Where Does $100 to the American Heart Association (AHA) Go (2019)?
The American Heart Association (AHA) is one of the most popular and recognized non-profits in the United States with enormous public support but 2018-2019 was not a great year for the organization. Total revenue reported was down 12% to $746 million (compared to $852 million the prior year). That the AHA has nearly a billion dollars in their net fund balance is also noteworthy.
By most accounts, this organization is a magnet for public contributions and an expert at raising and saving money. But, are they accomplishing their mission, which is to build healthier lives, free of cardiovascular disease and stroke (especially with hundreds of recipes on their website calling for eggs, dairy products, beef, poultry, pork – including bacon, a Type 1 carcinogen according to the World Health Organization, oil, sugar and white flour)? With heart disease the number one cause of death in the United States for decades, one has to wonder if all the contributions to the AHA are really helping to prevent and reverse heart disease?
The AHA is a 501 (c) (3) tax-exempt organization and, as such files an IRS Form 990 which details revenue, expenses, executive compensation, assets, liabilities, grants, fundraising, payments to contractors and more. The most recent IRS Form 990 filed (2018) reflects the operating period from July 1, 2018 to June 30, 2019.
To understand how revenue and expenses, lets look at where revenue comes from and then how it’s spent.
Revenue totaled $746 million and came primarily from four sources:
- $591 million (79% of revenue): contributions, gifts, and grants
- $ 59 million (8% of revenue): sale of inventory
- $ 52 million (7% of revenue): investment income, gains, royalties, rents, and fundraising
- $ 44 million (6% of revenue): Conferences, Seminars, Accreditation, Dues, Registry, Editorial
Expenses totaled $756 million (not including $14 million in depreciation) – $10 million more than the organization raised, and can be viewed two ways: by looking at expenses within four broad categories (program, grants, fundraising, and management) or by looking at specific category expenses (i.e. salaries, travel, office, etc), the latter of which provides more detail. Both ways are beneficial and simply offer two ways to look at costs: an overall general view of expenses and a more detailed look at how revenue was spent.
Expenses by Broad Categories (Program, Grants, Fundraising, and Management)
For the year ending June 30, 2018, the AHA reported total expenses of $756 million allocated as follows:
- $392 million (52% of revenue): Program Services
- $193 million (26% of revenue): Grants
- $ 98 million (13% of revenue): Fundraising
- $ 73 million (10% of revenue): Management and General Expenses
Using the above information, $100 in revenue was spent as follows:
-$ 13: Fundraising
-$ 10: Management and General Expenses
-$ 23: Subtotal Fundraising and Management/General Expenses
$ 77: Revenue Remaining
-$ 52: Program Services
-$ 26: Grants
-$ 78: Subtotal Program Services and Grants
-$ 1: Revenue Remaining
As illustrated above, the AHA spent $23 out of every $100 on fundraising and management and general expenses. $52 out of every $100 was spent on program services (note: this equates to nearly $400 million annually and yet heart disease has and remains the number one cause of death in this country).
$193 million or $26 out of every $100 was awarded in grants, primarily for research although there were many grants for equipment and education (i.e. addressing obesity). More than 380 grants greater than $5,000 were awarded with the largest recipients listed below:
- $19.2 million: Salk Institute Biological Studies, of La Jolla, CA for research
- $15.1 million: Stanford University, School of Medicine, in San Francisco, CA for research
- $ 9.6 million: University Hospitals Health Services, of Shaker Heights, OH for research
- $ 7.2 million: Brigham & Women’s Hospital, of Boston, MA for research
- $ 7.0 million: Northwestern University, of Evanston, IL for research
- $ 6.4 million: University of Michigan, of Ann Arbor, MI for research
- $ 6.1 million: Vanderbilt University, of Nashville, TN for research
- $ 4.8 million: Johns Hopkins University, of Chicago, IL for research
- $ 3.3 million: Augusta University Research Institute, of Augusta, GA for research
- $ 3.1 million: University Texas Health Science Center, of Houston, TX for research
- $ 3.0 million: Yale University, of New Haven, CT for research
- $ 2.9 million: Mass General Hospital, of Boston, MA for research and equipment upgrade
The AHA spent $98 million on fundraising, most of which was on compensation and office-related expenses. AHA participates in mail, phone, internet, email, and in-person solicitations. In addition, the organization solicits for government and non-government grants, and holds special fundraisers.
