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Dow 'Madoff' with billions of investment income.

Perhaps no other category had more impact on this I year's NPT 100 than investment income, which was responsible for knocking at least two organizations off the list.

Investment income for the 100 nonprofits in the ranking totaled $1.97 billion, accounting for a mere 3 percent of total revenue. Last year, the top 100 nonprofits totaled $4.24 billion in investment income, or more than 7 percent of overall revenue.

It's important to note, particularly this year, the exact fiscal year in which particular nonprofits operate. Nonprofits that report a fiscal year ending before the stock market collapse last year appear to have done well when it comes to investment income. The dividing line seemed to be October 2008, when each of the indexes dropped at least 14 percent.

The three major market indices (Dow Jones, NASDAQ, S&P 500) were down anywhere from 33 percent to 41 percent for 2008. The steepest drops, however, didn't occur until the fall, specifically October. The three markets were all down double digits through the first haft of 2008, but in the second half the markets shed as much as a quarter to almost a third of their value.

Nonprofits running on a calendar-year budget--approximately one quarter of The NPT 100--would reflect those losses in this year's study. With about 70 organizations running on fiscal years ending anywhere from March to September, next year's report could be catastrophic by comparison.

Despite the heavy losses in the markets for calendar year 2008, just 10 organizations reported investment income losses, the first time since the 2003 NPT 100 that any of the 100 saw a loss. That year, which covered FYE 2002, some 27 nonprofits showed negative investment income.

Almost haft of the organizations in this year's report saw a negative change in net assets, mainly a result of unrealized losses, according to Daniel Romano, Partner-in-Charge, National NFP Tax Practice, Grant Thornton in New York City. "That may change for the better next year, assuming that organizations are holding on to things that are coming back in value," he said. Net change in net assets was down $1.33 billion, though that figure is incomplete as some national organizations could not report system-wide figures in that category or only reported for national headquarters.

Organizations that have alternative investments are awaiting K-1 and hedge fund reporting which doesn't come in until later in the year, Romano said. Those reports will be reflected on next year's returns, he said, "which will have a big negative impact."

Total assets for NPT 100 organizations came in at $86.71 billion. However, that number is probably a bit underestimated. Some national organizations in the study--such as United Way, Boys and Girls Clubs of America and Girls Inc. --report various categories system-wide, to include all affiliates, but are only able to report assets and balance sheets for the national headquarters. Value of investments was approximately $44.79 billion in the aggregate for all the nonprofits in The NPT 100, although it's somewhat incomplete in much the same way as total assets.

Without a doubt, the farthest to fall this year was Shriner's Hospitals for Children. Typically among the top 20 organizations in The NPT 100, the Tampa, Fla.-based healthcare group has an enormous endowment that was rocked by the stock market's plunge. Despite reporting $233 million in public support, total income was reported as just $42 million as a result of $428 million in realized losses against almost $200 million in interest and dividends. Last year, Shriner's reported $666 million in investment income. Total assets for Shriner's dropped almost $3 billion, from $10.2 billion at the start of 2008 to $7.3 billion by the end.

Hadassah was the fastest-moving organization within The NPT 100 in recent years, rising from No. 91 to No. 46 in last year's report thanks in part to a capital campaign that raised $210 million. The stock market crash didn't help and neither did Bernard Madoff, leaving the New York City-based nonprofit with $42 million in total revenue for the fiscal year ending May 2008. That total included a write-off of $88 million invested with Madoff Securities, which turned out to be an estimated $50-billion Ponzi scheme.

The largest drop in investment income by an organization within the 2009 NPT 100 was Boy Scouts of America (BSA), which reported a loss of $417 million in investment income. The decline cut revenue in half from last year, dropping BSA from its usual perch amid the top 25 to No. 38, with $413 million in total revenue.

Investment income accounted for the largest percentage of total revenue at Metropolitan Museum of Art, where 50 percent of its $ 537 million overall revenue came from investment income ($270 million).

Largest gains

Salvation Army $300,838,000
Metropolitan Museum of Modern Art * $270,174,332
City of Hope and affiliates $188,159,172
New York Presbyterian Fund $149,271,886
Nature Conservancy $148,545,824

Largest losses

Boy Scouts of America -$417,259,000
YMCA -$263,298,000
Boys & Girls Clubs of America -$104,350,418
United Way -$94,844,221
JUF/Jewish Federation of Metro Chicago -$14,281,842

* FYE 2007
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Title Annotation:THE 2009 NPT TOP 100
Author:Hrywna, Mark
Publication:The Non-profit Times
Date:Nov 1, 2009
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