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April 27, 2020

Where Does $100 to the Heritage Foundation Go?

by Anne Paddock

The Heritage Foundation (Heritage) is a non-profit, tax-exempt organization staffed by conservative “experts” who provide advice on political, economic, social, and financial problems in the United States. Based in Washington, DC Heritage raises about $80 million annually, spends about the same amount, but has about $250 million in net fund assets.

In 2018, Heritage raised $81 million, most of which came from contributions, gifts, and grants. Expenses totaled $80 million and can be viewed two ways:  by broad general category (program service, management and general, and fundraising) or by specific line item categories (i.e. compensation, office-related, travel and conferences, fees for services, etc). Both ways are beneficial with the latter approach providing more specific detail on how revenue was spent.

Expenses by Broad General Category

The $80 million in expenses (including $4 million in depreciation) were categorized as follows:

  • $63.5 million (78% of revenue):  Program Services
  • $ 1.5 million (2% of revenue):  Management and General
  • $15.0 million (19% of revenue):  Fundraising

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

$100:  Revenue

-$ 78:  Program Services

-$ 19:  Fundraising

-$  2:  Management and General Expenses

-$ 99:  Total Expenses

$  1:  Revenue Remaining:  To Fund Balance

As illustrated above, $78 out of every $100 was spent on program services while $21 out of every $100 was spent on fundraising and management and general expenses.

Expenses by Specific Line Item Category

The $80 million in expenses were categorized as follows:

  • $38 million (47% of revenue):  Compensation
  • $21 million (26% of revenue):  Office-Related
  • $ 9 million (11% of revenue):  Fees for Services
  • $ 6 million (8% of revenue):  Travel and Conferences
  • $ 5 million (6% of revenue):  Other Expenses (interest, books, dues, etc)
  • $ 1 million (1% of revenue):  Advertising and Promotion

As illustrated above, the largest expense for Heritage is compensation ($38 million) for the organization’s 561 employees who received an average compensation of $68,000. 91 employees received more than $100,000 in compensation while the most highly compensated employee, Kay Coles James, received $532,265.

Office-related expenses were the second largest expense made up primarily of three expenses:  office-related ($15 million) with no detail provided, IT ($3.3 million), and occupancy ($2.7 million).

Fees for Services ($9 million) were primarily fees paid to non-employees, $5.7 million of which is not detailed. $2.2 million was paid to professional fundraisers while $1.1 million was paid to investment managers. It is important to point out that Heritage paid more than $100,000 to 30 organizations with the 5 most highly compensated organizations listed below:

  • $1.7 million:  Merkle Response Services, Inc. of Hagerstown, MD for mailing contact management.
  • $1.5 million:  Conrad Direct, Inc. of Cresskill, NJ for mailing contact management
  • $1.1 million:  Give Right, Inc. of Los Angeles, CA for marketing and fundraising
  • $ .9 million:  Active Engagement of Leesburg, VA for marketing and fundraising
  • $ .7 million:  Admiral Security Systems of Bethesda, MD for security

$6 million was spent on travel and conferences, including first class or charter travel and companion travel (see Schedule J for more detail).

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

$100:  Revenue

-$ 47:  Compensation

-$ 26:  Office-related Expenses

-$ 11:  Fees for Services

-$  8:  Travel and Conferences

-$  6:  Other Expenses

-$  1:  Advertising and Promotion

-$ 99: Total Expenses

$  1:  Excess Revenue:  To Fund Balance

As illustrated above, $73 out of every $100 in revenue was spent on compensation and office-related expenses. $11 out of every $100 was spent on compensating non-employees while $8 out of every $100 was spent on travel and conferences.

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

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