ARDC is pleased to share that our 2022 audit, conducted by AAFCPAs, is complete! You can now find our 2022 audited 990-PF (tax return) and financial statements in their usual spot on https://www.ardc.net/about/legal.
Over the past few years, since creating our endowment in 2019, ARDC has grown and evolved as an organization. We went from having no staff to a full team (including, in late 2022, bringing on our Technical Director Jon Kemper KA6NVY), and from minimal to a more formalized grant making process. Before having staff in 2020, we did not meet the IRS-required 5% distribution balance. With the staff’s hard work, we successfully exceeded the minimum distribution in both 2021 and 2022.
Meanwhile, as many of our readers likely observed, the stock market experienced excessive gains in 2021 that later dropped in 2022. Our endowment rode this same financial rollercoaster. Luckily, even with our disbursement totals, our ending balance in 2022 (~$108M) was not significantly less than our initial balance in 2020 (~$109M).
You’ll see this context reflected in our 2022 990-PF and financial statements, along with the same documents for 2021 (financial statement, tax return) and 2020 (financial statement, tax return) (used to show year-over-year comparisons).
Cash vs. Accrual
As you look at some of the comparisons below, you’ll see some items listed as cash and some as accrual.
- Accrual totals show expenses approved in a given year (such as an invoice received from a vendor or an approved grant). Ideally, these liabilities get paid within the same year that they were approved, though some may be paid in the following year.
- Cash totals show expenses that were actually paid in a given year. When the IRS calculates our minimum 5% distribution, they are looking at these cash numbers.
- The 990-PF shows both cash and accrual totals, while the financial statements primarily show accrual totals in their analysis.
Grants & Gifts
As noted above, we did not issue quite enough grants and gifts in 2020, whereas in 2021, we more than tripled that amount to make up for it. In 2022, the amount disbursed through grants and gifts evened out a bit.
|Year||Grants & Gifts (Accrual)||Grants & Gifts (Cash)|
The 2021 and 2022 accrual grant & gift totals above can be seen on page 2 of the 2022 Financial Statements, and the 2020 totals can be found in the 2020 and 2021 Financial Statements. The cash totals are pulled from 2022, 2021, and 2020 990-PFs, Part I.
Unlike prior years, 2022 shows a much higher cash total than grant total. This is because a larger amount of grant funds were approved in 2021 than were issued in 2022.
Functional expenses are how the IRS looks at nonprofit expenses overall. Here’s how ARDC’s break down over the past few years (which can be seen in our 2020, 2021, and 2022 Financial Statements):
|Salaries & Related||$517,190||$269,906||$40,265|
|Legal & Accounting||$56,241||$23,743||$48,092|
The two biggest differences between 2022 and 2021 relate to two categories: Salaries & Related and Other. The increase in salaries reflects a full year of five employees hired part way through 2021 (most of which are full-time), as well as the addition of a new employee in Q4 of 2022. Aside from that staff member, the others were hired in 2021.
As an organization that believes in transparency, Other is one of those categories that, frankly, we don’t love. And at ~$269,000, it’s worth at least a brief overview. In this case, Other is a catch-all that includes, among a smattering of other items, a few large-ish expenses which are partially reflected in our 990-PF: Conferences & Travel, Employee Healthcare Reimbursements QSEHRA, and Professional Fees (e.g. our bookkeepers, development for our open-source grant application platform Hypha, and IT services). These account for over 90% of those costs.
Overview of Expenses
Another way of looking at our expenses in 2022 is to look at the total expenses & contributions, as outlined in Part I of the 990-PF.
|Contributions, Gifts, Grants Paid||$6,904,678||$8,004,191|
|Total Expenses & Contributions||$7,812,796||$8,873,853|
Qualifying Distribution Balance
So where does all of this leave us in terms of our required 5% distribution balance? This information is outlined in Parts IX, X, XI, and XII of the 990-PF.
- Part IX calculates the amount of our qualifying distribution (5% of our average assets),
- Part X calculates the amount of the qualifying distribution minus the small amount ($38,456) of income tax that private foundations pay on their investment income,
- Part XI lists the qualifying distribution (same amount as the cash total of expenses in Part I), and
- Part XII outlines our remaining distribution from 2021, our minimum distribution amount for 2022, and the remainder based on our 2022 qualifying distribution. Since we spent more than needed, this remainder will be carried over toward our 2023 distribution.
|2021 Excess Distribution:||$486,289|
|2022 Minimum Distribution:||$5,780,834|
|2022 Total Distribution Required:||$3,093,019|
|2022 Qualifying Distribution:||$8,873,853|
|2022 Excess Distribution:||$3,579,308|
It’s worth noting that we like having some excess distribution on the books. Though we may have to comparatively pull back some of our charitable giving in 2023 in our continual surfing of the stock market waves, we are still targeting about $5-6M in charitable giving in 2023.
Beginning-of-Year vs. End-of-Year
Part II of the 990-PF outlines our balance sheets, which show our total portfolio at the beginning and end of the year. These numbers (and our month-by-month average assets, which aren’t shown) are used to determine our required distribution for the year.
- Beginning-of-year: $139,030,662
- End-of-year: $107,895,897
Because of the stock market’s downward trend, along with our increase in spending (primarily on grants and gifts), we ended the year with about $31M fewer assets. This points to more conservative spending in 2023 to maintain our asset-to-disbursement balance.
Another Brief Note
It’s worth sharing that this was the first year that ARDC filed our 990-PF on time (May 15) vs. by the extension deadline (Nov. 15). For anyone who has been through an audit, you know how much work goes into it. Making this happen is a major win for ARDC, made possible by our new bookkeeping team at J7 Bookkeeping, supported and managed by our Operations Manager, Merideth Stroh KK7BKI. The Board and I can’t thank these folks enough for their work here. If you are a nonprofit and need some bookkeeping support, we couldn’t recommend J7 Bookkeeping highly enough. You can’t have Merideth, though 🙂
Got questions about our 990-PF or Financial Statements? Just ask!
Please direct any questions to firstname.lastname@example.org