Financial AnalysisPRT 466

CLAIRE COLLINSNOVEMBER 30, 2017

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Table of Contents

Organization Profile ………………………………….………………………………………………………………3Overview…………………………………………………………………………………………………………………….3Activities………….………………………………………………………………………………………………………….3

Economic Environment………………………………………………………………………………………………4Revenue and Expenditure Summary …………………………………………….…………………..…………5

Revenues………….…………………………………………………………………………………………………………5Expenses………….……………………………………………………………………………..………………..….…….6

Assets and Liabilities Summary……………………………………………………….…………………..…………7Assets………….……………………………………………………………………………..………………………..…….7Liabilities………….…………………………………………………………………………………………………..…….7

Financial Analysis…………………………...……………………………………………...………………..…………9Ratios………….……………………………………………………………………………………………..………..…….9Conclusion………….………………………………………………………………………………………………....…10

Appendixes …………………………………………………………………………………………………………….11Appendix A…..…….………………………………………………………………………………………………....…11Appendix B………….………………………………………………………………………..……………………....…12Appendix C………….……………………………………………………………………………………..………....…12Appendix D ………….………………………………………………………………………………………….…....…13

References………….………………………………………………………………………………………..…………....…14

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Organization Profile

Overview:

The Kay Yow Cancer Fund, a 501 (c)(3) nonprofit charitable organization, was founded on December 3rd, 2007. Since its creation, the fund has raised of $5.38 million for the fight against women’s cancer. The Kay Yow Cancer Fund was created by Coach Kay Yow as she was battling with her fight with stage 4 breast cancer. Coach Yow had over 700 career victories as a collegiate women’s basketball coach and she wanted her victory over women’s cancer to be her last. The organization is partnered with the Women’s Basketball Coaches Association (WBCA) and The V Foundation for Cancer Research. The foundation awards various types of grants as funding is available. The grants available are as follows: Designated Grants, Women’s Final Four Grants, Community Research Grants, and Community Assistance Grants (“About/ Grants” 2017).

The organizations’ overall mission is “to raise money for scientific research for the development of life-enhancing drugs and clinical studies; assisting the underserved; and unifying people for a common cause.” Along with the mission, the fund was created off the basis of Coach Yow’s vision to “unite coaches, players, and women’s basketball community to do something for greater good that exceeds wins and losses on the court.” Coach Yow’s success as an outstanding women’s basketball coach has allowed her to carry on her legacy to help women all over the world with her fight against cancer. Yow famously said, “When life kicks you, let it kick you forward” and it is these words that the Kay Yow Cancer Fund upholds daily through their efforts (“About/ Vision”, 2017).

Activities:

The Kay Yow Cancer Fund raises money for cancer research in various ways, however their most prominent and well known effort is PLAY4KAY. Basketball games all over the country have been supporting the Kay Yow Cancer Fund for 9 years. PLAY4KAY games are basketball games (usually women’s high school and collegiate) that are dedicated to the fund in hopes to raise money and awareness of women’s cancer. During the event cancer survivors are honored on the court, there are various videos/PA announcements made about the organization, merchandise is sold and the head coach makes a personal contribution in honor of the survivors. Another major activity to raise money for the Kay Yow Cancer Fund is the Golf Classic, a golf tournament at the Pinehurst No. 8 Course held yearly. Other notable fundraisers consist of the Celebration Run/Walk (a 4k to honor and remember those affected by women’s cancer) and Clays4Kay (a shooting tournament at Deep River Sporting Clays). Outside of these 4 major revenue generators there are multiple small grassroots fundraisers that are held all throughout the year all over the country. The Kay Yow Cancer Fund is also partnered with Nike in which a collection of footwear, apparel, and equipment is sold to the public and royalties are earned on these purchases. Other top partners of the fund include WBCA, The V Foundation, ESPN, and the NCAA (“About/ PLAY4KAY”, 2017).

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Economic Environment

President Donald Trump was elected into office and has been serving for nearly a year. The nonprofit business sector could see potential changes in amount of charitable giving that they receive based off Trump’s tax reform. According to American Enterprise Institute, $17.6 billion in annual giving to nonprofits and charities could disappear in 2018 (Rooney, 2017). If Donald Trump and the Republican House activate the proposed tax reforms of limiting the amount that taxpayers can write off for charitable donations then nonprofits all over the United States will see drops in their collection numbers. The Kay Yow Cancer Fund receives over 54% of their revenue from charitable gifts and if taxpayers are receiving less of a deductible they could potentially be less inclined to donate as much to the fund (Audited Financial Statement, 2017). The American Enterprise Institute simulated the actual effects the tax reform would have on nonprofits in the United States and it resulted that the tax plan would only effect 1% of donors because of how the average American itemizes their donations; however, this 1% consists of the largest and most influential donors (Rooney, 2017). The Kay Yow Cancer Fund could lose profits due to losing large contributions from their biggest donors and therefore they would have less money to give towards grants.

