Follow the Money: Shriners Part 5
Thu Jun 29, 2006
news, shriners, losing-money
What would you think of a charity group that lost over 99% of its cash assets in one year? In 1998, the Shriners Hospitals for Children started the year with a cash asset balance of $354 million. By the end of the year, they were down by $351 million. They lost 99.1% of what they started with. If you had started the year with, say, $30,000, you'd have lost $29,730 and be left with only $270.
Let's talk about money.
According to Guidestar.org, an online non profit resource, Shriners Hospitals for Children's assets are valued at $9,500,000,000. That's over $9.5 billion. Melissa Data also lists Shriners trusts and affiliated organizations whose assets are dedicated to Shriners hospitals. This adds up to $10,000,917,629 or over $10 billion dollars.
How can we wrap our heads around these numbers?
Let's compare the $10 billion figure to the Gross National Product of some countries. The GNP is a measure of a country's economic performance, or what its citizens produced like goods and services and whether they produced these items within its borders.
Angola has a GNP of $10.1 billion. Ivory Coast has a GNP of $10.1 billion. Tanzania has a GNP of $9.87 billion. The combined GNP of Afghanistan, $4.63 billion, and Zimbabwe, $5.53 billion, comes to $10.1 billion.
Let's look at it another way.
If the Shriners assets were distributed per capita:
•Each of China's 1.3 billion people would get $7.95.
•Each of the United States' 298 million people would get $34.70.
•Each of the U.K.'s 60 million people would get $172.34.
•Each of Australia's 20 million people would get $517.
•Each of Palau's 20,500 people would get $504,428.
Guidestar also offers non profit financial data for the years 1998 to 2004. This is sorted according to what is taken in as revenue, what is spent as expenses and what is left over at the end of the year as net gain/loss. The data also tracks areas such as investments and cash assets.
Net Gains/Losses -
For the years 1998, 1999 and 2000, the Shriners Hospitals for Children had net gains of $233 million, $246 million and $317 million. The next three years, though, they lost a lot of money. In 2001, the Shriners lost or spent $183 million more than they took in. In 2002, they lost or spent $406 million more than what they took in. And in 2003, they lost or spent $40 million more than they took in.
For the years 1998 and 1999, the Shriners saw investment gains of $1.274 billion and $545 million. However, in 2000, they lost $234 million in investments. In 2001, they lost $614 million in investments. And in 2002, the Shriners lost nearly 16% of their investments, down by over a whopping $1+ billion dollars or $1,045,760,830. If you have a monthly income of $2,500, this would be like losing $430 a month or like losing $5,160 a year.
Cash Assets -
In 1998, the Shriners had a beginning cash balance of $354 million. By the end of the year, they lost over $351 million or 99.1% of what they started with. Again, if you started the year with $30,000 cash, you'd have lost $29,730 and be left with only $270. In 1999, they posted an $8 million cash gain. In 2000, they lost nearly $2.5 million in cash assets. In 2001, they lost $1.1 million. And in 2002, they lost $5.5 million in cash assets.
Why should anyone wrap their head around these numbers? Once the public understands these gains and losses, questions such as these can be asked:
•Why was so much money lost in 2000, 2001 and 2002?
•Why did 99.1% or $351 million in cash assets disappear in 1998?
•Why did cash assets disappear for four out of seven years and where did this money go?
•What caused the Shriners to overspend in 2001, 2002 and 2003?
•What happened in 2002 to cause Shriners to lose $1.1 billion in investments, to lose over $1.1 billion in the fund balance and to lose $5.5 million in their cash assets?
In this day and age, non profit transparency and accountability matter to the American public. A recent Harris poll revealed that 30% of Americans think that charity groups are headed in the wrong direction. This is why financial disclosure is so important. If it looks like a charity isn't doing right by their volunteers and donors, they, and everyone else, has the right to know.
To their credit, the rank and file Shriners pay over $2 million a year in dues, volunteer their time and work hard to raise money to help support the hospitals that provide free medical care to sick and needy children. Many trusting donors include the Shriners in their wills to pass on their estates, establish trusts and make bequests to also support the much needed free medical services. Both the Shriners and the donors trust that their time, energy and donations will be well managed instead of mismanaged as some of the data seems to indicate.
