Doing the Numbers: How The Chronicle’s Philanthropy 400 Was Compiled

The 11th annual Philanthropy 400 uses financial data gathered from nonprofit organizations to

determine which charities raised the most from individuals, foundations, and corporations during the fiscal year ending in 2001, or in 2002 for organizations with fiscal years ending in January, February, or March.

Cash and in-kind gifts are included in the private-support total, which is used to determine an organization’s rank.

The 2001 rankings shown on this year’s chart are based on figures that may have been revised since publication of last year’s Philanthropy 400.

The Philanthropy 400 rankings show how well charities do in attracting private support. The rankings do not take into account money provided by governments or as fees that charities charge for their services. As a result, nonprofit groups with big budgets but little in donations from individuals, corporations, or foundations may not be on the list.

Data from fiscal 2000 were used for 15 organizations that did not have complete information for fiscal 2001. Five organizations that file their financial information in March were unable to provide information for fiscal 2002, so data for fiscal 2001 were used. One organization, the United Way of Central Indiana, could not provide data for fiscal 2001 because of a change in its fiscal year, so it gave data for the fiscal year ending June 30, 2002.

In most cases, The Chronicle relied on figures from charities’ Form 990 informational tax returns.

Some groups that have affiliates provided data from their consolidated audited financial statement. Information from annual reports and from a Chronicle survey form that is based on the Form 990 also was used.

Different Approaches

Nonprofit organizations report their financial information in various ways.

Many follow rules issued by the Financial Accounting Standards Board that are designed to standardize financial reporting. However, those rules are not necessarily consistent with those governing the Form 990. The Chronicle adjusted some organizations’ data to make them consistent with information provided by other groups from their Forms 990.

Under generally accepted accounting principles, nonprofit groups can report donated services as part of their contributions. Donated services cover those volunteered by a professional that the charity would otherwise have had to pay for, such as a doctor’s or accountant’s services. However, the Internal Revenue Service does not recognize donated services as contributions and thus they are not reflected in fund-raising totals reported on Forms 990. Because of that, The Chronicle dropped from the Philanthropy 400 Operation Smile, a health organization that recruits medical professionals to donate their time to travel to developing countries and throughout the United States to perform reconstructive surgery on children. In the fiscal year ending June 30, 2001, Operation Smile reported that it received $29.8-million in donated services, which accounted for 83 percent of its private-support total.

Make-a-Wish Foundation (No. 129) said it could not exclude donated services from its figures, but The Chronicle left the organization on the list because it said such services accounted for only a small percentage of its contributions from private sources.

Under generally accepted accounting principles, organizations can include unrealized gains and losses in the total income line, but the Form 990 does not. When possible, The Chronicle did not count such information for groups that use only financial statements to report their data.

Osmond Foundation (Children’s Miracle Network) was dropped this year from the Philanthropy 400 because the organization does not include on its Form 990 money it raises in its national telethon.

Osmond participates in fund-raising efforts for children’s hospitals around the nation but does not collect the money that goes to those groups.

College Figures

Contribution figures for most colleges and universities in the Philanthropy 400 come from an annual survey conducted by the Council for Aid to Education, a New York organization that monitors charitable giving to higher education and private elementary and secondary schools.

Those data are used because public colleges and universities are not required to fill out the Form 990, and getting an accurate comparison of public and private institutions can be difficult.

One difference between the council’s data and the information reported on the Form 990 involves the counting of pledges.

Under accounting standards used by most nonprofit organizations to fill out the Form 990, groups are supposed to count pledges as revenue that has been received. The council, however, directs colleges and universities to count only money that is actually in hand at the end of the fiscal year.

Because the council’s data reflect only money received, other data for universities in the Philanthropy 400, including income figures, may reflect additional information, such as pledges.

Some public universities report their financial data for an entire state higher-education system, while others provide information on each campus. How state systems report their data can change from year to year.

Seven colleges and universities did not participate in the council’s survey, but are included in the Philanthropy 400 based on their Forms 990 or information provided on a survey form that the Chronicle sent them.

They are Bard College (No. 293), California Institute of Technology (No. 128), Franklin W. Olin College of Engineering (No. 383), Hillsdale College (No. 352), Jewish Theological Seminary of America (No. 334), Saint Louis University (No. 170), and Yeshiva University (No. 148).

Earmarked Gifts

Following guidelines set forth by the IRS in a private-letter ruling in 2001, The Chronicle includes in all United Way figures any funds that donors have earmarked for specific causes.

Special circumstances affect several organizations in the survey:

• Data for Doctors Without Borders USA (Médecins Sans Frontières USA) (No. 283) reflect only its U.S. office. If figures for its affiliates in 18 countries and the international office in Brussels had been included, the groups’ private-support total would have been an estimated $333-million.
• Greater Twin Cities United Way (No. 169) was formed May 1, 2001, by the merger of the United Way of Minneapolis Area and the United Way of the St. Paul Area. Information in the Philanthropy 400 reflects the combined data of the merged organizations for part of the year and the newly formed organization for the other part.
• United Cerebral Palsy Associations (No. 112) is included on the list using figures estimated by the organization based on the total operating expenses for the main office and all affiliates.

The Philanthropy 400 provides information on fund-raising costs and other charity expenditures. The figures are best used to compare a charity’s ability to raise money and convert gifts to programs from year to year. Using those figures to compare one charity with another could be misleading if done without knowing more about each organization, such as its age, programs, management, and accounting methods.

Using expense figures in the survey to calculate management and other costs may also be misleading. Not all expenditures are included in data requested for the Philanthropy 400 survey.

For the most part, the Philanthropy 400 does not include churches because the IRS does not require religious organizations to make their finances public. Religious groups that agreed to fill out the survey form are included.

The Philanthropy 400 was conducted under the direction of Martha Voelz, with assistance from Marni D. Larose.