Where Does $100 to the Fresh Air Fund Go?

The past 5 years have been a revenue roller coaster ride for the Fresh Air Fund (FAF). In 2014, the FAF reported total revenue of $19 million and they had $138 million in net fund assets. In 2015 and 2016, revenue grew to $27 million and $38 million, respectively and the endowment remained stable at $133 million and $127 million, respectively. But something happened in 2017. Revenue dropped to $24 million although the endowment increased to $136 million. In 2018, revenue dropped again, to $16 million although, again the endowment remained stable (and actually increased slightly to $139 million due to unrealized gains on investments).  But, no one seems to be talking or writing about what happened to cause the most recent decline in revenue.

The long-time (since 1983) executive director, Jenny Morgantheau was replaced in July, 2015 by Fatima Shama who oversaw FAF hit $38 million in revenue in 2016. But then the decline in revenue began and was most recently less than half ($16 million) of what it was ($38 million) two years ago.

Tobin Shearer, a professor of history at the University of Montana published a book in 2017 (after 10 years of research) entitled “Two Weeks Every Summer:  Fresh Air Children and the Problem of Race in America” that exposed the racial inequality in FAF in prior years (Shearer’s book stops at 1979 so it seems unlikely his book would have had a major influence on the most recent decline). Maybe the organization lost key fundraisers? Whatever the reason, FAF’s revenue is at its lowest in more than 7 years and no one’s talking about it.

So, if you donated $100 in 2018, how was that $100 spent? Read on.

In 2018, total revenue was $16 million, most of which came from contributions, gifts and grants.

Expenses totaled $19 million (of which nearly $2 million was depreciation), $3 million more than FAF collected which means the organization dipped into their general fund to cover the excess expenses over revenue. Because FAF reports nearly $7 in unrealized gains on investments, the general fund actually increased from $135 million to $139 million in 2018.

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

Expenses by Broad General Category

Expenses totaled $19 million in 2018 (although nearly $2 million was depreciation which won’t be included below) and were categorized as follows:

• $11.4 million (71% of revenue):  Program Services
• $ 4.2 million (26% of revenue):  Fundraising
• $ 1.6 million (10% of revenue):  Management and General Expenses

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

$100:  Revenue

-$ 26:  Fundraising

-$ 10:  Management and General Expenses

-$ 36:  Subtotal Fundraising, Management, and General Expenses

 $ 64:  Revenue Remaining

-$ 71:  Program Services

-$  7:  Excess Expenses over Revenue

As illustrated above, FAF spent $107 for every $100 in revenue the organization received. To do this, they relied on the general fund (primarily excess revenue from previous years).

Expenses by Specific Line Item Category

The $19 million in expenses (less the nearly $2 million in depreciation) were categorized as follows:

• $7.8 million (49% of revenue):  Compensation
• $4.4 million (28% of revenue):  Office-related Expenses
• $1.8 million (11% of revenue):  Food and Supplies
• $1.3 million (8% of revenue):  Fees for Services
• $1.2 million (7% of revenue):  Volunteers and Contracted Services
• $0.7 million (4% of revenue):  Travel

The two largest expense for FAF are compensation and office-related expenses. Headquartered in New York City (in Murray Hill), FAF has 727 employees who were compensated $7.8 million which equates to an average compensation of $10,700 (this is very low). 8 employees received more than $100,000 in compensation with the 7 most highly compensated employees listed below:

• $412,066:  Fatima Shama, Executive Director
• $325,260:  Jean Jeremie, CFO
• $210,242:  Alicia Skovera, Director of Camping
• $189,981:  Tara N Gardner, Director of COSS
• $156,920:  Michael Clarke, Director of Sharpe Reservation (Camp)
• $156,150:  Sheryl Cardoza, Director of Friendly Towns Program
• $132,359:  George Morfessis, Director of IT (former)

5 of the 7 (71%) employees listed above are female while 2 (29%) are male.

Office-related expenses are $4.4 million and appear high because FAF is in New York City, where rents are high. Fees for Services are primarily investment management fees (for managing the investment funds), professional fundraising fees, and management fees although there are also legal and accounting fees.

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

$100:  Revenue

-$ 49:  Compensation

-$ 28:  Office-related Expenses

-$  8:  Fees for Services

-$ 85: Subtotal: Compensation, Office-related Expenses, and Fees for Services

$ 15:  Remaining Revenue

-$ 11:  Food and Supplies

-$  7:  Volunteers and Contracted Services

-$  4:  Travel

-$ 22:  Subtotal Food, Supplies, Volunteers, Contracted Services, and Travel

-$  7:  Excess Expenses over Revenue

As illustrated above, $85 out of every $100 in revenue was spent on compensation, office-related expenses, and fees for services. $22 out of every $100 was spent on food, supplies, volunteers, contracted services, and travel.

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