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July 4, 2019

Where Does $100 to the American Lung Association Go?

by Anne Paddock

The American Lung Association (ALA) was established more than 100 years ago (1918) initially to fight tuberculosis but expanded its mission to improve lung health and preventing lung disease through research, education, and advocacy.

Specifically, ALA works to “defeat” lung cancer, “improve” the air we breathe, “reduce” the burden of lung disease on individuals and families, and “eliminate” tobacco use and tobacco-related diseases. To do this, the organization relies on staff (626 people) so the organization is a non-profit (a 501 (c) (3)) that provides services more than a grant maker (ALA made $8 million in grants in 2018).

Based in Chicago, Illinois, the ALA has local offices nationwide. In 2018, total revenue was $108 million compared to $43 million in 2017 – a $65 million increase that appears to be due to higher contributions and grants (approximately $65 million came from contributions and $25 million from grants while $8 million came from investment income, $5 million from program services, and $5 million from other sources). However, the real reason is attributable to uniting the eight chartered organizations and the national office as a single unified nationwide organization.

Expenses totaled $104 million in 2018 and can be viewed two ways:  by broad general categories (i.e. grants, program services, management, and fundraising) or by specific line-item category with the latter providing more detail on how revenue was spent.

Expenses by Specific Line Item Category

The $104 million in expenses were categorized as follows:

  • $ 46 million (43% of revenue):  Compensation
  • $ 23 million (21% of revenue):  Fees for Services (primarily consulting)
  • $ 14 million (13% of revenue):  Direct Mail and Advertising
  • $  9 million (8% of revenue):  Office-related Costs
  • $  8 million (7% of revenue):  Grants
  • $  3 million (3% of revenue):  Travel and Conferences
  • $  1 million (1% of revenue):  Other Expenses

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

$100:  Revenue

-$ 43:  Compensation

-$ 23:  Fees for Services (primarily consulting)

-$ 13:  Direct Mail and Advertising

-$  8:  Office-related Costs

-$  3:  Travel and Conferences

-$  1:  Other Expenses

-$ 89: Subtotal: Compensation, Fees, Direct Mail, Office, Travel and Other Expenses

$ 11:  Revenue Remaining

-$  7: Grants

$  4: Unspent Revenue:  To Net Fund Assets

As illustrated above, $96 out of every $100 in revenue was spent with the four largest expenses being compensation for the 626 staff who were compensated $46 million which equates to an average compensation of $73,500, frees for services (primarily consulting), direct mail and advertising, and office-related costs. The unspent revenue ($4 out of every $100 or $4 million out of the $108 million) was placed in net fund assets which increased from $20 million at the beginning of the year to $149 million at year-end (note:  the increase is primarily due to the consolidation of the ALA offices into one unified nationwide ALA office).

Expenses by Broad General Category

The $104 million in expense were categorized as follows:

  • $ 81 million (75% of revenue):  Program-related
  • $ 12 million (11% of revenue):  Fundraising
  • $  8 million (7% of revenue):  Grants
  • $  3 million (3% of revenue):  Management

As illustrated above, the largest expense was for programs followed by fund-raising.  $4 million of total revenue was unspent and went to the net fund assets (think savings account).

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

 $100:  Revenue

-$ 75:  Program-related expenses

-$ 11:  Fundraising

-$  7:  Grants

-$  3:  Management

-$ 96: Total Expenses

$  4:  Unspent Revenue:  To Net Fund Assets

As illustrated above, $75 out of every $100 in revenue was spent on program-related costs.

To read the IRS Form 990 (2017) for the year ending June 30, 2018, click here

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