Where Does $100 to the Rotary Foundation Go?

The Rotary Foundation is literally the foundation of the Rotary clubs across the world. Although Rotarians conduct meetings, go to conferences, do community service projects, and collect funds from each other to support Rotary International and the Rotary Foundation, the Rotary Foundation is the entity that awards almost all the grants, most of which ($207 million out of $230 million) are to overseas organizations, which may surprise many people.

In the most simplistic terms, the Rotary Foundation engages in primarily two functions:  they manage their endowment ($1.06 billion as of June 30, 2017) and award grants (again, primarily to foreign organizations) – $69 out of every $100 in revenue collected in 2017 were awarded in grants.

In 2017, the Rotary Foundation reported the receipt of $333 million that came primarily from contributions ($305 million) and investment income/gain on the sale of assets ($28 million).

Expenses totaled $284 million and can be viewed two ways:  by broad general category (grants, program, management, and fundraising) or by specific line item category (i.e. grants, compensation, office-related expenses, fees for services, travel and conferences, etc). Both provide important information on how revenue is spent with the latter approach providing more specific detail on how revenue is spent.

$49 million was not spent and was added to the fund balance. At the beginning of the year, the net fund assets totaled $930 million. After adding the unspent revenue and the unrealized gain of $78 million, the year-end balance was $1.06 billion.

Expenses by Broad General Category

The $284 million in expenses were categorized as follows on the IRS Form 990 (2016) for the year ending June 30, 2017:

• $230 million (69% of revenue):  Grants
• $ 24 million (7% of revenue):  Program Services
• $ 21 million (6% of revenue):  Fundraising Expenses
• $  9 million (3% of revenue):  Management Expenses

Grants totaling $230 million were primarily awarded to overseas organizations and individuals ($207 million) while $23 million in grants were awarded domestically. Grants are given to support humanitarian projects, scholarships, and vocational training. In addition, grants are awarded to rotary districts to support goals and to partners to carry out the mission of the Rotary Foundation.

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

$100:  Revenue

-$ 69:  Grants

-$   7:  Program Services

-$   6:  Fundraising Expenses

-$   3:  Management Expenses

-$ 85:  Total Grants, Program, Fundraising, and Management

$  15:  Revenue Not Spent:  To Fund Balance

As illustrated above, $69 out of every $100 in revenue collected in 2017 was distributed in grants, most of which were to overseas organizations. 1,236 grants greater than $5,000 were awarded to organizations not recognized as tax exempt by the IRS.  The Rotary Foundation has 8 overseas offices staffed by 64 employees.

The 990 does not list the specific recipients but the regions and the amount of the grants are listed for those grants greater than $5,000:

• South Asia:  $81 million
• Sub-Saharan Africa:  $64 million
• East Asia and the Pacific:  $32 million
• Europe:  $11 million
• Central America:  $9 million
• South America:  $8 million
• North Africa and the Middle East:  $4 million
• North America:  $4 million
• Russia:  Less than $1 million

In addition, 286 individuals from outside the United States were awarded grants and assistance totaling $9.2 million (or an average of $32,200 each).

Domestically, the Rotary Foundation awarded 287 grants greater than $5,000 to organizations, 138 to other 501 (c) (3)’s and 149 to other organizations.  The largest grants were awarded to:

• $1,500,000:  Serving Hands International of San Diego, California for Economic and Community (E & C)
• $933,744:  Whispering Winds Catholic Camp of San Diego, California for E & C
• $400,000:  Dynamic Catholic Institute of Erlanger, Kentucky for E & C
• $280,000:  Life Perspective of San Diego, California for E & C
• $250,000:  One World Children’s Fund of San Francisco, CA for E & C
• $210,000:  Wakefield Rotary Charitable Foundation of Kingston, Rhode Island for E & C
• $180,593:  Rotary District 770 of Bluffton, South Carolina for E & C
• $177,893:  Rotary District 6900 of Griffin, Georgia for E & C
• $169,944:  Rotary Club of Alamo of Walnut Creek, California for Disease Prevention
• $163,659:  Rotary District 5950 of Grove Heights, Minnesota for E & C
• $159,380:  Rotary District 5870 of Austin, Texas for E & C
• $157,759:  Rotary District 5020 of Bainbridge Island, Washington for E & C
• $156,104:  Rotary District 5160 of Berkley, California for E & C
• $153,961:  Rotary District 5280 of Palos Verdes, California for E & C

As illustrated above, the Rotary Foundation awards many grants to Rotary Districts. In essence, the Rotarians (and/or the Rotary Districts and/or the Rotary Zones) make donations to the Rotary Foundation who turns around and awards grants to specific districts.

113 grants for scholarships and fellowship totaling $3.8 million (an average of $33,600 each) were awarded to domestic individuals.

Expenses by Specific Line Item Category

The $284 million in expenses were categorized as follows:

• $230 million (69% of revenue):  Grants
• $ 28 million (9% of revenue):  Compensation-related Expenses
• $   9 million (3% of revenue):  Office-related Expenses
• $   7 million (2% of revenue):  Fees for Services (primarily investment management and other fees)
• $  4 million (1% of revenue):  Travel and Conferences
• $  2 million (0.5% of revenue):  Reserve for Pledges
• $  1 million (0.5% of revenue):  Other Expenses (detail not provided)

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

$100:  Revenue

-$ 69:  Grants

$ 31:  Revenue Remaining

-$  9:  Compensation-related Expenses

-$  3:  Office-related Expenses

-$  2:  Fees for Services

-$  1:  Travel and Conferences

-$  1:  Reserve for Pledges and Other Expenses

-$ 16: Subtotal Administrative Expenses

$  15:  Revenue Remaining:  To Fund Balance

As illustrated above, the Rotary Foundation spent $16 out of every $100 in revenue on administrative support expenses and $69 out of every $100 on grants.  $15 remained unspent and was added to the fund balance.

In summary, the Rotary Foundation is managing a billion dollar endowment while awarding grants (mostly overseas). $69 out of every $100 in revenue was spent on grants while $16 out of every $100 was spent on expenses to run the organization leaving $15 for the foundation to retain. Although domestic grants were a small portion ($23 million out of $230 million), it is important to point out that a significant portion of the grants were awarded to Rotary Districts, which some may say is redundant. Rotarians donate money to the foundation for the foundation to turn around and award funds in grants. In addition, donors always need to think about whether they are giving to an organization that primarily awards grants (i.e. Rotary Foundation, United Way, etc) or an organization that provides the actual service or product.  Generally, dollars go further to an organization that provides the actual service or product because the administrative support costs of a grantor organization are bypassed.

To read the IRS Form 990 (2017) for the year ending June 30, 2017, click here.