6,051 fundraising events were held throughout the year (compared to 7,399 the previous year) generating $337 million. After deducting contributions of $311 million, the gross income of these events was $26 million. AHA spent $37 million on expenses for these events (i.e. facility costs, food and beverage, prizes, and entertainment) which means a loss of $11 million was recognized.
The 990 reports that AHA paid nearly $2.6 million in professional fundraising fees (compared to $3.9 million the previous year). These fees were paid to two organizations:
- Infocision Management for phone marketing. Infocision Management raised $3.1 million but retained $2.5 million, leaving AHA about $600,000. (Bottom line: donors should not respond to phone solicitors if they want most of their donation dollars to go to AHA).
- Insurance Auto Auction of Carmel, Indiana sold donated vehicles that generated $300,000. They kept $80,000 leaving $220,000 to AHA. (Bottom line: donors should not donate their vehicles if they want more donation dollars to go to AHA. Instead they should sell the vehicle themselves and then make the donation).
Expenses by Specific Line Item Categories
For the year ending June 30, 2019, the AHA reported total expenses of $756 million allocated as follows:
- $366 million (49% of revenue): Compensation
- $193 million (26% of revenue): Grants
- $ 73 million (10% of revenue): Office-Related Expenses
- $ 55 million (7% of revenue): Fees for Services (primarily fees with no detail provided)
- $ 46 million (6% of revenue): Travel and Conferences
- $ 17 million (2% of revenue): Other expenses
- $ 6 million (1% of revenue): Advertising and Promotion
Using the above information, every $100 in revenue was spent as follows:
-$ 49: Compensation
-$ 10: Office-Related Expenses
-$ 6: Travel and Conferences
-$ 7: Fees for Services
-$ 2: Other Expenses
-$ 1: Advertising and Promotion
-$ 75: Subtotal Expenses
$ 25: Remaining Revenue
-$ 26: Grants
-$ 1: Excess Expenses over Revenue
As illustrated above, AHA’s two highest administrative expenses are for staff compensation (4,434 employees received $366 million in compensation, which equates to an average compensation of $83,000 with the most highly compensated employee, Nancy Brown, the CEO who received $3,474,435) and office-related expenses. Add in travel and conferences, and fees for non-employees and $72 out of every $100 was spent on these expenses. In addition, it is important to note AHA paid for first class travel, companion travel, and health or social club fees and/or initiation fees. In addition, AHA made gross up payments and tax indemnification payments.
In conclusion, most revenue is spent on supporting the organization and its programs (and, yet heart disease remains the number one cause of death in the US). About $26 of every $100 goes to grants for research, equipment, and obesity and anti-tobacco initiatives (which is better than last year when only $20 out of every $100 was awarded in grants). The organization spent $48 million on expenses that are not detailed on the tax return (categorized as fees for services and other expenses). Infocision Management – a key phone solicitor – kept $81 of every $100 they raised for AHA. The questions to ask yourself as a donor include:
- Do you think the AHA is accomplishing their mission (“to build healthier lives, free of cardiovascular disease and stroke”) with the $750 million the organization raises and spends annually?
- Is the AHA working to prevent and reduce heart disease and stroke by promoting unpopular lifestyle choices (i.e. whole food plant-based diet) instead of promoting popular foods that contain cholesterol and saturated fats, along with recipes on their website?
If any of your answers are maybe or no, then consider making donations locally to non-profits that need emergency equipment, defibrillators and monitoring equipment, research, and to organizations that address the cause and reduction of heart disease through programs that educate the population on the heart and health benefits of a whole food plant-based diet rather than an organization that raises nearly $1 billion a year and hasn’t knocked heart disease off as the number one cause of death in the USA, paid its top executive $3.5 million, and paid for first class travel, companion travel, health or social club dues or initiation fees, and made gross up payments and tax indemnification.
To read the IRS Form 990 (2018 for the year July 1, 2018 to June 30, 2019), click here.