Cash & In-Kind Contributions

To fulfill its mission and program objectives, Direct Relief has long sought partnerships with businesses and organizations with particular expertise that is needed and can be leveraged for humanitarian purposes. This approach has led to 200+ healthcare manufacturers and other corporations, in sectors ranging from technology to transportation, providing in-kind contributions in the form of needed goods (primarily medical products) and services that would otherwise have to be purchased. Direct Relief also solicits and receives cash contributions, which are used to cover internal costs and for goods and services to advance the organization’s mission and that cannot be obtained through in-kind donations.

The strategic pursuit of in-kind resources enables Direct Relief to provide far more humanitarian assistance than would be possible in a model that relied entirely upon raising cash and then converting the cash into goods and services. It makes little economic sense to incur the expense involved in raising funds to then purchase something that a business may be willing and able to provide directly and more efficiently as its charitable contribution.

Direct Relief’s financial statements must account for both cash and in-kind contributions that are entrusted to the organization to fulfill its humanitarian mission. In Fiscal Year 2017, over 97 percent of our total public support of $1.1 billion was received in the form of in-kind medical products and certain other donated goods and services (such as transportation services from FedEx, online advertising from Google, and donated data analytics software from Qlik). The previous pages explain where and why the in-kind medical products were provided by the organization to its partners around the world and in the United States.

Direct Relief’s activities are planned and executed on an operating (or cash) budget that is approved by the Board of Directors prior to the onset of the fiscal year. The cash budget is not directly affected by the value of in-kind medical product contributions. Cash support—as distinct from the value of contributed products—is used to pay for the logistics, warehousing, transportation, program oversight, program and administrative staff salaries, purchasing of essential medical products, acquisition of donated medical products, and all other program expenses.

In response to several years of dramatic growth, a $40 million Campaign for Direct Relief was launched in 2015 to raise funds to purchase 7.99 acres of land and build Direct Relief a 155,000 square-foot state-of-the-art facility—with a 128,000 square-foot warehouse and a 27,000 square-foot office and meeting space—certified for pharmaceutical distribution, that will improve capacity and enable more expansive responses to healthcare challenges. This capital campaign raised $5.8 million in cash and pledges in FY 2017, to total $19.2 million in funds raised as of June 2017. The Campaign will also receive the proceeds of the sale of Direct Relief’s current facility which is under a purchase and sale contract to the City of Goleta that is expected to close after the move to the new building is completed in March 2108, as well as an additional contribution from Direct Relief’s operating reserves.

On March 9, 2017, Direct Relief established DR Property 1. LLC (LLC) for the purpose of holding title to the 7.99 acres of land and the new facility under construction at 6100 Wallace Becknell Road in Santa Barbara. Direct Relief is the sole member of the LLC. The 7.99 acre parcel was purchased in August 2016 for $8.7 million. The building construction commenced in October 2016 and is expected to be completed by February 2018. The estimated cost to complete the construction of the new building is $29.2 million. The total project cost, including the cost of the land is budgeted at $37.9 million. To finance the construction during the Campaign, Direct Relief secured a $25 million non-revolving line of credit from a local bank. The line of credit matures in August 2021 and is secured by all the assets of Direct Relief, the Direct Relief Foundation, and the LLC. As of June 30. 2017, $19 million remained to be drawn to complete the construction of the building.