How The Chronicle Compiled Its Annual Philanthropy 400 Rankings

The Chronicle’s 16th annual Philanthropy 400 uses financial data gathered from nonprofit organizations

to determine which groups raised the most money from individuals, foundations, and corporations last year.

The rankings are based on cash donations raised by charities, as well as gifts of art, stock, real estate, medicine, food, and other noncash items.

The Chronicle relies heavily on figures from the Form 990 informational tax returns that charities are required to file annually with the Internal Revenue Service.

Some groups that have affiliates provided data from their consolidated, audited financial statements. Data were also gathered from annual reports and a Chronicle survey that is based on the Form 990. The law requires nonprofit groups to provide the Form 990 to anyone who asks for it.

Religious organizations are not required to disclose their finances publicly, and do not have to file a Form 990. Some religious groups are included on the Philanthropy 400 because they provided their information to The Chronicle.

Charities were ranked based on the amount they raised in the fiscal year that ended in 2005, or in 2006 for organizations with fiscal years ending in January, February, or March.

Data from the 2004 fiscal year were used for six organizations that did not have or provide complete information for the 2005 fiscal year. In some cases, the groups had requested an extension from the IRS to file their Form 990; in others, the organizations changed their fiscal year and will have full data next year.

One organization, Lutheran Services in America, No. 12 on the list, said the most recent figures it could provide were for the 2002 fiscal year, the last year the organization compiled consolidated figures for its affiliates. While the headquarters of the group files a Form 990, many of its affiliates do not, because as religious organizations they are exempt.

$37.7-Million Minimum

The Philanthropy 400 rankings show charities’ ability to attract private support. Because the survey doesn’t take into account government money or the fees groups charge for their services, some large nonprofit organizations may not appear on the list. For example, some groups with large budgets do not raise as much from private sources as do smaller charities; to make the list this year, a charity had to raise at least $37.7-million from private sources.

The rankings are based only on donations made to charities and their affiliates in the United States, even though some groups on the list have international affiliates.

The Chronicle encourages charities that operate as one entity, even if they have multiple affiliates, to consolidate their fund-raising figures. In some cases, as charities change how they operate, The Chronicle changes its approach to counting them.

For instance, last year The Chronicle decided to consolidate the numbers United Ways provide because the organization has begun to require all units of the group to meet strict financial standards. From 1991 to 2004, each United Way was considered based on how much it raised.

In the past, only about two dozen United Ways were included on the list each year. Now the organization’s number represents more than 1,300 affiliates. As a result, the 400 rankings produced in 2004 and earlier are not directly comparable to last year’s and the 2006 rankings.

Consolidated figures were provided by 143 organizations in this year’s list.

Some organizations prefer not to submit consolidated information. Among them is one of the largest fund-raising entities in the United States: United Jewish Communities, an umbrella group for 155 Jewish federations.

United Jewish Communities is ranked No. 34 on the list based on the amount the headquarters organization raised. Eleven other federations made the list.

Reporting Data

Nonprofit organizations report financial information in a variety of ways. Many follow standards set by the Financial Accounting Standards Board. However those rules are not necessarily consistent with the ones governing the Form 990.

The Chronicle uses figures that colleges and universities report to an annual survey by the Council for Aid to Education, a nonprofit organization in New York that monitors charitable giving to educational institutions.

Because public colleges and universities are not required to complete the IRS Form 990, the council’s data offer the most reliable figures for ranking public and private institutions by their fund-raising success.

The key difference between the Form 990 and the council’s figure concerns pledges. The IRS form allows groups to include pledges in the amount of money they received from private sources, while the council allows only money in hand at the end of the institution’s fiscal year to be counted.

In addition, the council reports private-support figures in present value rather than face value, a calculation that donors make when writing off donations on their personal tax forms. Present value is generally the same or lower than face value, because it accounts for the loss of interest earnings that a group could have collected on a donation that is deferred rather than given at one time.

Comparing Charities

The Chronicle was not able to consider several organizations for inclusion on the list because they failed to provide their informational tax returns.

By law, the documents must be provided within 30 days of a request, but 12 organizations did not send their Form 990 after repeated requests and did not tell The Chronicle whether they had sought extensions from the IRS.

Those organizations, whose most recent fund-raising figures suggest they might have been eligible for the 2005 list are: Brookings Institution, in Washington; Futures Home Assistance Program, in Stockbridge, Ga.; Lucile Salter Packard Children’s Hospital at Stanford, in Palo Alto, Calif.; Nebraska Health System, in Omaha; Northwestern Memorial |Hospital, in Chicago; Omaha Performing Arts Society; Population Services International, in Washington; Ronald McDonald House Charities, in Oak Brook, Ill.; Senior Gleaners, in Sacramento; Urban Hospital Care Plus, in Livonia, Mich.; Van Andel Institute, in Grand Rapids, Mich.; and West Penn Allegheny Health System, in Pittsburgh. The Chronicle has reported these violations of the law to the IRS.

While the rankings rely on the total amount that charities raise from private sources, the Philanthropy 400 tables provide figures on fund-raising costs and other expenditures by nonprofit organizations. Readers should compare such numbers carefully, as they can be misleading if readers do not know more about specific groups, such as programs, management, and accounting methods, as well as the organization’s history.

For example, many of the organizations are set up mostly to distribute grants to other charities, so comparing their figures to groups that run charitable programs might not be fair.

The Chronicle strives to include all charities that might be eligible for the Philanthropy 400 each year. If readers know of a group that should be included next year, please send an e-mail message to survey@philanthropy.com.

The Philanthropy 400 was compiled by Noelle Barton, Maria Di Mento, Candie Jones, and Sam Kean, with additional help from Qahira El’Amin, Brennen Jensen, and Sarah Ludwig.