Thursday, December 5, 2013

The V Foundation

It seems almost commonplace now to hear of a charity whose finances have disappointed its donors. Donor frustration seems most common among cancer charities, where donors often believe their funds will be used to promote research in pursuit of better treatments and a cure only to later find out that many resources are directed toward salaries, legal consultants, and "awareness" advertising.

With this in mind, I want to highlight a success story where finances paint a picture of an organization singularly focused on its mission: The V Foundation for Cancer Research.

The V Foundation was established by the legendary coach Jim Valvano in order to generate funds to support cancer research. Its launch was announced in his famous speech at the ESPYs 20 years ago, a speech that exemplifies what the organization is about.

The point I want to make is that the passion and vision of Jim Valvano is seen clearly in the organization's finances. To demonstrate this, I will examine two key dimensions of the organization's most recent financial statements. As a benchmark, I provide the same information for a "composite" cancer charity, which consists of the total of two well-known cancer charities. (I will not mention which ones, because this is more about the unique characteristics of The V Foundation and not those organizations which are, in fact, quite typical.)

The organization does not waste time
Some funds that have been given to The V Foundation were designated by donors to be permanently restricted, whereas others were given without restriction or with limited restrictions. Interestingly, virtually all of the funds the organization chooses to retain from year-to-year are those designated as such by donors; the rest are directed toward the organization's mission as quickly as possible. This is confirmed by noting that 96% of The V Foundation's net assets carried forward represent net assets with permanent restrictions placed by donors. In contrast, the same figure in the benchmark composite charity is just under 4%.

The organization puts funds toward its mission
Many consider the program expense ratio, the percentage of assets spent on programs, to be a key indicator of financial priorities. Though it is certainly not perfect, it is informative. In the case of The V Foundation, 91% of its expenses were for programs, whereas the equivalent statistic for the benchmark composite charity is 81%. As I have stressed here before, however, that is not the entire story. The V Foundation focuses on providing grants for research. While other charities do so as well, the finances often demonstrate a variety of goals. The following chart breaks down where The V Foundation's program expenses went.

Program Expense Breakdown - The V Foundation

To see how remarkable this singular focus in The V Foundation's financials is, compare it to the same breakdown for the benchmark composite charity.

Program Expense Breakdown - Benchmark Cancer Charity

In short, the intensity and focus exhibited by Jim Valvano in his famous speech 20 years ago is exhibited with clarity in his organization's financial statements today. This is truly exceptional and inspiring.

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