How Revenue is Spent at the Horatio Alger Association (2022)

The Horatio Alger Association (HAA) is named for the gilded age writer, Horatio Alger who wrote about impoverished boys who rose from their humble backgrounds through education and good works to higher echelons of society.  Consequently HAA awards need based scholarships and honors the achievements of those who have overcome adversity and obtained personal achievement and success throw perseverance.

At the heart of HAA is the firm belief in achieving the “American Dream” through the free-enterprise system.  So, the purpose of this organization appears to be the awarding of grants (but surprisingly only $2.4 million or about 11% of total revenue was awarded in grants, while the Executive Director, Terrence Giroux received more than $5 million in compensation in 2022 – 24% of the $22 million in revenue raised in 2022).

A tax-exempt, non-profit 501 (c) 3, HAA is based in Alexandria, Virginia.  In 2022, HAA reported total revenue of $22 million (compared to $20 million in 2021 and $27 million in 2020) which came primarily from two (2) sources:  contributions, gifts, and grants ($18 million) and the Horatio Alger Foundation, a related organization ($4 million).

Expenses totaled $27 million in 2022 ($5 million more than the organization raised) with expenses categorized as follows:

• $2.4 million (11% of revenue):  Grants
• $4.5  million (20% of revenue):  Compensation*
• $3.4  million (15% of revenue):  Fees for Services
• $7.3  million (33% of revenue):  Travel and Conferences
• $1.5 million (7% of revenue):  Office Expenses
• $7.9  million (36% of revenue):  Advertising, Promotion, AV and Multimedia, and Taxes

HAA reports total compensation was $4.5 million but the Form 990 also reports Terrence J Giroux received $5,164,528 in compensation in 2022, so there appears to be an error on the Form 990 (compensation actually appears to be about $10 million, half of which was paid to Terrence J Giroux).  The question to ask is:  Why was Mr. Giroux paid more than $5 million in 2022 to oversee the awarding of $2.4 million in grants?

As illustrated above, the largest expense is advertising, promotion, AV and multimedia ($6 million of the $7.9 million total) and taxes followed by travel and conferences and specifically conferences ($6.5 million of the $7.3 million total).

The third largest expense is compensation which appears to be an error.  The Form 990 reports that 14 employees received $4.5 million (an average o $320,000) but the Form 990 also reports the Executive Director, Terrence Giroux received more than $5 million in compensation in 2022.  

Grants – the major purpose of the organization – totaled $2.4 million or about 11% of revenue (in 2021 grants were 65% of revenue which is more in line with a non-profit whose primary purpose is to award grants).  571 individuals in the US received $1.8 million in scholarships in 2022, or about $3,000 each (compared to 1,251 individuals receiving $11 million in scholarships in 2021, or an average of $9,000 each).

Approximately $200,000 in scholarship grants were awarded to students in North America (i.e. Mexico and Canada but not the US) although the number of students is not disclosed.

HAA closed the year with $14 million in net assets (note: HAA started the year with $21 million in net assets) with the deterioration primarily to spending more than the organization raised and to unrealized losses on investments.

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

$100:  Revenue

-$ 11:  Grants

$ 89:  Remaining Revenue

-$ 36:  Advertising and Promotion, AV and Multimedia, and Taxes

-$ 15: Fees for Services

-$  7:  Office Expenses

-$ 20:  Compensation*

-$ 33:  Travel and Conferences

-$111:  Subtotal: Advertising, Fees, Compensation, Travel and Conferences

-$ 22:  Amount of Expenses in Excess

As illustrated above, HAA spent $122 for every $100 in revenue raised (which means the organization had to rely on net assets to cover the shortfall, which amounted to $5 million).

In summary, HAA spent 11% of revenue on grants, which has historically been the organization’s largest expense, but not in 2022.  In 2022, there appears to be unexplained differences including:

• $5.2 million in compensation to the executive director, Terrence Giroux does not appear to be included in compensation expenses (which is reported on the Form 990 to be $4.5 million for 14 employees).
• Travel and conferences totaled $7.9 million and advertising, promotion, AV and multimedia totaled $7.3 million, which again has not historically been such a significant expense until 2022.

To read the IRS Form 990 (2022), click here.