NPI Evaluation of Red Sox Foundation


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NPI Evaluation of Red Sox Foundation

  1. 1. NONPROFIT INVESTORINDEPENDENT RESEARCH FOR PHILANTHROPYRed Sox Foundation SUMMARY The Red Sox Foundation (“RSF” or the “Foundation”), the officialNonprofit Investor Rating: team charity of the Boston Red Sox, focuses in serving the health, education, recreation and social service needs of children, families inNEUTRAL need, and wounded veterans across New England. The Foundation strives to capture the passion of Red Sox fans and transform it into aMission Statement vehicle for positive change in the community. RSF accomplishes thisThe official team charity of the Boston Red through partnerships with local communities, active involvementSox, the Red Sox Foundation is committed to from Red Sox players, and strong dedication from the team’susing the power of Red Sox Nation to create ownership group led by Principal Owner John Henry, Chairman Tomcommunity partnerships that will improve the Werner and President/CEO Larry Lucchino.lives of at risk children and wounded veterans STRENGTHSacross New England. ▲ Official affiliation with the Boston Red Sox provides instant credibility, an established and passionate group of potentialFinancial Overview volunteers and donators, and access to high net worth individuals$ in MM, Fiscal Year Ended December 31 with the resources to materially impact local communities. 2008 2009 2010 ▲ Lean organization with minimal full-time staff reduces programRevenue and Support $5.3 $4.1 $6.6 overhead and expenses, increasing the amount of capital whichOperating Expenses $4.1 $3.8 $8.0 flows directly to partner organizations.% of Total: ▲ Diversified charitable work allows RSF to contribute to Program Expenses 88.3% 93.6% 95.1% community and individual development in many ways, enhancing G&A 6.0% 3.0% 1.4% the Foundation’s reach throughout communities. Fundraising 5.7% 3.5% 3.5% ▲ Significant public recognition and awards adds credibility to the Foundation’s operations.Year Founded: 2002 CAUTIONSContact Details ● Lack of transparent information available to the public. WhileRed Sox Foundation annual Form 990 tax filings are available, the Foundation provides4 Yawkey Way minimal documentation, such as an Annual Report or AuditedBoston, MA 02215(617) 226-6323 Financial Statements, which are often provided by peer organizations. What information is available is often out of date. ● Consistent decline in Grants and Contributions could signalEIN: 33-1007984 underlying issues with key fundraisers.Analyst: J.B. Oldenburg RECOMMENDATION: NEUTRALPeer Review: Jordan Carter, Kent Chao The Red Sox Foundation does an excellent job of leveraging its assets, including cash and ticket donations, autographs, player appearances,Publication Date while keeping costs low, which has resulted in $52 million ofOctober 1, 2012 donations over the past 10 years. The key areas of caution are the current lack of transparency by RSF and increasing employee costs. Nonprofit Investor Research |
  2. 2. OVERVIEW OF RED SOX FOUNDATION’S ACTIVITIESRSF is the official charity of Major League Baseball’s Boston Red Sox. The Foundation was created in 2002 following theacquisition of the Red Sox by Principal Owner John Henry, Chairman Tom Werner and President/CEO Larry Lucchino. Thenew owners signed a contract with Massachusetts Attorney General Tom Reilly to raise $20 million over the next 10years to support local charities. In a report recently released by the Foundation, RSF stated that it has donated $52million to charitable programs since inception, making it the most charitable team in Major League Baseball.The Foundation has received considerable public notoriety for its effort over the last 10 years, including the first-everMLB Commissioner’s Award for Philanthropic Excellence in 2010 for its Red Sox Scholars program. In 2009, it won thePatterson Award for Excellence in Sports Philanthropy from the Sports Philanthropy Project and the Robert WoodJohnson Foundation.RSF focuses a majority of its efforts on five Cornerstone programs: • The Jimmy Fund • Dimock Community Health Center • Home Base • Red Sox Scholars • Youth baseball programs, including Reviving Baseball in Inner Cities (“RBI”) and Red Sox Rookie LeaguesSee below for