A precious few of the 100 largest organizations ever post more than 50 percent increases from year to year. Yet, when Lutheran Services in America (LSA), the St. Paul, Minn.-based human services giant, released its fiscal year ’99 data – its most recent available – the result was 87.5 percent more than the FY ’98 data. LSA nearly reached $7 billion in total revenues among its constituent organizations.
More than just the first organization to raise more than $4 billion in one fiscal year, LSA’s nearly $7 billion left them firmly ensconced at the top spot. It also was the rocket fuel that pushed the NPT 100 totals to more than $49 billion, or an average of nearly $500 million per organization.
Jill Schumann, president and chief executive officer of LSA, said there were more organizations – and larger organizations – from under its umbrella that reported their revenues in the latest survey. “As I look at that nearly $7 billion of income,” she said, “program fees represent around 52 percent, government about 39 percent. The reason that those numbers kind of flip-flopped from ’98 to ’99 is that in ’99 we had more hospitals reporting. So obviously they have a much higher ratio of fees – for instance insurance payments.”
But the explosive growth of the NPT 100 wasn’t a one-organization show. Total revenues grew 19 percent over the performance of these organizations in the previous fiscal year. The first 25 organizations alone in fiscal year 2000 raised more than the entire NPT 100 listing of 1999, which showed FY ’98 figures.
Bob Leavy, who heads the Boston office of accounting and management firm Grant Thornton LLP, which helped compile and analyze the data again this year, noted the 19 percent growth in total revenues for the 100 organizations compared to previous year’s data struck him in particular. “The components of the income stayed very much the same,” he said. “It’s not as if it was a very good year in the market and the investment revenue drove it up.”
He added, “It’s also interesting that because of such great growth, this year’s (second largest) organization would have been (the largest) last year by 8 percent.”
Even taking out Lutheran Services, which seems to skew the data, the other 99 organizations showed 12.4 percent growth in total revenues. This is nearly double the percentage growth of Giving USA for giving to the entire nonprofit sector in 2000. Even so, Leavy was reluctant to ascribe any meaning to that statistical finding. “Quite frankly, it doesn’t strike me in any way,” he said. “It’s interesting, but I’m not sure it means anything.”
The expense levels also rose at roughly the same pace, but he noticed increases in their total assets. With total asset and net asset data difficult to obtain from the largest systems and federations, however, it’s difficult to draw conclusions.
Still, the revenues exceeded expenses by nearly $8 billion. “That goes to the net assets of the organizations,” Leavy said. “They seem to be building their reserves and they’re building them at a faster pace.”
Leavy wondered whether building reserves was in anticipation of the economic slowdown of the latter half of 2000, but he added that holding onto the reserves too long could cause donors to decide to stop giving.
Among the specific categories, Leavy noted that civic and cultural organizations in particular appeared to be bolstering their reserves. Conservation groups also showed growing net assets, but the type of transactions many of these organizations enter, particularly The Nature Conservancy (11th overall at $784 million), holding onto tracts of land, could skew the appearance. “If, in fact, what they do with their revenue is to buy a fixed asset, a fixed asset wouldn’t show as an expenditure,” Leavy said. “They do effectively pay for that land, … they take title and keep title.” Leavy noted the reserves among cultural groups. For example, the Metropolitan Museum of Art in New York City, “spent half of what they took in,” he said. “Their investment income is more than half their total revenue.”
The cultural organizations in the NPT 100 raised 36 percent of their total revenue through public support. “Their percentage of income to investments, they’re more than 50 percent higher than any other group,” Leavy noted of the category. “That’s pretty big.”
The past few years, organizations in the categories of the NPT 100 have generally shown their largest growth in public support and investment income. That continued to be the case in FY ’00. Looking at the categories themselves, civic and cultural organizations attracted nearly $3.3 billion among the 13 organizations, which was a $456 million increase in total revenue compared to the same organizations’ fiscal ’99 figures. The lion’s share of that increase came from a $278 million increase in public support, with investment income rising nearly another $125 million.
When looking at specific total revenue changes among the cultural organizations, the $102.5 million increase at the National Gallery of Art was particularly noteworthy. Deborah Ziska, the gallery’s chief of press and public information, said that in addition to the typical $18-$20 million growth the organization experiences annually, FY ’00, “the other $80 million or so is from two major bequests (in FY ’00).”
The expenses among cultural groups increased 11 percent between the two years. While program expenses and administrative expenses grew at a similar rate, the fundraising expenses bumped 19 percent higher. The change in fundraising expenses only represented 6.6 percent of the overall increases in expenses, however.
Conservation organizations increased 11 percent in total revenue ($135 million), and $93 million in public support. The expenses of conservation organizations rose 20 percent, however, with all three expense categories increasing by similar levels.
