Archewell Foundation: CharityWatch Rating
Feb 02, 2024
CharityWatch CEO and Executive Director, Laurie Styron, spoke with USA Today about Archewell Foundation, the charity of Prince Harry and Meghan Markle, Duke and Duchess of Sussex.
“Prince Harry and Duchess Meghan's charity, the Archewell Foundation, suffered a $11 million decline in donations in 2022 compared to the year before,” reported USA Today. The news outlet asked Styron for comment, and she contributed the following:
"Laurie Styron, the executive director of independent charity watchdog group CharityWatch, says celebrity 'passion project' organizations like the Archewell Foundation often receive most of their support from a few individuals, such as its founders or one family."
"'This is particularly true within the first few years of their existence as they work towards drumming up broader support,' she tells USA TODAY via email."
"'We can deduce from this reporting that the majority of the charity's donations in 2021 came into the organization in the form of small donations from the general public, whereas nearly 100% of donations in 2022 came from only two donors', Styron says."
CharityWatch’s Rating of the Archewell Foundation
CharityWatch is unable to provide a rating for Archewell Foundation based on its fiscal year ended 12/31/2022 due to the charity's short history of financial activity. CharityWatch typically waits until a charity has had 3 years of significant financial activity before applying our methodology to the organization, evaluating its financial activities, and assigning a rating. CharityWatch's inability to provide a rating for the Foundation at this time does not imply a negative or positive evaluation.
Archewell Foundation Does Not Respond to Request for Financials
CharityWatch contacted the Archewell Foundation on 01/22/2024 via email and U.S. Postal Service mail requesting copies of its most recent IRS Form 990 and Audited Financial Statements. As of 2/1/2024 the charity has not responded to our requests. Should it provide these documents at a future date, CharityWatch may update our profile of Archewell Foundation at that time.
Major Drop in Donations
According to its fiscal 2022 IRS Form 990, which CharityWatch obtained from the organization's website, the Archewell Foundation reported raising $2,000,911 in cash contributions and spending $2,679,537 in total cash expenses that year. In its prior fiscal year 2021 reporting, the Foundation reported raising $13,004,470 in total cash contributions and spending $3,987,070 in total cash expenses, according to its IRS Form 990 of the same year.
A major, one-year drop in donations for an organization like Archewell Foundation does not necessarily signal trouble. Because the charity was formed in 2020 but did not report any financial activities until 2021 and 2022, there is not yet enough data with which to draw conclusions about its financial health or fundraising abilities. 2021 may have been an outlier year due to the initial excitement surrounding this celebrity-founded charity. It is extremely rare for a charity to raise $13 million in its inaugural year—even $2 million would have been extremely impressive.
Judging a charity’s ability to sustain its financial support over time requires more years of data. However, such data may not be forthcoming any time soon. Archewell Executive Director, James A. Holt, signed the charity’s 2022 tax filing on December 5th, 2023. Meaning, if the charity follows a similar timeline for filing its 2023 tax form, it may be nearly a year before the public has more information about how it is raising and spending public dollars.
While Archewell Foundation's reported contributions total to an average of about $7.5 million per year, this average is skewed due the charity having received significantly more contributions in its first year of operations as compared to its second. This is not largely due to it receiving large grants from a few sources in its first year of operations as compared to its second. In fact, the opposite is true.
According to the Foundation's IRS Form 990 (Schedule A, Part II, Section A), the Foundation reports that it collected $15,005,381 in “Gifts, grants, contributions, and membership fees received” during its first two years of operations. Of this amount, the "total contributions by each person (other than a governmental unit or publicly supported organization)...that exceeds 2%" per donor is reported as being only $3,699,786. Meaning, over its first two years of operations, the Foundation collected the vast majority of its contributions in the form of smaller donations from many sources. Over 50% of this $3,699,786 amount was donated in fiscal 2022, its second year of operations, according to the charity’s tax filing (IRS Form 990, Schedule B), which reports that Archewell Foundation received $1 million each that year from two different donors.
Who Are Archewell Foundation’s Major Donors?
Donors who are curious about who funds the Archewell Foundation won’t find this information in the charity’s tax form. Schedule B of the IRS tax Form 990 requires public charities that receive a substantial concentration of support from any one contributor during the reporting year, defined as the greater of $5,000 or 2% of total contributions, to disclose to the IRS the names of these donors and the amount of cash or non-cash support donated. However, unlike the core IRS tax Form 990 and other supporting schedules that can be accessed by the general public, Schedule B is not open to public inspection.
In 2021 CharityWatch filed an Amicus Brief with the Supreme Court of the United States (SCOTUS) in support of state laws that would have required charities to continue providing unredacted Schedule B data privately to state regulators. The state of California did not prevail in the case.