additional information on each Cornerstone program.Cornerstone programs overviewThe Jimmy FundThe relationship between the Jimmy Fund, an organization focused on cancer research and care at the Dana-FarberCancer Institute, and the Boston Red Sox, is over 58 years old. For the past nine years, RSF has been a title sponsor ofthe Pan Mass Challenge, a cross-the-state bicycle ride that annually raises approximately half of the Jimmy Fund. For thepast 10 years, the Red Sox have been key sponsors of the WEEI/NESN Jimmy Fund Telethon, which raised over $3.4million in 2010 and has raised more than $28 million since inception. Additional one-off activities, such as first basemanAdrian Gonzalez donating $5,000 per home run for the remainder of the 2012 season, contribute to the program’ssuccess as well.Dimock Community Health CenterIn 2004, RSF established a partnership with the Dimock Community Health Center (“DCHC”) located in Roxbury, MA.DCHC is a non-profit medical center focused on providing medical and social services to at-risk individuals in some ofBoston’s most disadvantaged urban settings. The partnership between RSF and DCHC began following a visit by JohnHenry to DCHC’s Teen Center, a safe haven for local at-risk youth and key department for healthy sociologicaldevelopment, which was facing closure due to budget cutbacks. Over the past decade, RSF has donated approximately$900,000 to DCHC, to go along with numerous volunteer and fundraising efforts.Home Base ProgramThe Home Base program was founded by a partnership between RSF and Massachusetts General Hospital with the goalof identifying, motivating, and clinically treating wounded service members and veterans with combat stress andtraumatic brain injury and their families. The Home Base program also offers opportunities for health care professionals Red Sox Foundation | Nonprofit Investor Research 2
  3. 3. from across New England and beyond to increase their understand of how to help veterans. An annual Run-Walk toHome Base event is held annually, with the 2012 event bringing in more than $2 million to support the Home Baseprogram.Red Sox ScholarsFounded in 2003, the Red Sox Scholars program currently serves more than 210 students in the Boston Public Schoolsystem. The goal of the Red Sox Scholars program is to provide an emotionally and financially supportive environmentfor at-risk students from low-income families to graduate from high school, enroll in and graduate from college, andgrow as an individual.In addition to tutoring and mentoring, RSF offers each Scholar a college scholarship of up to $10,000, pendinggraduation from high school, enrollment in an accredited college and continued good citizenship. Serving as an incentiveright from the start of the program, the funds are invested by the RSF in each Scholar’s name immediately when theScholars are selected. The scholarships are redeemable only directly to the college or university in which the Scholarenrolls to aid in tuition funding. Neither the student nor their parent/guardian will access the funds for any otherpurpose. Understanding that some students must work to obtain additional funds for college, the scholarships are heldfor up to three years after a student graduates from high school, with additional time offered for approved militaryservice or health reasons.All Red Sox Scholars also live in low-income neighborhoods throughout the Greater Boston area. Manyparents/guardians do not have a car and younger Scholars cannot travel alone on public transportation. For Scholars tofully participate in academic prep and enrichment programs sponsored by local colleges/universities and corporations,RSF staff and volunteers have also personally driven Scholars to and from their program. The dedication, timecommitment and sacrifices made by RSF staff in an effort to improve the futures of the Scholar’s demonstrates truecommitment to the youth of Boston beyond a financial commitment.Youth baseball programs, including Reviving Baseball in Inner Cities and Red Sox Rookie LeaguesReviving Baseball in Inner Cities (“RBI”)An initiative started by Major League Baseball, RBI brings baseball to children ages 13-18 who are from economicallydisadvantaged areas. RBI promotes positive conflict resolution, resistance to drugs and alcohol, and school retentionalong