As mentioned earlier, The Kay Yow Cancer Fund gives out their profits in the forms of grants for women’s cancer research. The Trump administration has presented a 2018 budget that would reduce the National Cancer Institute’s budget by $1 billion (Healy, 2017). The Center for Disease Control and Prevention would be decreased by $18 million (Healy, 2017). The National Institute of Health funds and conducts research on most cancer drugs. The loss of funding for these institutions could result in the grant money donated by the Kay Yow Cancer Fund to be used more quickly and each dollar donated would have less effect than it currently does in the 2017 budget. In 2018, the Kay Yow Cancer Fund will have more of a pressure to raise even more money to stretch their donations and to maintain the same effect as it does now. The decrease in budgeting for these institutions in research for cancer will have a direct effect on how the grants that the Fund hands out each year. With the combination of the tax reform and the budget cuts in cancer research and health institutions, The Kay Yow Cancer Fund will have less of an impact. To make up the lost money, there will need to be an increase in their own marketing and promotion budget to get the word out about their organization.

There is however, potential for increased gifts in the form of online giving from millennials. Millennials consists of Americans ages 20-36 and this generation feels the social responsibility to give back, just in a lazy way. Blackbaud’s Annual Giving Report found that online giving rose by 7.9 % and that almost 17% of online donations were made on a mobile device in 2016 (Funds, 2017). This trend has been sparked by millennials who are constantly connected to social media outlets on their devices. The Kay Yow Cancer Fund has great potential to maximize their gifts through acting on this. The fund has a donation page on their website and links to donate on their Twitter and Facebook accounts, however on Instagram they rarely promote the link and take advantage of their marketability on these platforms. With an increase of promotional efforts on these free platforms, the organization can reduce their marketing expenses and increase their donations from the millennial generation.

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Revenue and Expenditure Summary

Revenues:In the 2016 Fiscal Year The Kay Yow Cancer Fund generated $1,580,801 in revenues.

Their largest categories of profitability are contributions and gifts, royalties, and special events. Contributions and gifts are the donations they receive from donors without a special event involved and this amounted to $855,048. Royalties from the funds’ partnership with Nike (royalty % of each purchase not released) amounted to $317,791. The special events that the organization holds such as PLAY4KAY and the Golf Classic generated a revenue of $231,640 before expenses were accounted for. All together these 3 categories generated close to 89% of all revenues for the organization. The other 11% of revenues are a result of net investment profits, merchandise they sell at their own events and on their website, dividends and interests income, net investment profits, and in-kind services. Below is a table containing each revenue source and the profit generated as well as pie chart to show the percentage of each source.

See Appendix A for more detail from the organization’s financial reports.

Fiscal Year 2016 RevenuesContributions and Gifts $855,048Special Events $231,640Merchandise $69,520Royalties $317,791Net Gain on Investments $41,078Dividends and Interest Income $63,931In-Kind Services $1,793Total Revenues $1,580,801

Contribution Gifts54%

Merchandise4%

Special Events15%

Interest4%

Royalties20%

Net Investments3%

Revenues

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Expenses:The Kay Yow Cancer Fund’s expense for the 2016 Fiscal Year totaled $1,372,787. The

organization breaks down their expenses into 3 main categories: Program Services, Management and General, and Resource Development. Each expense source is broken down into each of these categories based on which category the money directly is going towards. In 2016 Program Services generated 79% of expenses with a total of $1,087,603. Management and General accounted for $68,066 and Resource Development expensed $217,118. Out of the expense line items, Salaries and Grants accounted for over 53% of all expenses. Below is an itemized chart with all of the major expenses along with a pie chart to show the percentage break down. The ‘other’ category contains multiple smaller expense line items that each amount to less than $50,000.

See Appendix B and C for more detail from the organization’s financial reports.

