Academy Foundation disputes “poor” rating
BY ROBERT W. WELKOS – PART 2 of 2
The Academy Foundation, a nonprofit arm of the Academy of Motion Picture Arts and Sciences, has been given a “poor” rating by one of the country’s leading charity watchdog groups – a rating Academy officials don’t think it deserves.
Charity Navigator, which calls itself “the nation’s largest and most-utilized evaluator of charities,” studied the Academy Foundation’s latest Internal Revenue Service Form 990 for fiscal year 2007-2008 and gave the foundation an overall rating of 36.39, or one star.
In the opinion of Charity Navigator, a nonprofit receiving only one star performs “far below industry standards and below nearly all charities in its cause.”
But Ric Robertson, the foundation’s executive administrator, doesn’t buy it.
He contends that the foundation actually deserves a far better rating and that Charity Navigator must not know all the facts.
The lowest rating a nonprofit can receive from Charity Navigator is zero stars, which it defines as performing “far below industry standards and below nearly all charities in its cause.” The best rating the group hands out is four stars to nonprofits it deems “exceptional.”
Sandra Miniutti, vice president of Charity Navigator, based in Mahwah, N.J., told HollywoodNews.com that looking at the most recent 990 filed with the IRS, the Academy Foundation reported program expenses of about 64% and administrative expenses of about 36%.
In dollar terms, program expenses amounted to $3,446,504 versus administrative expenses of $1,942,904.
“That pretty high,” Miniutti said of the foundation’s overhead costs. “Obviously, that pulls down the amount spent on programs.”
Robertson explained that AMPAS has four nonprofit affiliates and, taken together, their program expenses totaled $19 million.
These nonprofit affiliates include the Academy Foundation, the Vine Street Foundation, the Homewood Foundation and the Academy Archive Foundation.
Robertson said taken as a whole, the actual program/overhead expense ratio was 78% and 21%. That would put the Academy into the average range of most nonprofits examined by Charity Navigator.
He also noted that one reason for large overhead is that some of the Academy’s operations require a large staff. For instance, the Margaret Herrick Library’s staff numbers over 50.
“The lion’s share of that budget in running the Margaret Herrick Library is personnel,” Robertson explained. “[Charity Navigator] is probably not taking that into account. In order to run a world-class research facility it requires manpower.”
The Academy’s library contains more than 1,000 collections including original scripts, correspondence, recordings and other materials documenting the lives and careers of prominent individuals and organizations in film.
Robertson said the library’s current budget is $5.2 million.
He also pointed out that the Pickford Center for Motion Picture Study, which houses the Academy’s archives, employs about 25 full-time staff.
“Again, that is similar to the (Herrick) library in that it requires intensive manpower,” Robertson said. “That might (explain) why Charity Navigator is not giving us a higher rating.”
Miniutti said Charity Navigator is only crunching the numbers that the Academy Foundation submitted to the IRS and doesn’t evaluate where a charity spends its money. The watchdog group encourages charities to supply it with additional information whenever possible.
Charity Navigator, which was founded by two New York philanthropists, seeks to give donors information they can use when deciding whether to donate to a particular charity. AMPAS, the umbrella organization, is not a traditional charity in that it does not derive donations directly from the public, Robertson said.
By comparison, HollywoodNews.com examined the most recent 990 filed by the American Film Institute, which like AMPAS, conducts many film-oriented educational and preservationist activities. AFI spent $22.3 million, or 80.7%, on program expenses and $3.1 million, or 11.3% on administrative expenses, according to its most recent tax filing.
Charity Navigator gave AFI three stars, or a “good” rating. A three-star rating is given to a nonprofit when it “exceeds or meets industry standards and performs as well or better than most charities in its cause.”
“That’s not in the highest bracket,” Miniutti said of AFI’s three-star rating, “but it’s definitely toward the top.”
She noted that the majority of the 5,500 charities in her organization’s database spend about 75% on programs, 15% on overhead, and 10% on fundraising.
So, why did the Academy Foundation garner a poor rating?
In devising its rating system, Charity Navigator looks at how much a nonprofit spends on programs and services (the higher the better); how much it spends on administrative costs (the lower the better); fundraising expenses (lower the better) and fundraising efficiency – or the amount a charity spends to raise $1 (lower the better).
The Academy Foundation, for example, spent a miniscule $800 on fundraising, while the AFI spent nearly $2.2 million.
Charity Navigator also rates nonprofits on their “organizational capacity,” or how a charity is positioned to sustain its programs over time.
The Academy Foundation listed “primary revenue growth” of minus-22.7% and program expenses growth of minus-34.3%. Indeed, the foundation’s revenues have decreased dramatically in recent years, from $13.6 million in 2004 to $4.3 million in 2008.
“This is a negative trend,” Miniutti said. “Something happened.”
But Robertson explained that the reason revenues plunged was because AMPAS began divvying up its contributions among the four foundations a few years back
so instead of giving the Academy Foundation the money and letting it apportion the money out, the contributions are given directly by AMPAS to each affiliate.
If one looks only at the Academy Foundation, it may raise some eyebrows to learn that it earned $305,760 in fiscal 2007-2008. But he actually worked for all four affiliates as well as AMPAS.
Other Academy Foundation expenditures included:
–Printing services: $138,883.
–Public relations: $123,029.
–Camera and taping: $111,230.
Another area Charity Navigator analyzes is how a nonprofit is positioned to sustain its programs over time. To do this, the watchdog group looks at three key indicators: “primary revenue growth” and “program expenses growth,” or, a charity’s average annual growth of its three to five most recent fiscal years (higher is better), and “working capital ratio,” which determines how long a charity can sustain its level of spending using its net available assets (higher is better).
The Academy Foundation’s working capital ratio is 5.72 years, which is healthy by Charity Navigator’s standards.
“We like to see charities have six months to a year,” Miniutti said.
AFI’s working capital ratio is 1.01 years. But AFI’s primary revenue growth (5%) and program expenses growth (4.5%) are both in plus territory.
While the Academy Foundation distributes grants to various groups every year, two AMPAS-affiliated nonprofits received the bulk of the program’s expenses. In fiscal 2007-2008, the foundation gave $2.8 million to the Homewood Foundation, which was originally set up to acquire property for a future Academy motion picture museum, and nearly $2.1 million to the Academy’s Archival Foundation.
The foundation’s officers and board members include current AMPAS president Tom Sherak, former presidents Sid Ganis and Robert Rehme, as well as actors Annette Bening and Henry Winkler, writer-director James L. Brooks, producer Kathleen Kennedy and Fox Filmed Entertainment’s co-chairman Jim Gianopulos.
Photo courtesy of AMPAS.