with programs that seek to raise self-esteem on and off the field. RSF furnishes teams with equipment anduniforms and helps pay for umpire fees for the league.Red Sox Rookie LeaguesRed Sox Rookie Leagues introduces baseball to young children, ages 5-12. With over 15 years in operation, the RookieLeague program serves children from Chelsea, Charlestown, Dorchester, East Boston, Hill House, North End, Mission Hill,Roxbury, South End, and South Boston.PROGRAM RESULTS AND EFFECTIVENESSDespite the lack of public information, RSF has received significant publicity for its philanthropic efforts. See the Awardsand Additional Documents and News Section on Page 7 for additional information.One area for improvement for RSF is to make public the Foundation’s goals and expectations on an annual basis fordonations to RSF affiliated programs, third-party organizations and one-off event success. Stating goals will allow donorsto better determine the success of the Foundation’s efforts, and can be used as a powerful marketing tool when these Red Sox Foundation | Nonprofit Investor Research 3
  4. 4. goals are exceeded. The 2009 Red Sox Foundation Community Report (can be found here) is an excellent reporthighlighting the Foundation’s strengths and accomplishments; however, there is not one available for 2010 or 2011,making it difficult to see how RSF has progressed over the last two years.TRANSPARENCYTransparency is the key improvement area for RSF going forward. There is limited information that is easily foundthrough the RSF website or other public databases, other than the IRS Form 990s. Documents, such as annual reports,audited financial statements, and updated Community Reports (the currently report on the RSF website is from 2009),will not only provide financial transparency to potential donors and volunteers, but will also provide operationaltransparency. RSF is active in a variety of operations, including support of community programs, direct donations toother non-profits, assisting in fundraising efforts through event holding and personnel appearances, and an incalculableamount of tickets, autographs and other in-kind donations. Given RSF’s extremely positive public image, it should beeasier to find key pieces of financial and operational data.So the question becomes: where to go from here? There are three key “next-step” activities RSF can take to improvetransparency: 1. Clear and consistent website updates provide the easiest way for an organization to relay current information to the public. RSF’s current website is somewhat cluttered, making it cumbersome and overwhelming to navigate. Additionally, outdated material can reduce the credibility in the organization in donor’s eyes. 2. Consistent release of any annual reports, audited financial reports or Community Reports. These documents would provide a window into the operations of RSF. Annual reports can be a powerful marketing tool and provide a forum for RSF management to talk about ongoing operations and future philanthropic plans. Audited financial reports increase organization credibility and enable management to discuss the financial operations of the company beyond the numbers. Community Reports, and other such materials, would allow RSF to release key updates from time to time and capture important events for the Foundation. 3. Active marketing of one-off events, such as awards, reports and event success. The Foundation has gained significant public credibility over the last three years, winning two notable awards and continuing to build relationships with local communities. However, it is difficult to quickly and easily find information relating to these items and there is no mention on the RSF website. Additionally, a recent Boston Globe article discussing the immense success of RSF references a report released by the Foundation; however, the report cannot be found publicly. It is not an immediate red flag that this information is not available, it does draw into question i) what is the information in the report?, and ii) what is the data behind the information in the report? Finally, additional marketing and a clear understanding of RSF’s successes in various annual events (i.e. the Run-Walk to Home Base) will provide an additional layer of operational and financial transparency.FINANCIAL