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April 21, 2020

Where Does $100 to ALS Go (2018)?

by Anne Paddock

The ALS Association (ALSA) was chugging along raising about $20-25 million a year (with a $20 million endowment) when the Ice Challenge video went viral a few years ago (2014) and brought in $115 million in donations to the organization. But before we talk about what ALS did with the revenue windfall, it is important to know that ALS is a progressive disease that effects nerve cells in the brain and the spinal cord. Motor neurons from the brain reach muscles through the spinal cord. In patients with ALS, the motor neurons die so the brain cannot send communication to the muscles to move, leading to paralysis and death.

In order to combat any illness, the medical community needs to understand the disease, where it originates, why it strikes, what it does, and how it responds to various treatments. This is accomplished through research and usually through research grants.  This is no less true with ALS. In order to prevent, treat and cure ALS, significant dollars have to be awarded to research. But, because only about 5,000 people are diagnosed annually (compared to 1.8 million diagnosed with cancer) in the US, ALS research has not had significant dollars allocated to reasearch.

ALSA reports the following financial information on the Form 990’s submitted to the IRS:

Year                2012                2013               2014               2015               2016             2017             2018

Revenue          $20                $24                 $138                $26                $31                $25               $27

Expenses        $20                $21                  $39                 $36                $35                $38               $35

Net Income     $0                  $3                    $99               -$10               -$4                -$13              -$8

Net Assets      $18                $20                  $120               $106              $104              $96               $90

Grants             $7                  $7                     $23                $18                 $19                $22               $18

Key points include:

  • ALSA has historically raised about $20-$25 million annually with the exception of the windfall from the ALS Ice Challenge in 2014.
  • In 2018, total revenue was $27 million, most of which came from contributions, gifts, and grants. However, it is important to point out, ALSA actually had nearly $30 million in contributions but these gifts were offset by net losses on the sales of securities.
  • ALSA used most of the funds from the ALS Ice Challenge to strengthen their endowment. Research grants increased but not by much. Before the Ice Challenge, approximately $7 annually was awarded in grants. During and after the Ice Challenge, ALSA awarded about $20 million annually to grants, not enough to make a significant difference in patient outcomes.
  • ALSA allocated about 30% of revenue to grants prior to the Ice Challenge. Since the Ice Challenge, 61-88% of revenue has been allocated to grants, with the average being about 70% of revenue. However, it is important to note that ALSA has been spending about $10 million more annually then they have raised since the Ice Challenge. Before the Ice Challenge, grants as a percentage of total expenses were about 30%. After the Ice Challenge, grants as a percentage of total expenses increased to about 50%. So more revenue as a proportion of total revenue has been allocated to grants since the Ice Challenge.

It is important to understand ALSA primarily engages in three activities:  awarding grants for ALS (Lou Gehrig’s disease) research, providing patient and community services through the network of chapters in the states (each files their own 990), and providing public and professional education.  Their main focus, as determined by the amount of dollars spent, is on awarding grants for ALS research with about 70% of revenue raised allocated to grants.

In 2018, $18 million in grants were awarded, most to domestic organizations for treatment center excellence, clinical research, patient surveys, clinical management, strategic initiatives (no further detail provided), Lou Gehrig Challenge initiatives, fellowships, and to treat ALS. 221 grants greater than $5,000 were awarded to non-profit tax-exempt 501 (c) (3)’s with the largest grants awarded to:

  • $1,150,000:  NY Genome Center of New York, NY for a strategic initiative
  • $  624,000:  Anelixis Therapeutic of Cambridge, MA for an ALSA initiated study
  • $  600,000:  National Institute of Neurological Disorders of Bethesda, MA for a Lou Gehrig Challenge initiative
  • $  589,342:  The Trustees of Columbia University of NY, NY for a Lou Gehrig Challenge initiative
  • $  559,697:  Mass General Hospital of Boston, MA for a Lou Gehrig Challenge initiative
  • $  530,000:  Ludwig Institute for Cancer Research of La Jolla, CA for a strategic initiative
  • $  500,000:  Cedars-Sinai Medical Center of LA, CA for a strategic initiative
  • $  500,000:  J David Gladstone Institute of San Francisco, CA for a strategic initiative
  • $  453,471:  Johns Hopkins University of Baltimore, MD for a Lou Gehrig Challenge initiative

EXPENSES

Expenses can be analyzed two ways:  by broad category:  Grants, Program, Management, and Fundraising; or by specific line item expenses. Both ways are beneficial with the latter approach providing more specific detail of how revenue was spent. Expenses in 2018 were $35 million – $8 million more than total revenue reported.