Fiscal Year 2016 ExpensesSalaries $371,806Building Maintenance $53,213Grants $351,338Travel $60,465Marketing and Promotions $148,787Professional Services $96,559Special Events $81,757Other $209,808Total Revenues $1,372,787

Salaries27%

Building Maintence4%

Grants26%

Travel4%

Markteting and Promotions11%

Professional Fees7%

Special Events6%

Other15%

Expenses

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Assets and Liabilities Summary

Assets:The Kay Yow Cancer Fund had a total of $3,039,171 in assets in the 2016 Fiscal Year. Of

this amount, current assets amounted for 99% of total assets after taking in account the depreciation of the long-term assets. In long term assets, computer equipment and furniture hold a value of $84,814, however; the depreciation taken off these items is $66,635. This only gives these assets an accountable value of $18179. The major current assets consist of cash, investments and accounts receivable. Other smaller but notable assets are prepaid expenses, net inventory and deposits. Below is a chart of all assets and their current worth.

See Appendix D for more detail from the organization’s financial reports.

Fiscal Year 2016 AssetsCurrent Assets

Cash $686,826Investments $1,955,821Accounts Receivable $310,284Prepaid Expenses $23,847Net Inventory $40,083Total Current Assets $3,016,861

Long Term AssetsComputer Equipment $56,940Furniture $27,874(less depreciation) ($66,635)Deposits $4,131Total Long Term Assets $22,310Total Assets $3,039,171

Liabilities:The Kay Yow Cancer Fund accounted for $320,189 in total liabilities in the 2016 Fiscal

Year. Current liabilities make up nearly 95% of all liabilities. The largest liability consists of the grants that are payable towards women’s cancer research and advancement. Other current liabilities included in the balance sheet include accounts payable, deferred rent, and deferred revenue. There is only 1 long-term liability on the balance sheet: net deferred rent. Below is a chart of all liabilities included on the organizations balance sheet along with their amount.

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See Appendix D for more detail from the organization’s financial reports.

Current LiabilitiesAccounts Payable $686,826Grants Payable $1,955,821Deferred Rent $310,284Deferred Revenue $23,847Total Current Liabilities $303,828

Long Term LiabilitiesNet Deferred Rent $16,361Total Long Term Liabilities $16,361Total Liabilities $320,189

The Kay Yow Cancer Fund classifies the remaining amount on their balance sheet as Net Assets Unrestricted. This amount is listed as $2,718,982. As a non-profit organization, the foundation has this excess amount of money to do what they see fit with it to account for their revenues and expenses. This amount is unrestricted because unlike a public business they have no shareholders and it can be put back into the organization. Below is a pie chart showing the percentages that assets, liabilities, and net assets unrestricted account for in the organizations balance sheet.

Current Assets $3,016,861.00

Long Term Assets $22,310.00

Current Liabilities $303,828.00

Long Term Liabilities $16,361.00

Net Assets Un-restricted

$2,718,982.00

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Financial Analysis

In order to effectively analyze The Kay Yow Cancer Fund’s financial standing and future outlook we use a variety of ratios and calculations.

Quick Ratio: The quick ratio is calculated by subtracting net inventory from total current assets and dividing that total by total current liabilities. The quick ratio determines how able an organization could meet their short-term liability expenses if it needed to be done immediately without selling their inventory. If a company’s ratio is larger than 1.0 then they are more likely to meet the short-term expenses effectively and are in good financial positioning. The calculation for the fund is as follows: (3016861-40083)/303838= 9.8. This ratio far exceeds 1.0 and therefore the organization is in great standing while comparing their current assets and liabilities, excluding inventory.

Current Ratio:The current ratio is calculated by dividing current assets by current liabilities. This ratio determines how effectively an organization can meet short term financial obligations with the inclusion of selling inventory. For the fund this ratio calculation is as follows: (3016861)/(303828)= 9.93. Anything over 1.0 is great and it means that the company can effectively meet their obligations and expenses.

Contributions and Grants Ratio:The contributions and grants ratio applies specifically to nonprofit organizations. It is calculated by dividing contributions and grants by the total revenue. This ratio determines how much the organization relies on donations to operate. Kay Yow’s ratio is calculated as follows: (855048)/(1580801)=.54. This simply means that 54% of all revenues are based off donor’s contributions and since this is a large percentage, without a consistent amount donations, the organization could suffer.

Program Ratio: The program ratio is another calculation that specifically applies to nonprofit organizations that have large fundraising events. The purpose of the ratio is to find out how much money is being allocated to hosting an event after all the expenses of the event are accounted for. You simply get this calculation by dividing program service expenses by total expenses. For the fund the calculation is: (81757)/(137787)= .06 (6%). According to Guidestar, “Over time, organizations should strive to achieve ever-higher program ratios, devoting as many of their resources to "program activity" as possible” (Coffman, n.d.) The Kay Yow Cancer Fund currently has a low program ratio so in the future there is a lot of room to grow this number. Once PLAY4KAY and the Golf Classic grow to larger events with more participants and spectators, then the expenses for these events will need to grow and in return with more participants, donations and special events revenue will rise. The cliché is true: you need to spend money to make money.