The Shriners have been criticized by non profit watch dog groups such as Give.org and the American Institute of Philanthropy for "hoarding" more than three times their operating costs. This is a standard bench mark used by Give.org they include in their standards for charity accountability.
The Shriners are sitting on $9.5 billion. Plus that which is dedicated by the trusts. In 2004, their expenses for program services was reported as $456 million, so the Shriners assets are twenty times more than what is needed to operate their hospitals. For this reason, in 2004, KOBTV reported that the Shriners Hospitals for Children took second place on the world's worst charity list.
Back to the importance of non profit groups making their finances public, especially when today, they can post their tax returns and associated financial documents online so everyone can see how they are managing their finances.
The Shriners do not do this.
Remember what Deep throat told Woodward and Bernstein.
Follow the money.
Especially if it looks like it's going down the drain.
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Sandy FrostAt this point, I think that these types of questions require the investigative muscle of three letter agencies. Vernon Hill, the Shriners Whistleblower, has asked financial questions for the past four years and has gotten stonewalled. I may ask one of the Shriners public relations contacts to look into these questions. If/when I get the answers, I'll let you know immediately. Thank you, Sandy
TopJediSandy, from an accounting standpoint it looks like the $354 million in cash is an annual operating budget of 3.7% of the total Shriner assets of $9.5 billion. From the private sector perspective it is not uncommon for companies to use more than 5% of their assets (cash or other) in normal operation. I like puzzles and mysteries as much as anybody so let me take a quick stab and try to make educated guesses on such limited information...
Why was so much money lost in 2000, 2001 and 2002?
You indicate those were the years where their investments dropped as much as 16% after years where they made more than 16% in investments. Not a red flag, but maybe a warning to consider less risky/aggressive investment portfolios.
• Why did 99.1% or $351 million in cash assets disappear in 1998?
From an accounting standpoint it looks like the $354 million in cash could be an annual operating budget of 3.7% of the total Shriner assets of $9.5 billion. From the private sector perspective it is not uncommon for companies to use more than 5% of their assets (cash or other) in normal operation. Actually that is a very low operating % compared to most companies.
• Why did cash assets disappear for four out of seven years and where did this money go?
the answer could be as simple as they overspent on various programs they thought would provide great returns and didn't, very common result for those with checkbooks. I suppose we can't know unless they divulge it.
• What caused the Shriners to overspend in 2001, 2002 and 2003?
No idea. Could be as simple as hospital construction drifted out of scope and budget.
• What happened in 2002 to cause Shriners to lose $1.1 billion in investments, to lose over $1.1 billion in the fund balance and to lose $5.5 million in their cash assets?
Really depends on what they typically invest in. Stock market could easily have those kind of swings, and I would be just as interested as how they made $1.2 billion in 1989 as how they lost it back the following years. Again the % movements are not terribly out of the ordinary for a lot of investments people engage in and neither really is investing 10-15% of your assets a bad idea. However on the surface it looks like they were willing to take higher degrees of risk.
I would be happy to look at more detailed income statements, balance sheets to help with these concerns. Though I tend to lean toward charities, especially ones as large as the Shriners, as taking the high road on their budget decisions to do the most for the greatest good. As far as I can tell, though they have impressive capital to work with there is nothing grossly out of the ordinary in terms of percentages relative to other organizations.
Sandy FrostI can fax you the 990s from 1999 - 2004 if you like. And I appreciate your expertise and willingness to help. I had spoken with a charity expert about this a few weeks ago and he indicated that, from where he sat, the numbers seemed odd to him. Email me at email@example.com with your contact info and I will fax these docs to you. And congratz on that Newsvine Award! I now see why you got it!!! Thanks! Sandy =.>
TopJediOk Sandy, I will take a look over the next few days and see if anything looks out of the ordinary from my perspective.
ValeroThe years you have mentioned are years in which investments did very poorly in the market. Because most of their assets are held in Trust formats, the Prudent Man Rule applies and tends to limit the amount of cash that should be removed from accounts in years where income flows may have been degraded by market movements.
I strongly suspect that you are looking at Market fluctuations here, not anything else. However, I will be very interested in what you find out.Top Jedi seems to be on the right track. Thanks for the article.
1 vote#4 - Fri Jun 30, 2006 7:19 AM EDT