Philanthropy is a $295 billion a year business in the United States. Though very few of us give to philanthropy now, most of us will be philanthropists in the future. The purpose of this article is to teach the reader how to acquire high-quality philanthropic information with a focus on UR’s connection to the world of philanthropy. Though we all know that UR provides an excellent education, very few of us know that it is also one of the most efficient non-profit institutions in the nation. According to Charity Navigator, America’s premier independent charity evaluator, UR has a four-star rating, the highest possible.
Charity Navigator was founded in 2001. It is a 501(c) (3) non-profit organization under the Internal Revenue Service Code. It evaluates over 5,000 non-profits and does not accept any contributions from any of the non-profits that it evaluates. It evaluates non-profits based on the financial information provided by the non-profits on their annual Form 990 tax returns. Charity Navigator rates non-profits by analyzing two areas of financial health – “organizational efficiency” and “organizational capacity.” Organizational efficiency refers to the non-profit’s ability to limit its administrative and advertising costs and deliver the majority of its spending to its programs. Organizational capacity refers to the non-profit’s ability to sustain its programs over the long term. In examining organizational capacity, Charity Navigator rates the non-profit’s average annual growth of primary revenue and program expenses over three to five years. Those non-profits that generate annual growth of primary revenue and program expenses will be able to outpace inflation and sustain their programs from year to year.
How did UR earn a four-star rating, and how does UR compare to other universities and charities? According to Charity Navigator’s evaluation of UR’s 2005 Form 990 tax return, UR had primary revenue of $1,692,689,000. It spent $1,648,929,000 (96.4 percent) on program expenses, $47,052,000 (2.7 percent) on administrative expenses, and $13,776,000 (0.8 percent) on fundraising expenses. It had primary revenue growth of 9.6 percent and program expenses growth of 11.4 percent.
For purposes of comparison, let us examine Yale University and Smith College. Charity Navigator gave Yale a four-star rating and Smith College a three-star rating. In 2005, Yale had primary revenue of $1,474,963,948. It spent $1,783,759,114 (95.4 percent) on program expenses, $60,693,999 (3.2 percent) on administrative expenses, $24,390,319 (1.3 percent) on fundraising expenses, had a primary revenue growth of 9.3 percent and program expenses growth of 5.8 percent. In 2005, Smith College had primary revenue of $157,467,720. It spent $175,452,795 (88.6 percent) on program expenses, $17,862,510 (9.0 percent) on administrative expenses, and $4,818,881 (2.4 percent) on fundraising expenses. Both Yale and Smith had program expenses that exceeded their primary revenue; these schools probably met their program expenses by tapping into their endowment funds.
Two conclusions can be drawn from this comparison: first, UR is more efficient at using its primary revenue for paying for expenses than Yale and Smith. Second, UR is growing at a faster rate than Yale and Smith.
Most universities rated by Charity Navigator have either a three or four star rating. But there are many well-known, non-educational non-profits that have lower ratings. For example, the American Museum of Natural History, Amnesty International and the Christopher Reeve Foundation all have two-star ratings.
In addition to the excellent education that we receive, we should also be pleased to know that our administration uses its revenue in an efficient manner and in a manner designed to sustain future growth. This is also significant information for all possible donors to the university.
This explains the following recent grants to UR: It announced on Sept. 4 that it received a grant for $634,157 from the National Science Foundation. It was awarded to the Warner School of Education. On Sept. 11, UR announced that it received a grant for $1.2 million from the National Institutes of Health to “bolster University of Rochester experts research and care efforts for children suffering Batten disease.”
Schloss is a member of the class of 2010.
