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November 5, 2022

Kars 4 Kids: How Donations are Spent (2020)

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 (2020) reveals Kars4Kids received $96 million in contributions (compared to $63 million in 2019 and $77 million in 2018) nearly all of which were non-cash contributions.  However, it is important to point out that total contributions, gifts, and grants were reported to be $107 million, of which $104 million were non-cash contributions. However, Kars4Kids also reported $90 million in gross sales of inventory and $101 million in cost of goods sold, netting an $11 million loss. This loss was applied to the $107 million in total contributions, gifts, and grants to get to a reported $96 million in contributions on the Form 990.

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 2020 totaled $90 million but the cost to sell them was $101 million, netting the organization an $11 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).

138,771 vehicles valued at a sales price of $96 million (an average of $700 each) and 1,322 boats and planes valued at a sales price of $2 million (an average of $1,500 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 100 people (with three employees receiving more than $100,000 in compensation from Kars4Kids and related/affiliated organizations) who received nearly $6 million in compensation (which equates to an average compensation of $60,000).

Reported expenses totaled $79 million categorized as follows:

  • $45 million (47% of revenue):  Grant ($44 million to Oorah)
  • $26 million (27% of revenue):  Advertising and Promotion
  • $  6 million (6% of revenue):  Compensation
  • $  2  million (2% of revenue):  Fees for Services, Office, and Repairs

As illustrated above, Kars4Kids spent nearly half of revenue ($45 million of the $96 million) on grants primarily to Oorah, Inc) and $26 million (27%) on advertising and made $45 million in grants.  $8 million was spent on compensation and fees for services, office, and repair expenses.  In all, $82 out of every $100 was spent, leaving $18 out of every $100 (or $17 million) added to the general fund (note:  Kars4Kids had $24 million in net assets at the end of 2020).

Based on the above information reported by Kars4Kids, every $100 in revenue was used as follows:

 $100:  Revenue

-$ 27: Advertising and Promotion

-$  6:  Salaries, Compensation, and Payroll Taxes

-$  2:  Fees (Legal, Acct, etc), Office, and Repairs

-$ 35:  Subtotal Functional Expenses

  $ 65:  Revenue Remaining

-$ 47:  Grants (primarily to Oorah, Inc.)

  $ 18:   Amount Not Spent and added to Fund Balance

In summary, Kars4Kids raises money by focusing a significant portion of revenue ($27 million in 2020) on advertising and promotion for vehicle donation. They then take these vehicles and sell them (139,000 vehicles were donated in 2020 with the average net proceeds reported to be about $700 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 as revenue which appears to be net of some costs.

The bottom line is that for every $100 in revenue, $27 was used for advertising and promotion which raises the question: is there a more financially efficient way to raise donations? Only $6 was spent on staff while $2 was used for operating expenses. $47 out of every $100 was granted, with most ($46 out of every $100) to Oorah, Inc. 

In closing it is important to note that the $44 million granted to Oorah, Inc. in 2020 was Oorah’s primary source of revenue – and they only used $26 million.  These funds were primarily used:  to pay staff ($8 million), make grants ($9 million), pay office-related expenses ($5 million) and save funds (allocated to the general fund) in the amount of $22 million (note: Oorah had $129 million in net assets at the end of 2020) so it seems clear that Kars4Kids is being used to grant money to Oorah who then spends only a small portion for programs for Jewish children and their families, and applying a significant portion to net assets which has allowed Oorah to accumulate nearly $130 million in net assets.

What Kars4Kids should be telling potential donors is this:  We sell your donated car and use about 35% to pay for advertising, staff, and other costs, and give about 50% to an organization called Oorah.  In 2020 that 50% amounted to $44 million. Oorah gave $6 million to a related organization called Oorah Congregation in Statin Island and $3 million to individual kids and families for programs, spent $13 million paying staff and administrative expenses and put the rest – $22 million – into savings.

To read the IRS Form 990 (2020), click here.

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