Wednesday, February 13, 2013

Matching Mission and Financials: The Case of the Michael J. Fox Foundation

Perhaps too often, this blog has highlighted circumstances where an organization's financial statements paint a different picture from that of the prevailing public perception.  However, it is worth noting that there are many success stories when it comes to matching an organization's mission and its financial performance.  Today, I highlight one such match between mission and financial performance, the Michael J. Fox Foundation.

The mission of the Michael J. Fox Foundation (MJFF) is very clear and focused.  In their words, "The Michael J. Fox Foundation is dedicated to finding better treatments and, ultimately, a cure for Parkinson's disease."  How do they aim to achieve this mission?  The following word cloud (thanks to presents their stated promise and core values.

Besides the obvious focus on Parkinson's disease, what stands out?  A focus on research, cure, treatments, and speed.  The question to consider is to what extent do their financials jibe with that focus?

Research for cure and treatments
The most recent financial statements of MJFF (year ended 12/31/11) demonstrate that the organization uses a sizable portion of its expenses on programs.  However, that's not the end of the story.  As we have seen before, many organizations with large program expense ratios disperse such program expenditures among a wide variety of efforts, including education, advocacy, public awareness, etc.  In the case of MJFF, the focus on research is borne out in the data, with 83% of all expenditures being directly for research grants.  As the chart below indicates, the high program expense ratio (91%) is backed primarily by research expenditures.

I should note that 2011's financial focus on funding research is not an anomaly.  In fact, these percentages have remained remarkably consistent over the years.

Another thing worth noting is that many charities exhibit impressive program expense ratios but do not spend their resources quickly.  The desire to accumulate a net asset cushion, for whatever reason, may limit the degree to which organizations expend resources with speed.  Consistent with their goal of finding research to fund and funding it quickly, MJFF exhibits a remarkable sense of urgency in its financials.  In fact, in both 2011 and 2010, they spent more money than they raised (and they managed to raise a lot!).  Over the past several years, revenues and expenses have been roughly equal.  And, to the extent MJFF had assets at the end of the year, those assets were mostly held as cash, since much of those funds were already earmarked for approved grants.  So, their financials place urgency ahead of long-term financial health.  Since they intend not to exist in the long-term, the financials certainly match their goals.

I am not saying MJFF is alone in this regard, or that they have no flaws.  What I am saying is that they do ideally represent a match between what they state as their mission and approach and what is borne out in their financial reports.  For that, they should be commended.

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