Where Does $100 to Shriners Hospitals Go?

Shriners Hospitals for Children is a network of 22 hospitals that provide specialized pediatric care (orthopaedic, burn, spinal cord, and palate) for children under the age of 18. According to the Shriners website, 20 out of the 22 hospitals are located in the United States and file IRS Form 990’s under two corporations:

• The Shriners Hospitals for Children (for 18 of the hospitals in the US) – a Colorado corporation based in Tampa, Florida; and
• The Shriners Hospitals for Children (for 2 of the hospitals in Massachusetts) – a Massachusetts corporation based in Tampa, Florida.

The Shriners Hospitals for Children (the Colorado corporation for 18 hospitals)

The Shriners Hospitals for Children – Colorado (SHC – Colorado) is a non-profit 501 (c) (3) based in Tampa, Florida that includes 18 hospitals in the US. Key information about SHC – Colorado is summarized below (based on the IRS Form 990 (2017):

SHC – Colorado has net assets of $8.3 billion, which provides significant investment income to the organization.

SHC – Colorado reported $838 million in 2017, which primarily came from three (3) sources:

• $360 million in contributions, gifts, and grants (including $37 million from the government)
• $332 million in investment income, gain on the sale of assets, etc
• $144 million in patient services (i.e. insurance payments)

SHC – Colorado reported $815 million in expenses (not including $41 million in depreciation) which can be viewed two (2) ways:  by broad general category (i.e. grants, program services, management, and fundraising) or be specific line item categories (i.e. grants, compensation, office-related expenses, travel and conferences, medical supplies, fees for services, etc). Both ways are beneficial with the latter providing more detail.

Expenses by Broad General Category

The $815 million in expenses were categorized as follows:

• $630 million (75% of revenue):  Program Service Expenses
• $ 88 million (11% of revenue):  Management Expenses
• $ 52 million (6% of revenue) :  Fundraising Expenses
• $ 45 million (5% of revenue):  Grants

It is important to note of the $45 million in grants, $20 million was awarded to SHC – Mass (2 hospitals), $19 million to the Shriners Hospital in Mexico and $6 million was awarded to the Shriners Hospital in Canada.

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

$100:  Revenue

-$ 75: Program Service Expenses

-$  5:  Grants

-$ 80: Total Program Service Expenses and Grants

$ 20:  Revenue Remaining

-$ 11:  Management Expenses

-$  6:  Fundraising Expenses

-$ 17:  Total Management and Fundraising Expenses

$  3:  Revenue Remaining

It is important to note that depreciation, a non-cash expense ($41 million) was not included above. If included, expenses totaled $856 million, resulting in an $18 million loss. However, SHC – Colorado had $620 million in unrealized gains on assets and a $106 million adjustment based on intracompany asset growth resulting in net fund assets increasing from $7.5 billion at the beginning of the year to $8.3 billion at year-end – an $800 million increase which is substantial.  Basically the organization that collected about $800 million, spent $800 million, but still came out ahead by $800 million because of investment gains.

Expenses by Specific Line Item Category

The $815 million in expenses were categorized as follows:

• $418 million (50% of revenue):  Compensation-related Expenses
• $149 million (18% of revenue):  Fees for Services (fundraising, investment, PR, program, mgmnt) and Other Fundraising
• $ 85 million (10% of revenue):  Medical Supplies and Patient Costs
• $ 66 million (8% of revenue):  Office-related Expenses
• $ 45 million (5% of revenue):  Grants
• $ 31 million (4% of revenue):  Advertising and Promotion
• $  9 million (1% of revenue):  Travel and Conferences
• $  7 million (0.5% of revenue):  Other Expenses (no detail provided)
• $  5 million (0.5% of revenue):  Interest, Fees, Taxes

As illustrated above, the largest single category expense was compensation-related costs for the 5,537 employees who were compensated $418 million, which equates to an average compensation of $76,000.

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

$100:  Revenue

-$ 50:  Compensation-related expenses

-$ 18:  Fees for Services

-$ 10:  Medical Supplies and Patient Costs

-$  8:  Office-related expenses

-$  4:  Advertising and Promotion

-$  1:  Travel and Conferences

–$  1:  Other Expenses, Interest, Fees, and Taxes

-$ 92: Subtotal Expenses

$  8:  Revenue Remaining

-$  5:  Grants

$  3:  Revenue Remaining

As illustrated above, revenue was primarily spent on compensation for the medical staff, fees for outside services, medical supplies and patient costs, office-related expenses and advertising and promotion. With regard to advertising and promotion, it is important to point out SCH – Colorado used Edge Direct of Baltimore Maryland for direct mail solicitation and tv ads which raised $36.3 million. Edge Direct was compensated $9.9 million (27% or $27 out of every $100 they raised), leaving $26.4 million for SCH – Colorado. So, if your donation was through Edge Direct, then $73 out of every $100 was given to SHC – Colorado.

