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December 9, 2019

Where Does $100 to the American Heart Association Go (2018)?

by Anne Paddock

The American Heart Association (AHA) is one of the most popular and recognized non-profits in the United States with enormous public support as evidenced by the $852 million raised last year.   That the AHA also has nearly a billion dollars in their net fund balance (which is often referred to as the endowment) is also noteworthy.

By most accounts, this organization is a magnet for public contributions and an expert at raising and saving money.  But, are they accomplishing their mission, which is to build healthier lives, free of cardiovascular disease and stroke (especially with hundreds of recipes on their website calling for eggs, dairy products, beef, poultry, pork – including bacon, a Type 1 carcinogen according to the World Health Organization, oil, sugar and white flour)? With heart disease the number one cause of death in the United States for decades, one has to wonder if all the contributions to the AHA are really helping to prevent and reverse heart disease?

The AHA is a 501 (c) (3) tax-exempt organization and, as such files an IRS Form 990 which details revenue, expenses, executive compensation, assets, liabilities, grants, fundraising, payments to contractors and more.  The most recent IRS Form 990 filed (2017) reflects the operating period from July 1, 2017 to June 30, 2018.

To understand how revenue and expenses, lets look at where revenue comes from and then how it’s spent.

REVENUE

Revenue totaled $852 million and came primarily from three sources:

  • contributions, gifts, and grants: $659 million or 77% of revenue
  • the sale of inventory:  $96 million or 11% of revenue)
  • investment income, gains on the sale of assets, royalties, and rents: $67 million or 8% of revenue

EXPENSES

Expenses can be viewed two ways:  by looking at expenses within four broad categories (program, grants, fundraising, and management) or by looking at specific category expenses (i.e. salaries, travel, office, etc), the latter of which provides more detail.  Both ways are beneficial and simply offer two ways to look at costs:  an overall general view of expenses and a more detailed look at how revenue was spent.

Expenses by Broad Categories (Program, Grants, Fundraising, and Management)

For the year ending June 30, 2018, the AHA reported total expenses of $827 million allocated as follows:

  • $493 million (58% of revenue):  Program Services
  • $173 million (20% of revenue):  Grants
  • $106 million (13% of revenue):  Fundraising
  • $ 55 million (6% of revenue):  Management and General Expenses

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

$100:  Revenue

-$ 13:  Fundraising

-$  6:  Management and General Expenses

-$ 19:  Subtotal Fundraising and Management/General Expenses

$ 81:  Revenue Remaining

-$ 58:  Program Services

-$ 20:  Grants

-$ 78:  Subtotal Program Services and Grants

$  3:  Revenue Remaining:  To General Fund

As illustrated above, the AHA spent $19 out of every $100 on fundraising and management and general expenses.  $58 out of every $100 was spent on program services (note:  this equates to nearly $500 million annually and yet heart disease has and remains the number one cause of death in this country).

Grants

$173 million or $20 out of every $100 was awarded in grants, primarily for research although there were many grants for equipment and education (i.e. addressing obesity). More than 360 grants greater than $5,000 were awarded with the largest recipients listed below:

  • $10,047,503:  Vanderbilt University in Nashville, TN for research
  • $ 9,717,845:  Northwestern University in Evanston, IL for research
  • $ 9,363,805:  Stanford University School of Medicine, San Francisco, CA for research
  • $ 9,267,701:  Brigham & Womens Hospital in Boston, MA for research
  • $ 6,204,972:  Cleveland Clinic Foundation in Cleveland, OH for research
  • $ 4,406,431:  Mass General Hospital, Boston, MA for research
  • $ 3,917,246:  Johns Hopkins University of Baltimore, MD for research
  • $ 3,879,709:  University of Iowa in Iowa City, IA for research
  • $ 3,249,066:  University of Pittsburgh in Pittsburgh, PA for research
  • $ 3,147,108:  University of Kentucky in Lexington, KY for research
  • $ 2,922,972:  University of Virginia in Charlottesville, VA for research
  • $ 2,885,894:  University of CA in Los Angeles, CA for research

Fundraising

The AHA spent $103 million on fundraising, most of which was on compensation and office-related expenses.  AHA participates in mail, phone, internet, email, and in-person solicitations. In addition, the organization solicits for government and non-government grants, and holds special fundraisers.

