Where Does $100 to Mathew 25 Ministeries Go?

Mathew 25 Ministries (M25M) is a Cincinnati, Ohio-based 501 (c) (3) that delivers humanitarian aid and disaster relief supplies to those in need.

In 2017, M25M collected goods and shipped more than 900 40-foot containers of food, clothing, medical supplies, school supplies and hygiene products to 33 countries and 24 sites in the United States. They did this with 112 employees who received total compensation of $3.7 million, which equates an an average compensation of $33,000 (compare this to Samaritan’s Purse whose average compensation was $49,000 in 2017).

In 2017, M25M reported the following key information on the IRS Form 990:

$218 million in revenue was collected, of which $205 million were non-cash contributions (food, clothing, medical supplies, school supplies, hygiene products, etc). $9 million came from contributions, gifts, and grants, while $4 million came from program services (handling and processing fees, Loads of Hope, Missions Hotel, camp, and product sales) and other sources (investment income, gains, etc). In terms of cash contributions, M25M collected $13 million in 2017.

Expenses totaled $211 million in 2017, of which $205 million were grants ($51 million in the US and $154 million to foreign organizations, primarily Central America and the Caribbean). Although most of the grants were non-cash, the exact amount is not reported because only grants greater than $5,000 are reported on the 990.  What we do know is the following:

• Foreign Organizations:  $148.6 million in non-cash grants and $0.7 million in cash grants were made to foreign organizations. So, $4.7 million in other grants (below $5,000) were made but it is unclear how much of these grants were non-cash or cash.
• Domestic Organizations:  $43.8 million in non-cash grants were made to domestic organizations.  So, $7.2 million in other grants (again, grants below $5,000) were made but it is unclear how much of these grants were non-cash or cash.
• Collectively (domestic and foreign) grants of $11.9 million ($4.7 million + $7.2 million) were made in which we don’t know how much were non-cash or cash grants. If we look at the balance sheet, two pieces of information pop out:  inventories increased by $4 million from $61.5 million at the beginning of the year to $65.5 million at the end of the year; and second, cash increased by nearly $3 million.  So, it appears that $4 million of the non-cash contributions were not distributed (thereby increasing inventories) which means $4 million of the $11.9 million in grants were probably cash contributions and $7.9 million were non-cash grants. In other words, of the $205 million in grants, $201 million appear to be non-cash grants while $4 million appears to be cash grants (but, again this an estimate based on the information provided on the 990).

Using this information, an analysis of revenue and expenses follows based on total revenue and total expenses and also cash revenue and cash expenses. It is important to look at revenue and expenses both ways because this is an organization that is primarily engaged in moving non-cash contributions so to understand how cash revenue is being spent, the non-cash revenue and expenses need to be excluded for one part of the analysis.

Expenses can be viewed by large broad categories (grants, program, management, and fundraising) or by specific line item categories. Both provide beneficial insight into the organization with the latter providing more detail.

Expenses by Broad Category

The $211 million in expenses were categorized as follows:

• $201 million (92% of total revenue):  Non-cash Grants
• $    4.0 million (2% of total revenue):  Cash Grants
• $    4.7 million (2% of total revenue):  Program Services
• $    1.3 million (1% of total revenue):  Management ($0.6 million) and Fundraising ($0.7 million) Expenses

$7 million in revenue was not used and was added to the net fund balance (think savings account):  $4 million appears to be in inventories while $3 million appears to be in cash, along with net unrealized gains on investments, which increased the net fund balance from $73 million at the beginning of the year to $80 million at year-end.

Using the above information, cash revenue ($13 million) and cash expenses ($10 million) can be summarized as follows:

• $4.0 million (31% of cash revenue):  Cash Grants
• $4.7 million (36% of cash revenue):  Program Services
• $0.6 million (5% of cash revenue):  Management Expenses
• $0.7 million (5% of cash revenue):  Fundraising Expenses

The total of Program Service, Management, and Fundraising Expenses was $6 million. After adding cash grants of $4 million, the total amount of cash spent appears to be $10 million, leaving $3 million in cash to be added to the net fund balance.

