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August 22, 2018

Where Does $100 To Food For The Poor Go?

by Anne Paddock

Food For The Poor has been in the news over the past few years. First, there was the scandal with the founder and president who resigned after allegations of sexual and financial misconduct when funds (estimates range from $275,000 to $400,000) were diverted to two female employees in which he was involved (note: the money was paid back to the charity). Then, allegations were made of employing family members (the Mayfood family who are still involved with the organization) and doing business with for-profit companies in which family members are involved.

More recently (2018), the Attorney General in California issued a cease and desist order claiming the Florida-based charity (that primarily operates in Latin America and the Caribbean) over-inflated the value of its donated goods (primarily prescription medications that are near their expiration date and cannot be sold in the US) which provides a win-win for both the donor (the pharmaceutical company who gets the full charitable deduction) and the charity (Food For The Poor who appears to be more efficient than what they are by having a high value on donations which are booked as revenue thereby making the ratio of expenses to revenue look better than they actually may be).

To better understand Food For The Poor, it is helpful to understand the organization. For the past several years, the organization has raised about $1 billion annually, about 85-90% of which is in donated goods while the remainder has been in cash. Although their name suggests they raise money for food, they primarily collect pharmaceuticals, medical supplies, textbooks, clothing, household items, and building supplies, and distribute most of these goods to “the poorest of the poor in 17 countries throughout the Caribbean and Latin America” along with their Christian ministry beliefs.

Key financial information (based on the 2017 IRS Form 990) about Food For The Poor is summarized a follows:

$948 million in revenue was reported of which $800 million (84%) were non-cash contributions, leaving $148 million (16%) as actual cash revenue.

Expenses totaled $949 million, most of which – $873 million (92% of revenue) were grants and of those total grants, $866 million were provided to foreign governments and individuals.

If the non-cash contributions that were made and given in grants in 2017 are not considered, then $148 million in revenue was collected while $149 million in expenses were incurred in the following categories:

  • $73 million (or 49% of revenue):  Grants
  • $25.3 million (or 17% of revenue):  Compensation, Salaries, Benefits, Pension, Payroll Taxes
  • $19.7 million (or 13% of revenue):  Freight
  • $14.7 million (10% of revenue):  Advertising
  • $11.1 million (7% of revenue):  Office-Related Expenses
  • $2.4 million (or 2% of revenue):  Travel and Conferences
  • $1.7 million (or 1% of revenue):  Fees for Services (investment, fundraising, acct, legal, and mgmnt)
  • $1.1 million (or 1% of revenue):  Miscellaneous (other, uncollectable pledges, etc)

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

$100:  Revenue

-$ 17:  Compensation, Salaries, Benefits, Pension, Payroll Taxes

-$ 10:  Advertising

-$  7:  Office-Related Expenses

-$  2:  Travel and Conferences

-$  1:  Fees for Services

$  1:  Miscellaneous

-$ 38: Subtotal of Expenses

 $ 62:  Revenue Remaining

-$ 49:  Grants

-$ 13:  Freight

$   0:  Amount Remaining

As illustrated above, Food For The Poor spent $38 out of every $100 on administrative expenses related to running the organization while the remaining $62 was spent on grants and freight to transport the grants.

If we look at the finances from a perspective of function:  program, management, and fundraising, then the following expenses were reported:

  • $98 million (or 66% of revenue): Program Services
  • $42 million (or 28% of revenue):  Fundraising
  • $ 9 million (or 6% of revenue):  Management

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

$100:  Revenue

-$ 28:  Fundraising

-$  6:  Management

-$ 34:  Subtotal Fundraising and Management Expenses

  $ 66:  Revenue Remaining

-$ 66:  Program Services

$    0:  Amount Remaining

Looking at the above analysis, it appears the organization spends a significant sum of revenue on fundraising (which is not clear when looking at the website because the organization includes non-cash donations as revenue which makes revenue higher and overall expenses appear lower as a percentage of revenue). Rather than looking like they spent 95% of revenue on program services, Food For The Poor spent 62-66% of revenue on what could be considered program services.

Food For The Poor basically spent or distributed all revenue and goods received in 2017. At year-end, the organization had $36 million in net fund assets (which they paid nearly $1 million in investment fees to manage).

To read the IRS Form 990 (2017), click here.

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