OVERVIEWRevenueThe historical revenue picture for RSF is not a pretty one at first glance. Revenue fell by 28% from 2007-2008 and 23%from 2008-2009, primarily driven by declining Contributions and Grants. Couple the drop in donations with volatileOther Revenue, which is primarily generated from one-off fundraising events, and one could argue that RSF’s reputationas the “best charity in Major League Baseball” is in serious jeopardy. Hello, 2010! Contributions and Grants continued todecline (we’ll get to this in a little), but a surge in Other Revenue, primarily due to the Run-Walk to Home Base whichgenerated over $2.5 million, helped to increase total revenues to a level not seen since 2007. We believe this trend willcontinue as the Run-Walk to Home Base initiative is relatively new… Red Sox Foundation | Nonprofit Investor Research 4
  5. 5. …however, we will want to continue watching the Contributions and Grants line item. Annual decreases over the last 4years are no doubt troubling as these donations often help to provide a consistent inflow of capital to non-profits. GivenRSF’s affiliation to the Boston Red Sox and Major League Baseball, we are less concerned with the decrease as there isongoing access to high net worth individuals. Additionally, these contributions and grants do not include autographs,ticket donations, etc. which are contributed by the Red Sox organization and corporate sponsors over the course of theyear.ExpensesOpposite of the revenue picture, the RSF expense profile is exemplary for a non-profit. Expenses tracked revenue intakeduring years of revenue decline, staying below 100% of revenues during 2008 and 2009, while increasing the percentageof Program Expenses as a percent of Total. The biggest question related to expenses is what drives the increase from2009 to 2010? The answer is the same as for revenues: Home Base Program. In 2010, RSF contributed over $4 million toMassachusetts General Hospital through its partnership with the Home Base Program, compared to $0 in 2009. Expectto see donations to Massachusetts General Hospital continue to increase driven by the program partnership and effortsof the Home Base Program.The remainder of the approximately $7.6 million in program expenses from 2010 was spread across 59 third-partyorganizations, with a majority of these organizations receiving less than $100k in donations, and RSF affiliatedorganizations.The one thing to watch on the expense side will be in Salaries, other compensation and employee benefits, whichincreased from 2008-2009 before almost doubling from 2009-2010. The increase is largely driven by an increase inCompensation in current officers, directors, trustees and key employees from $0 to over $200,000, a diligence itemwhich we would like to discuss with RSF management. 2010 Red Sox Foundation Donation Breakdown 2010 RSF Donations Breakdown Massachusetts General Hospital $4,076,809 Jimmy Fund Pan Mass Challenge 266,589 Mike Lowell Foundation 125,000 George W Bush Foundation 100,000 The Dimock Center 80,000 Total Top 5 $4,648,398 Remaining Third-Party 1,118,013 RSF Affiliated Organizations 1,842,693 Total Program Expenses $7,609,104 Revenue Breakdown Expense Breakdown by Function$ in MM $8.0 $7.4 $10.0 140% 121.1% $7.0 $6.6 120% $8.0 $8.0 $6.0 $5.3 93.0% 78.1% 100% $5.0 $4.1 $6.0 80% $4.0 $3.0 $4.1 $4.0 $3.8 60% $2.0 40% $1.0 $2.0 20% $0.0 ($1.0) 2007 2008 2009 2010 $0.0 0% 2008 2009 2010 Investment Income Program service revenue Other expenses Salaries, other compensation, employee benefits Contributions and grants Other Revenue Grants and similar amounts paid Expense % of Revenue Red Sox Foundation | Nonprofit Investor Research 5
  6. 6. Detailed Financial InformationFiscal Year Ended December 31 2008 2009 2010Revenue and Expenses (GAAP Tax Accounting Basis) Operating Revenue: Contributions and grants $4,704,253 $4,340,042 $2,929,270 Program service revenue 0 0 0 Investment Income (190,123) (123,844) 83,746 Other Revenue 780,499 (127,004) 3,596,846 Total Support and Revenues $5,294,629 $4,089,194 $6,609,862 % Growth (28.2%) (22.8%) 61.6% Expenses: Program Services: Grants and similar amounts paid $3,461,634 $2,914,983 $6,446,901 Benefits paid to or for members 0 0 0 Salaries, other compensation, employee benefits 358,835 368,090 622,389 Professional fundraising fees 0 0 0 