Using the above information, cash revenue in 2017 appears to have been spent as follows:

 $100:  Revenue

-$ 36: Program Service Expenses

-$  5:  Management Expenses

-$  5:  Fundraising Expenses

-$ 46: Subtotal Program Service, Management, and Fundraising Expenses

 $ 54:  Revenue Remaining

-$ 31:  Cash Grants

 $ 23:  Revenue Remaining:  To Net Fund Balance

As illustrated above, M25M appears to have spent $46 out of every $100 in renenue on Program Service, Management, and Fundraising Expenses. An additional $31 appears to have been spent on grants, leaving $23 out of every $100 in cash revenue unspent and added to the net fund balance.

Expenses by Specific Line Item Category

The $211 million in expenses were reported as follows:

• $201 million (92% of total revenue):  Non-Cash Grants
• $  4 million (2% of total revenue:  Cash Grants
• $  3.7 million (2% of total revenue):  Compensation-related Expenses
• $  1.0 million (0.5% of total revenue):  Office-Related Expenses
• $  1.0 million (0.5% of total revenue):  Other Expenses (Bank Fees, Travel, Conferences, Depreciation)
• $  0.2 million (0.1% of total revenue):  Equipment Rental, Accounting, Legal, Investment Fees
• $  0.1 million (0.05% of total revenue):  Advertising and Promotion, Printing and Publications

As illustrated above, the two highest specific line item expenses are cash grants and compensation for the 112 employees.  Only 3 individuals received more than $100,000 in total compensation:

• $239,212: Tim Mettey, CEO
• $151,829:  Wendell E Mettey, President
• $131,088:  Karen Otto, Vice President

Cash revenue ($13 million) and cash expenses ($10 million) can be summarized as follows:

• $  4 million (31% of cash revenue):  Cash Grants
• $  3.7 million (28% of cash revenue):  Compensation-related Expenses
• $  1.0 million (8% of total revenue):  Office-Related Expenses
• $  1.0 million (8% of total revenue):  Other Expenses (Bank Fees, Travel, Conferences, Depreciation)
• $  0.2 million (1% of total revenue):  Equipment Rental, Accounting, Legal, Investment Fees
• $  0.1 million (1% of total revenue):  Advertising and Promotion, Printing and Publications

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

 $100:  Revenue

-$ 28:  Compensation-Related Expenses

-$  8:  Office-related Expenses

-$  8:  Other Expenses

-$  1:  Equipment Rental and Fees for Services

-$  1:  Advertising,Promotion, Printing, and Publications

-$ 46:  Subtotal Expenses

 $ 54:  Amount Remaining

-$ 31:  Cash Grants

$ 23:  Revenue Remaining:  To Fund Balance

As illustrated above, M25M spent $46 out of every $100 in cash revenue to pay for staff and support fees to move the non-cash contributions and cash contributions to persons in need.

The 990 reports the following information:

• Wendell E Mettey receives a housing allowance.
• Wendell E Mettey, Tim Mettey and Director Claire Iery are related.

In 2017, M25M spent about $6 million to move more than $200 million in goods to persons in need in the United States and 33 foreign countries.  $4 million in cash grants appear to have been made.

There were no high salaries, first class or charter travel, and the average compensation for the employees was only $33,000. There are not a lot of non-profits with employee costs this low. About the worst thing that could be said of the organization is that both the CEO and the President and one of the 12 Directors are related so there is an inherent conflict of interest, especially when the 990 reports that potential conflicts of interest are resolved by the President and the Chairman of the Board.

The bottom line is that the organization spent $46 out of every $100 in cash revenue in 2017 (primarily for staff, office, and support functions), $31 out of every $100 in cash revenue on cash grants, leaving $23 out of every $100 in cash revenue to the fund balance at year-end.

To review the IRS Form 90 (2017), click here.