Inadequate Governance & Transparency
Archewell Foundation reports in its 2022 tax filing (IRS Form 990, Part XII) that its financial statements were audited by an independent accountant. However, as of February 1st, 2024, CharityWatch has been unable to locate a copy of this audit on its website or in public databases. In addition, the charity has not yet responded to CharityWatch’s January 22nd, 2024 request for a copy of this document.
Though the charity reports a total of five “Officers, Directors, Trustees, Key Employees, and Highest Compensated Employees” (IRS Form 990, Part VII), it reports only two board members—“Meghan, The Duchess of Sussex” and “Prince Harry, The Duke of Sussex.” This in not in keeping with widely accepted best practices in the United States for nonprofit boards of directors, which generally advise a minimum board size of five to seven members. According to the IRS, “Small boards run the risk of not representing a sufficiently broad public interest and of lacking the required skills and other resources required to effectively govern the organization.”
According to the Office of the Attorney General of the State of California, the state in which the Archewell Foundation is located, charities organized in the state are only required to have one board member. The IRS very strongly encourages 501(c)(3) public charities to have at least three directors on their boards, with the reasoning that a charity should not be controlled by private interests, undue benefits should not inure to private individuals, and its assets should not inure to the benefit of private persons. It can be extremely difficult for a charity board consisting of only two members to act with true independence when making decisions for the organization, and to maintain proper checks and balances against potential private inurement. When the two directors have a family relationship, fulfilling fiduciary duties by acting with true independence is all the more challenging.
CharityWatch’s analysis of the Archewell Foundation’s 2022 IRS tax Form 990 did not uncover any red flags with respect to private inurement. However, because charity tax filings are not subject to Generally Accepted Auditing Standards (GAAS) in the United States and are not presented according to Generally Accepted Accounting Principles (GAAP), an inspection of the charity’s audited financial statements is essential for understanding if an audit process identified any red flags not disclosed in the tax filing.
While Archewell Foundation does report having basic policies in place such as Whistleblower, Conflict of Interest, and Document Destruction and Retention (IRS Form 990, Part VI, Section B), a board consisting of only two people who are also married to each other does not inspire confidence that enough board independence exists to ensure that such policies are robustly enforced.
How Did Archewell Foundation Spend Its Money In 2022?
According to its 2022 tax filing Archewell Foundation gave out $1,134,000 in grants that year. $255,077 (IRS Form 990, Schedule F) went to undisclosed recipients in “Europe (Including Iceland & Greenland) – Albania, Andorra, Austria, Belgium.” Charities are not required to disclose specific grant recipients on Form 990, Schedule F, “Statement of Activities Outside the United States.” However, Form 990, Schedule I, “Grants and Other Assistance to Organizations, Governments, and Individuals in the United States” provides more detail about who received grants from the Foundation in 2022.
Archewell Foundation made grants of $125,000 or more to the following organizations in 2022, according to its tax filing of the same year:
$200,000 to Georgetown “to support its initiative on gender justice and opportunity to build trainings…”
$165,000 to Kaboom, Inc “to create a play space for play therapy and healing for children and the community at Deleon…”
$125,000 to NAACP Empowerment Programs “to support the Digital Civil Rights Award which support activists working towards racial equity…” (Note: NAACP Empowerment Programs receives a “D” rating on CharityWatch’s “A+” to “F” scale based on our analysis of its fiscal 2021 audit and tax filing).
Archewell Foundation gave out grants ranging between $10,000 to $100,000 to 14 other organizations. This includes a $50,000 granted to HIAS, a CharityWatch Top-Rated charity; $10,000 to Save The Children Federation, another CharityWatch Top-Rated Charity; and $10,000 to United States Fund for UNICEF, also a CharityWatch Top-Rated charity.
In addition to grants, the Archewell Foundation reports paying $534,780 for “Fees for services (nonemployees)…Other.” Of this amount, it claims that $499,954 consisted of program-related expenses and $34,826 consisted of management and general-related expenses. Breakouts of fees paid to independent contractors for the year include $180,524 to Invisible Hand, LLC; $127,807 to Herlihy Loughran; and $120,000 to Jiore Craig, all reportedly for “Programmatic Strategic Support.”
One red flag CharityWatch identified in the charity’s expense reporting for 2022 is $0 reported fundraising expenses. It costs money to raise money, so a charity reporting that it spent nothing to raise over $2 million in contributions heightens the suspicion that it may not be allocating its expenses correctly. The value of the time a staff member spends soliciting donations is a fundraising expense, for example, as are general office expenses incurred to do so, such as telephone, supplies, and any fundraising event costs. It is extremely rare for a charity to be able to raise significant donations without spending even one penny to do so.
Archewell Foundation reports about $8.3 million in net assets as of December 31, 2022, almost all of which consists of cash and savings. At 2022 spending levels, the charity could continue to operate for just over three years without raising another penny in donations or other revenue. In this sense, its drastic drop in donations from 2021 to 2022 does not mean that the charity is in danger of shutting down due to lack of resources any time soon.
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