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

Expenses were reported to be $  million (not including depreciation) in the following categories:

  • $18 million (67% of revenue):  Grants
  • $10  (37% of revenue):  Program Service Expenses
  • $ 4 million (15% of revenue):  Fundraising Expenses
  • $ 3 million (11% of revenue):  Management Expenses

As illustrated above, ALSA spent 63% of revenue on program, fundraising, and management expenses and 67% of revenue on grants. The organization spent 130% of revenue using revenue previously raised to cover the shortfall.  Using the above information $100 in revenue was spent as follows:

$100:  Revenue

-$ 37 :  Program Service Expenses

-$ 15 :  Fundraising Expenses

-$ 11 :  Management Expenses

-$ 63 : Subtotal Program, Fundraising, and Management Expenses

$ 37 :  Amount Remaining

-$ 67 :  Grants

-$ 30 :  Shortfall (covered by previously raised funds).

As illustrated above, $67 of every $100 in revenue was used for grants while $63 was used to cover program, fundraising, and management costs.  An additional $30 from previously raised funds was used to make more grants.

Expenses by Specific Line Item

Specific line item expenses totaling $35 million were reported to be as follows:

  • $ 9  million (33% of revenue):  Salaries, Compensation, Benefits, Pensions, Payroll Taxes
  • $ 5  million (19% of revenue):  Fees for Outside Services (primarily program and fundraising) CC Fees, Advertising
  • $ 2 million (7% of revenue):  Conferences and Meetings
  • $ 1 million (4% of revenue):  Office, IT, Telecommunications, Occupancy
  • $18 million (67% of revenue):  Grants

As illustrated above, the largest expense (outside of grants) was compensation which was $9 million for 106 employees, which equates to an average compensation of $85,000. 12 employees received more than $100,000 with the CEO’s compensation totaling $312,711. No first class or charter travel, companion travel, social club dues or initiation fees, gross up payments or tax indemnifications were paid for by ALSA.

Fees for services were primarily program and fundraising fees with no detail provided.

$100:  Revenue

-$ 33:  Salaries, Compensation, Benefits, Pensions, and Payroll Taxes

-$ 19:  Fees for Outside Services, Credit Card Fees, Advertising

-$  7:  Conferences and Meetings

-$  4:  Office, IT, Telecommunications, Occupancy

-$ 63: Subtotal Line Item Expenses

 $ 37:  Revenue Remaining

-$ 67:  Grants

-$ 30:  Shortfall (covered by previous donations in fund balance)

As illustrated above, the ALS Association spent $63 of every $100 in revenue on line item expenses related to program, management and fundraising, leaving $37 left for grants. The organization used this entire amount (and more from previous years donations) to cover the grants awarded.

The bottom line is that the ALS Association has been able to spend more than they have received because of the windfall in donations in 2014 that resulted from the Ice Challenge, which provided the organization with an additional $100 million in the general fund. But, over the last four years, ALSA spent between $4-$13 million more than they raised annually (for a total of $35 million).  Although gains on investments has partially offset the overspending, the net result has been a $30 million decline in net fund assets.

The allocation of revenue to grants has increased since the Ice Challenge from about $7 million a year to $20 million a year but the organization still has a long way to go in working to prevent, treat, and cure ALS. From an outsider looking in, it appears that research grants need to be increased while reducing overhead and operational costs (i.e. other program fees, travel and conferences). In addition, it is unclear why investment income is not higher over the past 5 years given the bull market.

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

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