Where Most Needed

One of the ongoing paradoxes of private charity arises from the imbalance of needs and donor interest.  Money and other support (such as media attention) goes to the organizations that tell good stories, not necessarily the ones where need is greatest.

Recently, New York Times reporter Stephanie Strom visited Santa Barbara, California to attend the annual "shareholders meeting" (actually a donor event) of Direct Response International (EIN 95-1831116 Form 990). DRI distributes donated medical equipment and pharmaceuticals.  The event offered various testimonials from beneficiaries, like a doctor from Zambia whose hospital received an incubator. 

Yet the story that interested me was buried in the article: in response to the tsunami, DRI received about $14 million in contributions, far in excess of its annual operating expenses of $3-4.5 million.   Their Form 990 for the year ended March, 2005 explains how this can be:  line 1a shows public contributions of $219,862,189.  But line 1d makes it clear that only $20,447,714 of that was cash, while $199,570,989 is the value put on the in-kind contributions of medical equipment and parmaceuticals.

Expenses tell a similar story, looking at the expenses on page 2, the total of $127,033,365 includes amounts distributed as gifts and grants of $122,809,237 (cash & in-kind), leaving a mere $4,224,128 in actual cash operating costs.  A cross check on this result is found on line 90 (page 5):  the organization employs only 29 people. 

DRI is not unique in this pattern:  MAP International (EIN 36-2586390 Form 990) is a very similar organization in size and mission (also distribution of medical supplies & medicine).  It reports $258 million in revenue, $252 of which is in-kind, a staff of 44, and cash expense of roughly $6 million. 

Even huge AmeriCares (EIN 06-1008595 Form 990), reporting $1.3 billion in revenue, reports a staff of just 56. Expenses are higher (about $31 million) only because the organization reports massive shipping charges (it airlifts supplies directly) and write offs of inventory.  Like DRI and MAP, a significant portion of AmeriCares' in-kind distribution is medical equipment, supplies, and medicine. 

In each of these cases executive compensation is relatively modest. Thomas Tighe of DRI makes $155,000, Michael Nyenhuis of MAP $98,000, and Curtis Welling of Americares $275,000. 

The conclusion is that donors should be careful to look at what an organization's true cash needs are and not assume that because and organization reports large revenue and achieves national media exposure its cash needs are necessarily proportional.  In fact, they might be very modest. 

There are also some clear ethical and health concerns relating to the distribution of donated pharmaceuticals, and donors to these organizations need to be more aware of them if they choose to "kick the tires" of these organizations.   The book "An Assessment of US Pharmaceutical Donations," edited by Michael R. Reich is available in PDF form (it is out of print).  It describes research that was done in the late 1990's in response to concerns voiced by the World Health Organizations about the quality and suitability of donated pharmaceuticals.  It should be required reading of any potential donor for this kind of work.