The four education groups (United Negro College Fund, Citizens’ Scholarship Foundation of America, Junior Achievement, and Summer Institute of Linguistics) all posted revenue increases. The total revenues of the four organizations rose $60.8 million, and $49 million of that increase was from public support.
While the total expenses of education organizations rose only 4 percent, their fundraising spending spurred that expense. The fundraising expenses rose $2.7 million as a group, which was an 11 percent more than FY ’99, though there are certainly other organizations that spent more in fundraising by themselves than the $27.5 million these four organizations spent.
Human services remain the largest category in both number of organizations and in total revenue among them. Bringing in $29.2 billion of the $49 billion among the entire list, human service organizations experienced a $5.3 billion increase in total revenue, or 22 percent. Despite the size of the category, it was one organization that swung most of the changes. LSA’s total revenues increased by $3.2 billion, which would have placed third in the NPT 100 this year. LSA’s increase in program support was the lion’s share of the increase in what is the second largest revenue component of the human service category.
Health organizations, the second largest category, raised more than $600 million compared to fiscal ’99, with government support posting a 13 percent increase within the category. Still, public support and investment income remain the primary tributaries into the main stream of health organization revenues.
Relief organizations posted strong growth also, with total revenues rising more than $418 million in fiscal ’00. The big jump was in government support, which accounted for 46 percent of the category’s total increase. While expenses among relief organizations tended to follow the total growth, fundraising expenses rose by 23 percent.
The 11 organizations listed in the religious category posted $1.7 billion in total revenues, which was a $150 million increase compared to the previous year. With 76 percent of all revenues for these organizations coming from public support, it’s no surprise that most ($95.5 million) of the growth was from public support.
What may be somewhat surprising for those organizations is the part investment income played in the increase. Though investment income represents only 8 percent of total revenues in the category, the $25.9 million growth in fiscal 2000 represented 17 percent of the revenue growth. Among “financial service and product distribution” organizations, the large percentage increases of the category are easily traced to the growth of Fidelity Investments Charitable Gift Fund and Vanguard Charitable Endowment Program.
Considering the presence of the Schwab Fund for Charitable Giving, which landed outside the 100 with $73.6 million and others establishing themselves, these organizations have begun to make an indelible mark on the sector’s growth.
These organizations receive donations of cash and securities and generally pass along grants upon the preferences of the donors, though the organizations control the assets once they are donated. Many sector observers still see such groups as inherently different than other 501(c)(3) organizations.
“It really is a mixed bag,” Leavy said of the Fidelitys and Vanguards of the nonprofit world. “These are just the vehicles through which (some people) give to charity. It eventually gets double counted. … I think it distorts things.”
To be included in the NPT 100, nonprofits must raise at least 10 percent of total revenue from public sources. And the organizations must, therefore, derive less than 90 percent of revenue from program services, government grants, investments, etc.
This year the “buy-in” for inclusion was more than $90 million, which was nearly $10 million more than the number 100 slot last year.
The editorial staff of The NonProfit Times triple-checks the data, which was compiled with the help of the Boston office of accounting and management firm Grant Thornton LLP. Data were gathered through an exhaustive, nearly yearlong examination of Form 990s, organizational annual reports and personal contact with several hundred organizations.
Whenever possible, the data is taken directly from the Form 990s. Since many religious organizations do not file 990s, and are not required to do so, the data was derived from the audited financial statements of those organizations.
Nonprofits with a large number of affiliates, particularly those in federations, appear to be having increasing difficulty in compiling the figure for their entire system. Such federations also have caused some confusing data in the charts, where affiliates are apparently inconsistent with the allocation of revenues, causing the national organizations to assign them to different categories. So, while the total revenue figure is correct, the break out categories do not always “foot” across. This year we’ve begun to add footnotes on those organizations whose data includes such confusing reports. Debuting or making a comeback to the NPT 100 this year are: United Cerebral Palsy Associations (18), Trinity Christian Broadcasting (55), Christian Broadcasting Network (56), Robert W. Woodruff Arts Center (62), Educational Broadcasting Corp. (72), Vanguard Charitable Endowment Program (90), Mercy Corps International (91), Christian Aid Ministries (93) and Compassion International (100).
Compassion landed at 101 last year, and its revenues increased more than $10 million to $92 million to secure the 100th spot.
The near misses this year include organizations that weren’t able to keep pace with the rising floor for the NPT 100. Boston Symphony Orchestra (101), International Aid, Inc. (102), Lincoln Center for the Performing Arts (103), Cold Spring Harbor Laboratories (104), and Paralyzed Veterans of America (105) all fell from the list. Cold Spring Harbor fell the furthest, from 71st last year. Others that fell out of the top 100 last year include the Museum of Fine Arts, Houston ($86 million), Moody Bible Institute of Chicago ($85 million), Mennonite Board of Education ($79 million) and Brother’s Brother Foundation ($77 million).
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