It is also important to point out SCH – Colorado provides first class flights for board members and executive staff whose flights are more than 2.5 hours long. Companion travel is provided for board members whose companion is participating in Shriners business. And, temporary housing allowances were provided for recruited individuals when relocation was required.

The Shriners Hospitals for Children (the Massachusetts corporation for 2 hospitals)

The Shriners Hospitals for Children – Massachusetts (SHC – Mass) is a non-profit 501 (c) (3) based in Tampa, Florida that includes 2 hospitals in Massachusetts. Key information about SHC – Mass is summarized below (based on the IRS Form 990 (2017):

SHC – Mass has net assets of $1.1 billion, which provided a significant portion of income to the organization.

SHC – Mass reported $86 million in 2017, which primarily came from three (3) sources:

• $51 million:  Investment income, Gain on the sale of assets, and rents
• $26 million:  Contributions, gifts, and grants (of which nearly $20 million came from SHC – Colorado)
• $ 8 million:  Patient Services (i.e. patient insurance)

SHC – Mass reported $65.1 million in expenses (not including $4 million in depreciation) which can be viewed two (2) ways:  by broad general category (i.e. program services, management, and fundraising) or be specific line item categories (i.e. compensation, office-related expenses, travel and conferences, medical supplies, fees for services, etc). Both ways are beneficial with the latter providing more detail.

Expenses by Broad General Category

The $65.1 million in expenses were categorized as follows:

• $60.9 million (71% of revenue):  Program Services
• $ 3.7 million (4% of revenue):  Management Expenses
• $  .5 million (1% of revenue):  Fundraising Expenses

At year-end, SHC – Mass was able to increase their net fund assets from $1.058 billion to $1.147 billion because they spent less than what they raised and also because the organization had $94 million of net unrealized gains on investments. With the size of their endowment, SCH – Mass earned more in investment income than the hospital spent last year.

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

$100:  Revenue

-$ 71:  Program Services

-$  4:  Management Expenses

-$  1:  Fundraising Expenses

-$ 76: Total Program, Management, and Fundraising Expenses

 $ 24:  Revenue Remaining 

As illustrated above, SCH – Mass spent $76 out of every $100 in revenue raised.

Expenses by Specific Line Item Category

The $65.1 million in expenses were categorized as follows:

• $36.1 million (42% of revenue):  Compensation-related expenses
• $15.7 million (18% of revenue):  Fees for Services (investment, medical program services)
• $ 7.3 million (9% of revenue):  Medical Supplies and Patient Costs
• $ 4.9 million (6% of revenue):  Office-related expenses
• $  .4 million (0.4% of revenue):  Advertising
• $  .4 million (0.4% of revenue):  Other Expenses
• $  .3 million (0.2% of revenue):  Travel and Conferences

As illustrated above, the largest expense category was for compensation-related expenses for the 543 employees who were compensated $36.1 million, which equates to an average compensation of $66,500.

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

 $100:  Revenue

-$ 42:  Compensation-related expenses

-$ 18:  Fees for Services

-$  9:  Medical Supplies and Patient Costs

-$  6:  Office-related expenses

-$  1:  Advertising, Other, Travel and Conferences

-$76: Total Expenses

 $24:  Revenue Remaining

As illustrated above, revenue was primarily spent on compensation for the medical staff, fees for services, medical supplies and patient costs, and office-related expenses.

It is also important to point out SCH – Mass provides first class flights for board members and executive staff whose flights are more than 2.5 hours long.  Companion travel is provided for board members whose companion is participating in Shriners business. And, temporary housing allowances were provided for recruited individuals when relocation was required.

SUMMARY

In summation, the 20 Shriners Hospitals for Children in the United States raised nearly $925 million and spent about $880 million in 2017. Because the organizations have substantial endowments, significant investment income and unrealized gains on investments were realized, increasing the net fund assets by nearly $1 billion to nearly $9.5 billion at year-end, which is notable. In other words, if the hospitals cease to raise funds in the future, the endowment can fund the 20 hospitals’ operations for at least 10 years.

To read the IRS Form 990 for SHC – Colorado (2017), click here.

To read the IRS Form 990 for SHC – Mass (2017), click here.

To read an update, click on:  “Where Does $100 to Shriners Hospitals Go (2018)?“