Q: How can Direct Relief International use 100 percent of donations for program expenses – doesn’t the organization spend money on fundraising and administration?
A: Direct Relief International does incur fundraising and administrative expenses, but these expenses are paid from a bequest the organization received in 2007 from the estate of Mr. H. Guy DiStefano, a longtime donor. Incoming donations are applied only to program activities.
Q: How does the bequest support fundraising and admistration?
A: The bequest funds from Mr. DiStefano’s estate are held in the Direct Relief Foundation, a separate legal nonprofit organization overseen by a Board of Trustees, which is composed of current directors and former board chairs of Direct Relief International. Its sole mission is to support Direct Relief International. View related financial documents
Funds from the Direct Relief Foundation are transferred to Direct Relief International to pay fundraising and administrative expenses. This allows all incoming donations to be used for the organization’s humanitarian program activities.
Q: What are the fundraising and administration expenses paid by the Direct Relief Foundation?
A: The Direct Relief Foundation pays for all fundraising and administrative expenses, which include the salaries of the president/CEO, the Chief Financial Officer, and other staff performing financial-management functions; the director of development and other fundraising staff; and communications staff. Also included are expenses related to administration (including the costs of the annual independent audit) and those related to fundraising, such as mailing and printing newsletters and annual reports, and website and public relations services.
Q: Why does the Form 990 show Direct Relief International expenditures for fundraising and administration?
A: Bequest funds held in the Direct Relief Foundation are transferred to Direct Relief International to pay for fundraising and administrative expenses. Although the fundraising and administrative expenses are paid with funds transferred from the Direct Relief Foundation, the expenditures are reflected on Direct Relief International’s consolidated financial statements and IRS Form 990, as Direct Relief International is a separate legal entity.
Why doesn’t the Direct Relief Foundation simply pay fundraising and administrative expenses directly instead of transferring funds to Direct Relief International to pay them?
The process of transferring funds from the Direct Relief Foundation to Direct Relief International makes the fundraising and administrative expenses visible in our public reporting, even though such expenses are paid out of the bequest of Mr. DiStefano, the funds of which are held in the Direct Relief Foundation.
Q: What other expenses are paid by the Direct Relief Foundation?
A: Funds from the Direct Relief Foundation also have been transferred to Direct Relief International to pay for capital investments, including a new information system, and such program costs as emergency-response activities when other funds are unavailable. The Direct Relief Foundation pays no compensation directly to any employee. The only expenses it pays directly are for the annual independent audit of its finances and fees related to investment management and financial transactions.
Q: Why is the Direct Relief Foundation separate?
A: The Direct Relief Foundation was established in 2007 after the bequest was received in recognition of the long-term benefit the funds could provide to the organization. Direct Relief Foundation enables these funds to be managed separately, with a long-term view, but also to be available when needed at the discretion of the Board of Directors of Direct Relief International, who also serve on the Board of the Direct Relief Foundation.
Because the Direct Relief Foundation is a supporting organization of Direct Relief International and a separate legal entity, the law requires that its finances be managed, audited, and reported separately in the Form 990. However, the financial activity of the Direct Relief Foundation has to be consolidated in the financial statements of Direct Relief International, in accordance with U.S. Generally Accepted Accounting Principles.
The Direct Relief Foundation is a “type 1” 509(a)(3) supporting organization. Other common examples of supporting organizations of this type are university endowments and groups organized to support essential work of community hospitals. Click here for more information on supporting organizations from the IRS website: http://www.irs.gov/charities/article/0,,id=137609,00.html