Other expenses 314,624 521,558 935,072 Total Expenses: $4,135,093 $3,804,631 $8,004,362 % of Revenue 78.1% 93.0% 121.1% Increase in Net Assets from Operations $1,159,536 $284,563 ($1,394,500) Net Appreciation in Fair Value of Investments 0 340,171 44,705 Change in Assets $1,159,536 $624,734 ($1,349,795)KEY BALANCE SHEET INFORMATION Cash and Cash Equivalents $7,091,431 $6,793,235 $7,210,437 Investments $0 $1,092,883 $1,386,936 Total Assets $7,171,066 $7,967,051 $8,629,641Expenses by Function (Tax Accounting Basis) Program Services $3,651,021 $3,560,975 $7,609,104 Management, G&A 248,822 112,343 113,050 Fundraising 235,250 131,313 282,208 Total Expenses $4,135,093 $3,804,631 $8,004,362 Program Costs as a % of Total Expenses 88.3% 93.6% 95.1% G&A as a % of Total Expenses 6.0% 3.0% 1.4% Fundraising as a % of Total Expenses 5.7% 3.5% 3.5%Source: IRS Form 990 (Tax Acccounting Basis) Red Sox Foundation | Nonprofit Investor Research 6
  7. 7. OTHER THIRD PARTY RATINGS AND AWARDSThird Party Ratings • GreatNonprofits rates the Red Sox Foundation 5 out of 5 stars based on 4 user reviews. One thing to highlight is that all 4 user reviews have been submitted since August 2, 2012, which could be the beginning of an internal push by RSF to actively market itself to the volunteer communityRed Sox Foundation is not currently covered by Charity Navigator, Philanthropedia and GiveWell.Awards • MLB Commissioner’s Award for Philanthropic Excellence – Red Sox Scholars – 2010 o Award recognizes extraordinary charitable programs, run by the selected foundation, which have resulted in significant and sustained community impact • Patterson Award for Excellence in Sports Philanthropy – 2009 o The Patterson Award honors the legacy of Steve Patterson and celebrates and promotes the selfless service of those within the world of sports whose passionate efforts make a difference in the lives around themGET INVOLVED Make Donations Become A Volunteer - Positions Make a financial donation Become an RSF volunteer Make a donation to Teddy Ebersol’s Red Sox Fields Make a donation to the Home Base Program information/for-donors.aspxADDITIONAL DOCUMENTS AND NEWS2009 Red Sox Foundation Community Report: Globe Article - August 7, 2012: Red Sox Foundation | Nonprofit Investor Research 7
  8. 8. DISCLOSURESJohn Barrett Oldenburg certifies that he does not have any affiliation with Red Sox Foundation and has never made a donation tothe organization. Additionally, John Barrett Oldenburg has not supported directly competing organizations in a greater capacity thana nominal donation. NPI analysts and NPI as an organization do not receive any form of compensation from reviewed charities.This report is for informational purposes only and does not constitute a solicitation for donations. While the reliability of informationcontained in this report has been assessed by NPI, NPI makes no representation as to its accuracy or completeness, except withrespect to the Disclosure Section of the report. Any opinions expressed herein reflect our judgment as of the date of the materialsand are subject to change without notice. NPI has no obligation to update, modify or amend any report or to otherwise notify areader thereof in the event that any matter stated herein, or any opinion, projection, forecast or estimate set forth herein, changesor subsequently becomes inaccurate, or if research on the subject organization is withdrawn.Opinions and recommendations in our reports do not take into account specific reader circumstances, objectives, or needs. Therecipients of our reports must make their own independent decisions regarding any organization mentioned by NPI.ABOUT NONPROFIT INVESTORNonprofit Investor is a nonprofit organization with the mission of improving philanthropic capital allocation and nonprofiteffectiveness through research and analysis. NPI brings together volunteers with professional due diligence skills to produceindependent, in‐depth evaluations of nonprofits. NPI research is available for free, public downloadhere: To suggest a charity for NPI to review or to apply as a volunteer, please contactus: NPI is a tax‐exempt charity under section 501(c)(3) of the Internal Revenue Code (EIN:45‐3627609). Follow Nonprofit Investor on Twitter: @nonprofitinvest Red Sox Foundation | Nonprofit Investor Research 8