Executive Compensation at Operation Smile (2019)

Operation Smile is a non-profit tax-exempt 501 (c) (3) based in Virginia Beach, VA 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 raised $79 million in 2018-2019, spent $67 million (leaving $12 million to add to the general fund) and had $50 million in net assets at year-end (June 30, 2018).

The organization spent heavily on two expenses:  public awareness, advertising and promotion ($24 million or 30% of revenue) and compensation ($15 million) for 186 employees, which is equal to an average compensation of $81,000. 18 employees received more than $100,000 in compensation with the 10 most highly compensated employees listed below:

• $444,515:  William P MaGee, Jr. DDS, CEO and Director
• $275,781:  Kendra Davenport, Chief Development Officer
• $238,067:  Ruben Ayala, Chief Medical Officer
• $203,665:  Kristie Porcaro, SVP US & Global Philanthropy
• $200,499:  James Siti, Iteri CFO, COO as of 3/18
• $172,962:  Geir Strangeland, Associate Chief Medical Officer
• $158,806:  Christopher Bryant, SVP ENT APP & TECH
• $151,860:  Lisa Jardanhazy, VP Global Media Strategy & PR
• $150,723:  Mary Alice Rice, Director of Development
• $123,044:  Richard Vanderburg, Former Chief Program Strategist

The above 10 employees were compensated $2.2 million.  6 of the 10 (60%) of the most highly compensated employees are male while 4 of the 10 (40%) are female.

The Form 990 also reports:

• William P MaGee, Jr, Director and CEO is the spouse of Kathleen S MaGee, Director and President. Mr. McGee also appears to work outside Operation Smile.
• Kristie Porcaro, SVP US & Global Philanthropy is the daughter of William P MaGee, Jr., Director and CEO and Kathleen S MaGee, Director and President
• Todd MaGee, a board member is the son of William P MaGee, Jr., Director and CEO and Kathleen S MaGee, Director and President.  Todd MaGee is the brother of Kristie Porcaro.
• Alex Marshall, a board member is the nephew of William P MaGee, Jr., Director and CEO and Kathleen S MaGee, Director and President. Alex Marshall is the cousin of Kristie Porcaro.
• Operation Smile pays for first class travel. Specifically, the organization allows for upgrades to business or first class air travel in limited circumstances for the CEO, President, COO, Chief Medical Officer, Chief Program Strategist, Senior Vice President of Logistics, Strategic Initiatives and Development Directors. Upgradeable fares may only be purchased if travel is more than 5 hours domestically, business class fares for more than 8 hours internationally for the positions previously listed.  When possible upgrades are paid for with airline points. In addition, employees are allowed to travel business class if business fares are lower than coach or there is a medical necessity.
• Of the 9 directors, 4 are family and extended family members. Although Operation Smile reports on the Form 990 that there are 9 directors and that 8 are independent, it appears that 5 are independent.
• Schedule L, Part IV (transactions with interested persons) reports Kristie Porcaro received $243,345 for employment (note:  Schedule J reports Kristie Porcaro was compensated $203,665) so there is a discrepancy.

10 independent contractors were compensated more than $100,000. The 5 highest were reported to be:

• $723,132:  MDS Communications, of Mesa, AZ, for telefundraising services
• $713,564:  One All, Inc, of Pasadena, CA for fundraising counsel
• $380,692:  Blackbaud, of Atlanta, GA for consulting
• $361,021:  Merkle Response Services, of Hagerstown, MD for keying and caging (direct mail)
• $310,942:  Ceemless Air Corp, of Brooklyn, NY for freight services

As illustrated above, Operation Smile spends significantly on fundraising with 4 of the 5 most highly compensated independent contractors involved in fundraising.

Schedule G, Part I (fundraising activities) of the Form 990 reports that a company called “One and All Inc” raised $35,932,651 and retained $790,328, netting Operation Smile $35,142,323. This appears to be the primary source of revenue for Operation Smile with 44% of total revenue coming from One and All Inc.

• MDS Communications – a telemarketer- raised $2,165,931, retained $833,600 (38%), netting Operation Smile $1,332,331.
• M & R – an e-mail marketing firm – raised $749,408, retained $157,428 (21%), netting Operation Smile $591,980.
• Appco – a marketing firm – raised $52,250, retained $0, netting Operation Smile $52,250.
• Infocision – a telemarketing firm – raised $27,538, retained $27,166, netting Operation Smile $372.

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