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March 9, 2020

Where Does $100 to Baby2Baby Go?

by Anne Paddock

Baby2Baby is a relatively young organization, established six years ago in 2014 as a non-profit, tax-exempt 501 (c) (3) to provide children between 0-12 years old with the necessities (i.e. diapers, clothing, shoes, hygiene products, toys, books, backpacks) that every child deserves but doesn’t always receive.

Supported by many big names in Hollywood including Jessica Alba, Nicole Ritchie, Chrissy Teigan, Kelly Rowland, Rachel Zoe, Jennifer Meyer, Amy Adams, Drew Barrymore, Kate Hudson, Zoe Saldana, and dozens more, Baby2Baby is based in Los Angeles although the organization’s national network has grown to 37 cities.

The most recent IRS Form 990 (2017) reported the following key information about the organization and how Baby2Baby collects revenue and donations and distributes these goods to those in need:

Total revenue was $13.8 million of which $8.8 million were non-cash contributions (baby supplies) and $5 million were cash contributions.

$9.3 million in grants (primarily non-cash contributions and about $143,000 in cash grants $5,000 or greater) were distributed to 119 partner and/or vetted other 501 (c) (3)’s.

Total expenses were $11.6 million, of which $9.3 million were grants (of which $8.8 million were non-cash contributions given as grants), which means Baby2Baby spent $2.3 million on expenses excluding grants.

So, the bottom line is that Baby2Baby raised about $5 million in cash and spent $2.8 million on expenses:

  • $1.0 million:  (20% of cash revenue):  Compensation
  • $0.7 million:  (14% of cash revenue):  Office-related Expenses
  • $0.5 million (10% of cash revenue):  Grants ($9.3 million less $8.8 non-cash contributions distributed as grants)
  • $0.2 million (4% of cash revenue):  Fees for Services
  • $0.2 million (4% of cash revenue):  Play Date
  • $0.1 million (2% of cash revenue):  Travel and Conferences
  • $0.1 million (2% of cash revenue):  Baby Supplies/Miscellaneous

The above expenses add up to $2.8 million, which means $2.2 million was not spent and added to the fund balance. The largest expense for Baby2Baby is compensation for the 30 employees who received $1 million, which equates to an average compensation of $33,300.  The two co-presidents received $60,000 each in compensation.

Using the above information, every $100 in cash revenue was spent as follows (note: non-cash distributions were distributed via grants to other non-profits):

 $100:  Revenue

-$ 20:  Compensation

-$ 14:  Office-related Expenses

-$ 10:  Grants

-$  4:  Fees for Services

-$  4:  Play Date

-$  2:  Travel and Conferences

-$  2:  Baby Supplies/Miscellaneous

-$ 56: Total Expenses

 $ 44:  Revenue Remaining:  To Fund Balance

As illustrated above, $56 out of every $100 in cash revenue received paid for the expenses (including a small portion of the grants) of the organization. $44 out of every $100 in cash revenue was not spent; these funds were added to the general fund (which some people refer to as the endowment) which grew from $5.9 million at the beginning of the year to $8.1 million at year-end.

In other words, if you made a cash contribution of $100, $56 of the $100 was spent, primarily on organization expenses. $44 out of every $100 was saved.  If you made a non-cash contribution, your non-cash contribution was distributed to a partner or vetted charity to be given to a needy child.

The bottom line is that Baby2Baby relies on non-cash contributions to make grants while relying on cash to pay for the expenses of the organization and growing the endowment.

To read the IRS Form 990 (2017), click here

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