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Nonprofits Offer Bang for Bucks

Published May 15, 2009

BY DOUG MCCLELLAN

BOULDER, CO—The industry’s biggest nonprofit organizations—Bikes Belong, IMBA and Adventure Cycling—deliver good value for the contributions and dues they receive, an analysis of their financial records show.

Their executive directors also earn smaller salaries than their counterparts in related industries.

In 2007, Bikes Belong’s executive director, Tim Blumenthal, was the industry’s highest paid nonprofit executive, earning $169,000. The League of American Bicyclists’ Andy Clarke and IMBA’s Mike Van Abel earned $124,000 and $120,000, respectively. (See the compensation chart on page 20.)

Their salaries were modest compared to those paid to nonprofit executives in related industries.

For example, Frank Hugelmeyer, Outdoor Industry Association’s executive director, earned $156,000 for 28 hours a week of work, plus an undisclosed amount for additional work he does for the association’s for-profit subsidiary.
SnowSports Industries America paid its executive director, David Ingemie, $257,000, while James Faltinek, head of the National Sporting Goods Association, took home a whopping $535,000.

Bicycle Retailer & Industry News reviewed three years of financial records through 2007 submitted to the IRS by 21 nonprofit organizations. These groups must file annual information returns, which are public. The 2007 returns are the most recent available.

One independent organization that evaluates nonprofits gives good ratings to the three groups it rates. The exception is the League of American Bicyclists. It received a “poor” rating for its 2007 financial records, although that was an improvement from prior years.

In 2007 industry nonprofits raised more than $16.5 million, spending the money on causes such as lobbying for bicycle paths, putting inner city kids on bikes, shipping bikes to Africa, and sponsoring charity rides.

Most nonprofits are supported by member donations. However, industry suppliers and retailers underwrite three nonprofit trade associations through member dues. Nonprofit trade associations follow different but related IRS regulations than do charitable organizations (See sidebar).

King of the Road. When it comes to raising money, Adventure Cycling Association is king of the road. The nonprofit publishes touring maps and sponsors tours. It also collects dues from its members.

It raised $2.9 million in its latest fiscal year, which ended Sept. 30, 2008. Approximately $1 million came from dues, $950,000 from tours, and $1 million from its publishing division.

IMBA was close behind with 2007 income of $2.65 million. Membership dues accounted for $1.1 million or 40 percent of its revenue. The organization reported another $637,000 in income from its trail consulting business. The remainder, $756,000, came from contributions and grants.

Bikes Belong and its subsidiary, Bikes Belong Foundation, raised $2.12 million in 2007.

Nearly 87 percent, or $1.4 million of the parent association’s $1.62 million in revenue came from dues assessed on supplier and retail members. Executive director Tim Blumenthal said members pay dues based on annual U.S. sales from the prior year. The foundation’s revenue of $522,000 came from contributions.

Good Ratings. IMBA and Trips for Kids spent between 81 percent and 83 percent of their budgets on programs in 2007. Charity Navigator, an independent group that analyzes and rates charities, gave them a rating of three out of four stars, or “good.”

Charity Navigator is the largest and most-used evaluator of charities since its founding in 2001. It evaluates the financial health of more than 5,400 American charities. More than four million donors used its Web site last year.

Charity Navigator officials say seven of every 10 charities it analyzes spends at least 75 percent of their budgets on programs.

The League of American Bicyclists, the only other cycling association rated by Charity Navigator, earned a two-star rating, or “needs improvement,” for 2007. That was up from a one-star “poor” rating for 2006 and 2005.

Dragging down the League’s ratings were its relatively high administrative expenses of 21.5 percent.

The rating also reflects the League’s efforts to recover from years of operating deficits and internal turmoil. In 2003, the League posted an operating deficit of $47,000, a deficit that swelled to $264,000 the next year. In 2005, the League sought emergency funding and a number of employees left.

Although Charity Navigator doesn’t rate Adventure Cycling, it is one of the most frugal associations in the industry, spending nearly 90 percent of its budget on programs.

Diversified Income. The BPSA is at a disadvantage by being wholly dependent on member dues for funding (see related story on page 19).

Over the years, diversification has helped nonprofits reduce volatility in their income streams.

Fred Clements, NBDA’s executive director, said membership dues are now the association’s No. 3 source of revenue. It earns more from licensing Bicycle Retailer & Industry News, which contributed a $300,000 dividend to the association in 2007, and from its $180,000 annual Interbike endorsement fee. Both figures are disclosed in its IRS filings.

“The trend in the association business is to try to be less dependent on membership dues,” Clements said.

(Disclosure: The NBDA has published Bicycle Retailer under license from Nielsen Business Media since March 2006. The magazine relies primarily on industry advertising revenue. For every dollar spent on advertising, 90 cents goes to support the NBDA and the magazine’s overhead and staff. Ten cents on the dollar is returned to Nielsen as a licensing fee.)

A Timely Infusion. Nonprofits also are benefiting from the injection of new advocacy money. Bikes Belong, for example, reached an endorsement agreement with Interbike in 2007 after threatening to launch its own trade show. Interbike payments, which began flowing in 2008, are estimated to be more than $400,000 a year.

The newest source of advocacy money is the SRAM Cycling Fund. It aims to donate $2 million a year for five years. The Chicago component maker created the fund last September as part of a $200 million private equity investment.

It has awarded $200,000 each to IMBA, Bikes Belong and Safe Routes to School. It also gave $400,000 to the League of American Bicyclists and the Alliance for Biking and Walking, formerly Thunderhead Alliance.

Mixed Outlook. A relatively healthy sales climate, combined with an influx of new money for advocacy, has helped nonprofits bolster their balance sheets and expand programs.

Blumenthal said Bikes Belong expects to raise $3.5 million in 2009: $2.4 million for the trade association and $1.1 million for Bikes Belong Foundation.

“When I came here five years ago, our overall budget was $1.1 million,” he said. “Now it’s $3.5 million. We’ve tripled in size without having to raise our dues rates. It’s encouraging.”

Blumenthal said the industry had a successful 2008, which led to an increase in dues from the organization’s supplier and retail members. “Several of our larger companies grew last year and they’re paying a lot more in dues than they did,” he said.

But the recession is taking a toll on nonprofits that rely on individual memberships.

IMBA’s Van Abel said he expects to trim 2009 expenses to about $2.9 million from the $3 million budget his board originally approved. “We’re okay. We’re able to manage our cash flow. We’re just having to watch that,” he said.

Topics associated with this article: Advocacy/Non-profits

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