Monday, March 24, 2014

Lady Gaga's Charity Finances - It's Complicated

Media reports have swirled in recent weeks, skewering Lady Gaga's Born this Way Foundation for spending millions while only devoting "$5,000 to charity." Though it makes for a shocking headline, it turns out to be more complicated than that. Here are a few observations from a brief review the foundation's 2012 financial statements.
  • The claim that only $5,000 went to charity comes from the fact that the organization only provided grants of $5,000 to other organizations/individuals. However, the foundation never claimed to be in the business of providing grants, so this is surely an unfair benchmark. (What does the organization do, you ask? They are focused on developing youth programs and outreach to promote bravery, self-acceptance, and inclusiveness.)
  • The salacious media claims are bolstered by the fact that a large portion of their expenses were for legal fees ($406,552), consulting ($300,000), and web development/social media ($50,000). Seeing as how 2012 was the first full year of the organization, however, substantial startup and development costs shouldn't be too surprising. I'm not saying the money was well spent (I can't assess that), but it's possible.
  • Media coverage implies that the organization is wasting the funds donated by the general public, but it has been noted elsewhere that Lady Gaga herself provided much of the startup funding.
  • To the extent that the financial filings contain red flags, I would say it has more to do with management practices than any particular dollar amounts. As of the end of 2012, the organization listed 5 directors, 2 of which were considered "independent." A review of the directors reveals that 3 are relatives of Lady Gaga, while the two independent directors were the CEO and COO of Lady Gaga's management company. This hardly instills confidence that the organization is being run efficiently and independently.

Does all of this mean that the organization has been given a bad rap and is doing nothing wrong? Not necessarily, but if there is financial mismanagement, it is certainly not as extreme as the reports make it sound. That said, the organization would probably be wise to put in more independent oversight in its board to to give more assurances to a now-skeptical public.

Wednesday, March 19, 2014

Financial Trends of the Creation Museum

Answers in Genesis, the nonprofit that runs the well-known and highly-controversial Creation Museum, has seen its share of the spotlight in recent months, with a highly-publicized debate between Bill Nye and its CEO (Ken Ham) followed soon after by an announcement that construction of its new project, a Noah's ark-themed amusement park, would soon begin. Interestingly, much of the discussion of the organization and its efforts have centered around its finances, in particular its ability to generate sufficient funds for its latest endeavor.

I will not speculate about whether the organization has the financial ability to build and sustain its new project. Quite simply, too little information about that project's funding has been made available to say much of anything. However, all the publicity about the organization and its growth have led me to wonder about its broader financial picture. As the following figure shows, the trends don't quite match the media hype.

Answers in Genesis Annual Financial Performance
(Note: the data comes from the annual IRS Form 990 filings for Answers in Genesis from the inception of the Creation Museum until the most year made publicly available)

In short, no matter what benchmark one uses for revenues and/or profitability, the organization's finances exhibit a remarkably consistent (though not precipitous) decline. What, if anything, this portends for the new theme park I don't know for certain, but it's fair to say the finances don't alone demonstrate a mandate for the organization to expand.

Tuesday, March 11, 2014

The (Unfair) Demonization of PGA Tournament Charities

Many of the tournaments on the PGA tour are organized as 501(c)(3) charities. Both the PGA and the tournaments themselves have faced substantial criticism in recent months for the apparent lack of charity from these tournaments. This criticism has surfaced in a variety of arenas but reached a peak when covered by ESPN/ABC as part of their "Outside the Lines" series. To summarize the concern, ESPN and the nonprofit rating agency Charity Navigator noted that the PGA tournament charities have, on average, only given 16% of their expenses to charitable causes, far below the level of 65% recommended by Charity Navigator. Due to such low percentages, Charity Navigator rated every PGA tournament as receiving zero stars, its lowest rating.  Ken Berger, president of Charity Navigator summarized the outrage: "The lion's share of the money is going to big prizes, cash prizes for athletes and all the promotion around it, so it's really pathetic, actually...[e]very single taxpayer in this country ultimately is bearing the burden of having to pay the taxes for this wildly inefficient organization that's giving so little to charity." My question: is it really as bad as they say?