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Conclusion: After analyzing these 4 ratios, it is evident that The Kay Yow Cancer Fund is good

financial standing but has room to improve the way they are using their finances. Both the quick and current ratios tell that the organization is able to pay off their liabilities and bills as they arise. There is a lot of flexibility with this because the fund does not owe money to stockholders like a commercial company would; instead they have a net assets unrestricted balance that can be used however the fund sees fit, whether it be paying off liabilities or donating to grants. The contribution and grants ratio reveals that 54% of all of revenues come from donations. In the case that Trump’s tax reform is activated and has the effect that the American Enterprise Institute predicts and simulated to be, then the organization could see a drop in donations and therefore overall revenues (Rooney, 2017). The top 1% of large donors that the reform will affect will bring in far less donations. The potential drop in gifts should not cause harm to the organizations operations because of their limited expenses; instead it will just have a large impact on the amount that the fund can give out in their grants. Finally, the program ratio as explained above has room for improvement. The special events expenses are small compared to marketing and promotions as well as all the small “other” expenses accounted for. There are many ways to reduce expenses in marketing such as taking great advantage of free social media platforms and online giving. “Other” expenses such as the $8,000 accounted for miscellaneous and $3,000 in postage. These could be reduced by using more electronic systems and then there would be more room to expense special events and grow the number of participants and spectators.

After looking at the 2015 Fiscal Year finances and comparing it to the 2016 Fiscal Year, there is not a large change between expenses and current liabilities. The changes between the expenses only differs from a $13 increase in 2016. The current liabilities only differ in a decrease from 2015 to 2016 by $989 while the long-term liabilities are decreased by a significant $283,558. This large decrease in long term liabilities greatly aids the organization in having less debt to worry about in the future and gives them an ability to put more of their funds into grants. The fund has a stable financial outlook when you solely look at the decrease in liabilities to pay. The revenues have increased by $319,755 in the past fiscal year which adds another positive outlook for the organization. With the fund increasing in revenues and decreasing in liabilities, more donations in the form of grants will be able to be given out and it is more reassuring that the organization is not having to be concerned with worrying about going bankrupt.

There is one small area of concern when looking comparatively between the 2015 and 2016 Fiscal Years. There was a decrease in assets from 2015 to 2016 of $76,793. This is not a significant amount of money when looking at the total amount of assets the organization has but the decrease is a sign of caution. The main decreases come out of the cash and accounts receivable; however, this could just mean that the accounts have already been paid and the funds have already been put back into the organization in other faucets.

Overall, The Kay Yow Cancer Fund is in healthy financial standing. The organization could see a decrease in contributions in the future based off politics, however; since it is a non-profit, the organization itself will not see suffering but the grants given in the foundations name could. There are lots of opportunities for growth in the form of reducing marketing expenses and focusing on special events to raise more awareness and funding.

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Appendix

Appendix A:

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Appendix B:

Appendix C:

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Appendix D:

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References:

About Us. (n.d.). Retrieved November 30, 2017, from https://kayyow.com/

Audited Financial Statement [PDF]. (2017, February 27). Raleigh: Blackman & Sloop. https://kayyow.com/wp-content/uploads/2017/03/Issued-Financial-Statements-1-1.pdf

Coffman, S. (n.d.). Why Ratios Aren't the Last Word. Retrieved November 30, 2017, from https://trust.guidestar.org/why-ratios-arent-the-last-word

Funds, B. D. (2017, May 29). How Millennials Have Blown Up Traditional Charitable Giving. Retrieved November 30, 2017, from https://www.thebalance.com/how-millennials-have-changed-charitable-giving-2501900

Healy, M. (2017, May 23). Cancer research, public health and worker safety would all see steep cuts under Trump budget – LA Times. Retrieved November 30, 2017, from http://www.latimes.com/science/sciencenow/la-sci-sn-trump-budget-medical-research-20170523-story.html

Rooney, K. (2017, March 29). Trump and House tax plans have one thing in common: They likely hit nonprofits hard. Retrieved November 30, 2017, from https://www.cnbc.com/2017/03/29/trump-and-house-tax-schemes-both-could-hit-nonprofits-hard.html

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