7,399 fundraising events were held throughout the year generating $337.4 million. After deducting contributions of $309.8 million, the gross income of these events was $27.6 million. AHA spent $40.4 million on expenses for these events (i.e. facility costs, food and beverage, prizes, and entertainment) which means a loss of $12.8 million was recognized.

The 990 reports that AHA paid nearly $3.9 million in professional fundraising fees. These fees were paid to two organizations:

  • Infocision Management for phone marketing. Infocision Management raised $4.2 million but retained $3.8 million, leaving AHA about $400,000. (Bottom line:  donors should not respond to phone solicitors if they want most of their  donation dollars to go to AHA).
  • Insurance Auto Auction of Carmel, Indiana sold donated vehicles that generated $352,000. They kept $90,000 leaving $262,000 to AHA. (Bottom line:  donors should not donate their vehicles if they want more donation dollars to go to AHA. Instead they should sell the vehicle themselves and then make the donation).

Expenses by Specific Line Item Categories

For the year ending June 30, 2018, the AHA reported total expenses of $827 million allocated as follows:

  • $372 million (44% of revenue):  Compensation
  • $173 million (20% of revenue):  Grants
  • $119 million (14% of revenue):  Office-Related Expenses
  • $ 60 million (7% of revenue):  Fees for Services (primarily fees to non-employees, no detail)
  • $ 57 million (7% of revenue):  Travel and Conferences
  • $ 28 million (3% of revenue):  Other expenses
  • $ 11 million (1% of revenue):  Advertising and Promotion
  • $  7 million (1% of revenue):  CPR Training

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

$100:  Revenue

-$ 44:  Compensation

-$ 14:  Office-Related Expenses

-$  7:  Travel and Conferences

-$  7:  Fees for Services

-$  3:  Other Expenses

-$  1:  Advertising and Promotion

-$  1:  CPR Training

-$ 77:  Subtotal Expenses

$ 23:  Remaining Revenue

-$ 20:  Grants

$  3:  Revenue Remaining:  To General Fund

As illustrated above, AHA’s two highest administrative expenses are for staff compensation and office-related expenses. Add in travel and conferences, and fees for non-employees and $72 out of every $100 was spent on these expenses.

It is important to point out 246 independent contractors received more than $100,000 in compensation with the five highest reported to be:

  • $6,143,147:  Freeman Expositions, Inc. of Dallas, Texas for audio video
  • $3,701,404: Infocision Management of Akron, Ohio for phone marketing (note:  Schedule G, Part I Fundraising Activities reports Infocision Management was compensated $3,770,601 so there appears to be a $69,000 discrepancy)
  • $3,270,729:  Slingshot, LLC of Dallas, Texas for digital media
  • $3,182,438:  Scitent of Charlottesville, VA for e-learning
  • $3,147,244:  Rean Cloud, LLC of Herndon, VA for Precision Medic

SUMMARY

In conclusion, most revenue is spent on supporting the organization and its programs (and, yet heart disease remains the number one cause of death in the US). About $20 of every $100 goes to grants for research, equipment, and obesity and anti-tobacco initiatives. The organization spent $57 million on expenses that are not detailed on the tax return (categorized as fees for services and other expenses).  Infocision Management – a key phone solicitor – kept $90 of every $100 they raised for AHA. The questions to ask yourself as a donor include:

  • Do you think the AHA is accomplishing their mission (“to build healthier lives, free of cardiovascular disease and stroke”) with the $850 million the organization raises and spends annually?
  • Is the AHA working to prevent and reduce heart disease and stroke by promoting unpopular lifestyle choices (i.e. whole food plant-based diets) instead of promoting popular foods that contain cholesterol and saturated fats, along with recipes on their website?

If any of your answers are maybe or no, then consider making donations locally to non-profits that need emergency equipment, defibrillators and monitoring equipment, research, and to organizations that address the cause and reduction of heart disease through programs that educate the population on the heart and health benefits of whole food plant-based diets.

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

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