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December 14, 2020

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Where Does $100 to Operation Smile Go (2019)?

by Anne Paddock

Operation Smile is a non-profit tax-exempt 501 (c) (3) that provides corrective surgery to children and young adults in developing countries who are born with cleft lip, cleft palate or other facial deformities.

Established in 1982, Operation Smile was founded by Dr. William MaGee,Jr.  (a dentist and plastic and craniofacial surgeon) who serves as the organization’s Chief Executive Officer and his wife Kathleen McGee, who serves as the organization’s President. Their daughter, Kristie Porcaro also serves as the SVP of US and Global Philanthropy of Operation Smile. 

Operation Smile is overseen by a board of 9 directors, 8 of whom are independent. 8 are male while 1 (the CEO’s wife) is a female.

In 2018-2019 (the year is from July 1 – June 30 of the following year), Operation Smile raised $79 million (compared to $73 million the previous year), of which $4 million were non-cash contributions (primarily drugs and medical supplies).  The primary source of revenue was contributions, gifts, and grants.

Expenses totaled $67 million or 85% of revenue (note:  the $12 million of contributions not spent was added to the general fund) and were categorized as follows:

  • $24 million (30% of revenue): Public Awareness and Advertising/Promotion
  • $15 million (19% of revenue):  Compensation
  • $ 6 million (8% of revenue):  Travel and Conferences
  • $ 6 million (8% of revenue):  Mission Supplies
  • $ 6 million (8% of revenue):  Grants
  • $ 5 million (6% of revenue):  Fees for Services (primarily fundraising and “other” fees that are not detailed)
  • $ 4 million (5% of revenue):  Office-Related Expenses
  • $ 1 million (1% of revenue):  Other Expenses

As illustrated above, $24 million or 30% of revenue was spent on public awareness and advertising/promotion. 186 employees received $15 million in compensation, which equates to an average compensation of $81,000.  The most highly compensated employee was William P Magee, Jr., the CEO and Director who received $444,515.

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

$100:  Revenue

-$ 30:  Public Awareness and Advertising/Promotion

-$ 19:  Compensation

-$  8:  Travel and Conferences

-$  8:  Mission Supplies (of which $4 million appears to have been donated)

-$  8:  Grants

-$  6: Fees for Services (fundraising and other fees)

-$  5: Office-Related Expenses

-$  1:  Other Expenses

-$ 85: Total Expenses

 $ 15:  Remaining Revenue:  To General Fund

It is important to point out that Operation Smile has significantly increased their net fund balance. In 2017-2018, the organization spent $10 million less than they raised and in 2018-2019, they spent $12 million less than they raised; the result being Operation Smile has $50 million in net assets.

In summary, Operation Smile spends heavily on public awareness and advertising/promotion ($30 out of every $100). $42 out of every $100 was spent on public awareness/advertising/promotion, fees for services, office-related expenses, and other expenses. Compare this to the amount of revenue ($43 out of every $100) spent on compensation of employees, travel and conferences, mission supplies, and grants.

To read the IRS Form 990 (2018 for the year ending June 30, 2019), click here.

2 Comments Post a comment
  1. Dec 14 2020

    Hi Dan: Thanks for your comments. Operation Smile is not a business. It’s a tax-exempt, non-profit – if it was a business, they would be paying taxes. Having a spouse as a top company officer may be typical of smaller businesses (I don’t know) but not for non-profits. But, what is important to note is that spending $42 out of every $100 on advertising/promotion/fundraising is very high.

  2. Dec 14 2020

    Hello Ms. Paddock, My understanding is that OS treats patients with their facial conditions at least in all of the Americas, if not worldwide. Given that, I was expecting to see a larger percentage spent on travel, unless the majority of their patients are traveling to their facility here in the U.S. Secondly, if they are treating several hundred or more patients annually, the founder’s compensation level seems reasonable. With his wife being the top company officer is typical of many smaller businesses, for Federal tax filing purposes. If you have further information, please let me know and holiday blessings wished to you and your family. Sincerely, Dan G….

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