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

The mission of the American Diabetes Association is to prevent and cure diabetes and to improve the lives of all people affected by diabetes.

Established 80 years ago in 1940 when less than a million Americans (or less than 1% of the population) had diabetes, the American Diabetes Association (ADA) is one of the few (if not only) non-profit organizations working against a disease that has increased thirtyfold (The CDC estimates that more than 30 million people in the USA have diabetes – primarily Type 2 which is largely preventable and reversible – and that another 100 million people have pre-diabetes which if not treated often leads to Type 2 within 5 years) over the decades despite hundreds of millions of dollars raised by the organization.

For years, the ADA raised significant amounts of funds but times changed in 2014. After 4 straight years of declining revenues (see chart below; numbers in millions except the average compensation “Avg Comp” which is expressed in actual dollars), the American Diabetes Association reversed the financial trend in 2018, after bringing in a new Chief Executive Officer along with several other executives.

Year                              2013                 1014                 2015              2016                2017             2018

Revenue                         $216                $195               $181               $167               $144            $158

Expenses                       $220               $185               $186               $190               $169              $132

Rev – Exp                        $- 4                $ 10                 $- 5                $-23               $-25               $ 26

Net Assets                     $ 79               $ 89                 $ 82                 $ 59               $ 36               $ 59

# of Employees             1,562             1,475               1,539              1,502            1,277            1,007

Employee Comp             $73                   $71                   $66                 $69                 $60             $52

Avg Comp                    $46,700         $48,100          $42,900            $45,900         $47,000       $52,600

The ADA has cut staff (down to 1,007 employees from 1,562 five years before) and expenses but the real test for the ADA is whether they will ever meet their stated goal of preventing and curing diabetes – one of the most prevalent and fastest growing diseases in the USA.

We can look at the numbers but if the ADA continues to do what they have been doing for years to prevent and reverse diabetes, they are unlikely to meet their goals because it’s not working (hint:  they may want to start by redoing the Diabetes Food Hub which include recipes for deviled eggs, bacon wrapped shrimp, 245 recipes for chicken, 614 recipes that contain oil, 72 recipes that contain butter, and 21 recipes for bacon (a Type 1 carcinogen by the World Health Organization). Note:  for a detailed explanation of why the above foods are bad for Type 2 Diabetes, click here.

REVENUE

In 2018, the ADA raised $158 million which came primarily from four sources:

• $118 million (75% of total revenue):  Contributions, Gifts, and Grants
• $ 29 million (18% of total revenue):  Sub, Regist, Booth Rental, Material Sales
• $  6 million (4% of total revenue):  Advertising, Permissions, and Other Revenue
• $  5 million (3% of total revenue):  Investment Income, Gains, and Royalties

EXPENSES

Expenses totaled $132 million in 2018 and can be viewed two ways:  by broad general category (i.e. grant, program services, fundraising, management and general expenses) or by specific line item categories (i.e. compensation, office-related expenses, travel and conferences, fees for services, grants, etc). Both are beneficial with the latter approach providing more detail on how revenue was spent.

Expenses by Broad General Category

The $132 million in expenses were categorized as follows:

• $79 million (50% of revenue):  Program Services
• $31 million (20% of revenue):  Fundraising
• $13 million (8% of revenue):  Grants
• $ 9 million (6% of revenue):  Management and General Expenses

It is important to note that grants are usually included as a part of program services but it is helpful to separate the two figures out when seeking to understand the role of awarding grants in a non-profit.

For many diseases, non-profits raise funds to award grants for research in hopes of learning more about the disease in search of a cure. What makes Type 2 diabetes so unique is that the disease is largely preventable and reversible with lifestyle changes in diet. Consequently, the awarding of grants is not currently a significant part of program services at ADA. In 2018, ADA made $13 million in grants and almost all of it was to The American Diabetes Association Research Foundation, a non-profit that operates out of the same office as the ADA (note:  In 2017, ADA made $32 million in grants).

As illustrated above, the ADA spent $132 million of the $158 million raised, or 84% of revenue.  The unspent revenue – $26 million – was allocated to the general fund which had $59 million at year-end.

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

 $100:  Revenue

-$ 20:  Fundraising

-$  6:  Management and General Expenses

-$ 26: Subtotal Fundraising and Management/General Expenses

 $ 74:  Revenue Remaining

-$ 50: Program Services

-$  8:  Grants

$ 16:  Revenue Remaining:  To General Fund

As illustrated above, the ADA spent $26 out of every $100 on fundraising and management/general expenses. $58 out of every $100 was spent on programs and grants leaving $16 out of every $100 in revenue unspent and allocated to the general fund.

Expenses by Specific Line Item Category

The $132 million in expenses were categorized as follows:

• $52 million (33% of revenue):  Compensation
• $23 million (15% of revenue):  Office-Related Expenses
• $13 million (8% of revenue):  Grants
• $11 million (7% of revenue):  Printing and Publications
• $ 8 million (5% of revenue):  Fees for Services (i.e. legal, acct, fundraising, other)
• $ 8 million (5% of revenue):  Travel and Conferences
• $ 8 million (5% of revenue):  Other Expenses
• $ 6 million (4% of revenue):  Postage and Handling
• $ 3 million (2% of revenue):  Advertising and Promotion

Compensation is the largest expense for ADA.  In 2018, 1,007 employees were compensated $52 million which equates to an average compensation of $52,600.   99 employees received more than $100,000 in compensation with the most highly compensated employee, Tracey D Brown, the Chief Executive Officer receiving $943,881.

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

$100:  Revenue

-$ 33:  Compensation

-$ 23:  Office-Related Expenses

-$  7:  Printing and Publications

-$  5:  Travel and Conferences

-$  5:  Fees for Services

-$  5:  Other expenses

-$  4:  Postage and Handling

-$  2:  Advertising and Promotion

-$ 76: Subtotal (Comp, Office, Printing, Publications, Travel, Conferences, Fees, PP, Advertising)

$ 24:  Revenue Remaining

-$  8:  Grants

$ 16:  Revenue Remaining:  To General Fund

As illustrated above, $56 out of every $100 was spent on compensation and office-related expenses. An additional $28 out of every $100 was spent on printing, publications, postage, handling, advertising and promotion, fees for services, and other expenses.  In total, $76 out of every $100 was spent on staff and organization expenses while $8 out of every $100 in revenue received was spent on grants. $16 out of every $100 was not spent and allocated to the general fund to increase the endowment balance.

In summary, the ADA is a non-profit whose mission is to prevent and cure a disease (diabetes) that is one of the fastest growing diseases in the country. Although the ADA has been around for 80 years and has raised hundreds of millions of dollars, the organization has been unable to prevent and cure or even stop the growth of Type 2 diabetes, which is largely preventable and reversible with dietary changes.  From 2014-2017, revenues declined from $216 million to $144 million while the endowment fell from $79 million to $36 million. Changes in management were made in 2018 which resulted in staff cuts, slashing expenses, and not spending as much as the organization raised (presumably to strengthen the endowment). Revenue increased to $158 million in 2018 (from $144 million in 2017). The real test is if the ADA will be effective in preventing and curing diabetes in the future.

To read the IRS Form 990 (2018), click here.