was unrestricted, $306 million temporarily unrestricted, and $286 million restricted.

SUMMARY AND CONCLUSIONS

The ACS raises about $800 million a year and spends more than half the revenue on staff compensation because the organization provides many services to the public.  Although these services are beneficial, it is unclear why only 21% of revenue is spent on grants (primarily research).

Two other issues pop out:  the $30 million spent on fees for services (no detail provided) and the high compensation for the management at the top (and those that left the organization).

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