How the Philanthropy 400 Was Compiled

By HARVY LIPMAN

The Philanthropy 400 uses financial data gathered from nonprofit organizations to determine

which charities raised the most in donations from individuals, foundations, and corporations during the fiscal year ending in 1999 (or 2000 for those with fiscal years ending in January, February, or March).

Eight organizations did not have complete information for 1999, so data from fiscal 1998 were used instead.

Cash and in-kind gifts are both included.

In most cases, The Chronicle relied on figures from charities’ informational tax returns — Internal Revenue Service Forms 990.

For some nonprofit organizations, especially those that have numerous affiliates and do not file consolidated tax forms, data from audited financial statements were used.

Information was also compiled from a Chronicle survey form and from annual reports.

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

The policies that nonprofit organizations use to count donations vary widely.

Many follow rules issued by the Financial Accounting Standards Board that are designed to standardize financial reporting, but some do not. Some follow the board’s rules in their audited financial statements, but not on their federal tax returns.

Contribution figures for most colleges and universities come from an annual survey conducted by the Council for Aid to Education, a New York organization that monitors charitable giving.

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

One difference between the council’s data and the information reported on Forms 990 involves the counting of pledges. Under accounting standards used by most charities to fill out the Form 990, organizations are supposed to count pledges as revenue received. The council, however, directs colleges and universities to count only money actually received. The council survey also does not include gifts from affiliated foundations and organizations.

Some public universities choose to report their financial data for an entire state higher-education system to the Council for Aid to Education, while others provide information on each campus.

A few colleges and universities do not participate in the council survey, however, and are included in the Philanthropy 400 based on information from their I.R.S. forms. These are Emory (No. 107), Tulane (No. 122), and Yeshiva (No. 264) Universities.

Special circumstances affecting several organizations in the survey are important to note:

• CARE USA (No. 178) was unable to determine how much of the money it spent on program services, fund raising, and general expenses came from foreign government agencies and overseas donors, so those figures are not included in the survey. However, the organization was able to calculate how much private support it received from individuals, corporations, and foundations in the United States. That figure was used to rank the group.
• Heart of America United Way, in Kansas City, Mo., dropped off the list after changing its fiscal year. The organization could provide financial figures only for a six-month period, and its private support total was not high enough to qualify for the Philanthropy 400.
• Larry Jones International Ministries/Feed the Children (No. 21) is on the list based on data provided by the charity. However, the group’s financial picture is unclear following the resignation of its chief financial officer, Monty Rainwater, who has admitted forging the signature of the Arthur Andersen consulting firm onto the group’s financial statements for 1998 and 1999 — even though the accountants never reviewed the documents. An internal investigation of the group’s finance department is under way, and Arthur Andersen’s Business Fraud Investigation Unit has been hired to conduct an audit of financial documents for those two years.
• Operation Smile (No. 304) is included on the list based on its audited financial statement, which includes in its total private support a calculation of the cash value of the time volunteered by its doctors and nurses. This value is not included in the total support it reports on its Form 990.

As in last year’s survey, The Chronicle subtracted from private support totals of United Ways any donations earmarked by donors to be distributed to specific charities. The Chronicle follows that approach because it is used by the Internal Revenue Service and the Financial Accounting Standards Board.

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

One change has been made in this year’s data: The Chronicle is no longer reporting the percentage of total income each group spends on program services.

The reason is that much of what certain types of organizations, such as hospitals and universities, spend on providing services is not counted as program service expenses. Money spent on fee-for-service activities, such as hospital care for patients who are covered by insurance, is generally not included in program services, for example. Thus, using this percentage to compare such organizations with other nonprofit groups can be misleading.

For the most part, the Philanthropy 400 does not include churches, which are not required to make their finances public. Some religious groups agreed to fill out the survey form, however, and are included in the list.

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