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.

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