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November 18, 2021

How Kars 4 Kids Spends Revenue (2018)

by Anne Paddock

Kars4Kids, Inc. (Kars4Kids) is a tax-exempt, non-profit 501 (c) (3) national organization dedicated to the educational, material, emotional, and spiritual needs of Jewish children and their families.

Specifically, Kars4Kids appears primarily to be the fundraising entity for another 501 (c) (3) organization called Oorah, Inc., based in Lakewood, New Jersey (with the same business address as Kars4Kids) although they also fund other programs – school placement, tuition assistance, summer camp, holiday food and gift packages, parent education and counseling.

Oorah, Inc. is a 501 (c) (3) organization that provides Jewish children and their families with youth and family programming, education and studies, and community outreach.

The most recent IRS Form 990 (2018) reveals Kars4Kids received $77 million in contributions of which $76 million were non-cash contributions:  $72 million are reported to be primarily cars and other vehicles, and $4 million from real estate contributions.

The organization uses third-party towing companies and auction houses to tow, evaluate, sell, or scrap donated vehicles. The value of the vehicles is based on the sales price (although the sales price appears to be net of the towing and other costs) because Kars4Kids reports the sale of vehicles in 2018 totaled $62 million but the cost to sell them was $74 million, netting the organization a $12 million loss on the income side of the income statement, which is an unusual way to account for revenue (i.e. expenses are usually expensed on the income statement and not netted out of revenue).

143,062 vehicles valued at a sales price of $70 million (an average of $500 each) and 2,005 boats and planes valued at a sales price of $1 million (an average of $600 each) were reported on the Form 990.  What would be interesting to know is the value of the vehicle at donation less the costs of towing and other costs.

Kars4Kids employs 138 people (with two employees receiving more than $100,000 in compensation) who received $4 million in compensation (which equates to an average compensation of $29,000).

Expenses totaled $72 million (including the $12 million in vehicle costs that were deducted from income) with the expenses categorized as follows:

  • $33 million (43% of revenue):  Grant (to Oorah)
  • $20 million (26% of revenue):  Advertising and Promotion
  • $12 million (16% of revenue):  Additional Vehicle Costs
  • $ 4 million (5% of revenue):  Compensation
  • $ 4 million (5% of revenue):  Fees for Services, Office-Related,  and Other

As illustrated above, Kars4Kids spent more than half of revenue ($40 million of the $77 million) on organization costs and made a $33 million grant to Oorah.

Based on the above information reported by Kars4Kids, each $1 in revenue was used as follows:

$1.00:  Revenue

-$0.26: Advertising and Promotion

-$0.16: Additional Vehicle Costs

-$0.05:  Salaries, Compensation, and Payroll Taxes

-$0.05:  Fees (Legal, Acct, etc), Office, and Other Expenses.

-$0.52:  Subtotal Functional Expenses

  $0.48:  Revenue Remaining

-$0.43:  Grant to domestic organizations(Oorah, Inc.)

 $0.05:   Amount Not Spent and added to Fund Balance

In summary, Kars4Kids raises money by focusing a significant portion of revenue ($20 million in 2018) on advertising and promotion for vehicle donation. They then take these vehicles and sell them (145,000 vehicles were donated in 2018 with the average net proceeds reported to be about $500 each) raising funds for grants to another organization – Oorah, Inc.  What isn’t clear on the Form 990 is the value of the vehicle at donation and the costs associated with selling the vehicle, because Kars4Kids reports the “sales price” of the vehicle which appears to be net of some costs.

The bottom line is that for every dollar in revenue, 26 cents was used for advertising and promotion which raises the question: is there a more financially efficient way to raise donations? Only 5 cents was spent on staff while 5 cents was used for operating expenses. 43 cents of every dollar was granted to Oorah, Inc..

In closing it is important to note that the $33 million granted to Oorah, Inc. in 2018 was primarily used for 3 things in 2018:  to pay staff ($7.4 million), pay office-related expenses ($5 million) and save funds (allocated to the general fund) in the amount of $18 million.

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

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