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February 26, 2021

How Revenue is Spent at the National Equity Fund in Chicago, IL

by Anne Paddock

The National Equity Fund (NEF) is a tax-exempt, non-profit 501 (c) 4 engaged as a national syndicator of low-income housing tax credits. According to the NE website, they “revitalize communities, empower individuals, and create economic opportunities nationwide.”  What they don’t write about on their website is that most revenue goes to compensate employees and that only about 20% of revenue is used for grants. It is also important to note NEF is an affiliate of Local Initiatives Support Corporation – a tax-exempt non-profit 501 (c) 3 based in New York City, NY and who also happens to be the recipient of nearly all the grant money awarded in 2018. Read on.

In 2018, NEF reported total revenue of $55 million (compared to $49 million the prior year), most of which came from low income housing.  Expenses totaled $61 million and can be categorized as follows:

  • $32 million (58% of revenue):  Compensation
  • $11 million (20% of revenue):  Grants
  • $ 6 million (11% of revenue): Legal Fees
  • $ 4 million (7% of revenue): Other Fees for Services
  • $ 4 million (7% of revenue):  Office-Related Expenses
  • $ 2 million (4% of revenue):  Advertising, Promotion, and Other Expenses
  • $ 1 million (2% of revenue):  Travel and Conferences
  • $ 1 million (2% of revenue):  Loan Allowance

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

$100:  Revenue

-$ 58:  Compensation

-$ 11:  Legal Fees

-$  7:  Other Fees for Services

-$  7:  Office-Related Expenses

-$  4:  Advertising, Promotion, and Other Expenses

-$  2:  Travel and Conferences

-$  2:  Loan Allowance

-$ 91: Subtotal: Compensation, Legal Fees, Other Fees, Office, Advertising, Other, Travel, Conferences, and Allowance

$  9:  Revenue Remaining

-$ 20:  Grants

-$ 11:  Expenses over Revenue

As illustrated above, NEF spent $111 for every $100 in revenue received. What is also interesting to note is that NEF is almost completely reliant on low income housing revenue – most of which goes to pay the expenses of the organization – primarily compensation, fees, and office-related expenses.  Only 20% of revenue ($11 million) was spent on grants and nearly all of that grant money was awarded to an affiliate organization in New York City.

202 employees received $32 million in compensation which equates to an average compensation of nearly $160,000.  However, only 83 employees received more than $100,000 in compensation which suggests there were some very well compensated employees at NEF, including the President and CEO, Joseph Hagan whose total compensation was $926,416; and Todd Fabian, a VP and Regional Manager who received $1,027,895 in compensation. The 17 most highly compensated employees received $9 million in compensation, which equates to an average of $530,000 each.

It is important to note that even though NEF spent about $6 million more than they raised, net assets increased from $32 million at the beginning of the year to $46 million because of additional $19 million in capital added from related organizations – primarily from NEF Community Initiative (a 501 (c) 4 in Chicago), and NYEF – NY Equity Fund (a 501 (c) 4 in Chicago).

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

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