The founder and Executive Chairman of FedEx, Fred Smith, has given $65 million to the Marine Corps Scholarship Foundation (MCSF). The gift is the largest ever received in MCSF’s 60-year history, according to a December 12, 2022 statement posted on MCSF’s website. The "record" $65 million donation is also written about in Forbes.
Marine Corps Scholarship Foundation currently receives a "C-" rating on CharityWatch’s "A+" to "F" rating scale, based on an analysis of its fiscal year ended June 30, 2020 financial activities. MCSF’s financial efficiency rating of "B-" was downgraded due to the charity holding assets in reserve exceeding three years. Based on CharityWatch’s calculations, MCSF could continue to operate at fiscal 2020 spending levels for approximately 4.2 years without raising another penny of revenue.
CharityWatch has long been critical of charities that hold available assets in reserve of three years or more. Giving is a fixed pie, remaining steady at about 2% of gross domestic product since the mid-twentieth century. Because charitable dollars are limited and society’s needs are not, it is vital that charities do not hoard the funds they raise. When a charity sets aside an arguably excessive amount of funds for possible future needs, this necessarily makes those funds unavailable to other charities working in the same cause to address existing or more urgent needs. Unless MCSF ramps up its scholarship and other spending significantly, the recently announced $65 million major gift will only further grow the charity’s coffers.
Marine Corps Scholarship Foundation reported a net fund balance of $116,919,549 at fiscal year end June 30, 2020, according to its audited Statement of Financial Position. To compute the charity’s years of available assets, CharityWatch subtracted from the $116,919,549 the following: (1) Property and Equipment (net) of $59,091; (2) Pledges Receivable Due in More than Five Years (net) of $381,941; and (3) Perpetual Endowment funds of $55,144,026. The balance of $61,334,491 was then divided by the charity’s fiscal 2020 cash-based total functional expenses of $14,692,764 to compute its years of available assets, totaling approximately 4.2 years as of June 30, 2020.
Paycheck Protection Program Funds
Despite its history of maintaining available assets in reserve in amounts exceeding three years, as computed by CharityWatch, Marine Corps Scholarship Foundation qualified for two rounds of Paycheck Protection Program (PPP) funding. The first (May 1, 2020) and second (March 13, 2021) round loans were forgiven in the amounts of $569,773 and $575,585, respectively, including any accrued interest, according to the ProPublica Tracking PPP database.
MCSF was certainly not the only nonprofit with large asset reserves that received PPP funds. As previously reported by CharityWatch, six charities with respective assets in reserve ranging from 6.6 to 16.1 years received PPP funding, as did many CharityWatch "F" rated nonprofits.
The amounts of first and second round PPP funding each nonprofit received were largely based on the amount of qualified expenses it substantiated in its PPP application(s)—i.e., a nonprofit that could substantiate a higher amount of qualified expenses would be eligible to receive more PPP funding than a nonprofit that could substantiate a lower amount. Having many years’ worth of available assets in reserve was not a disqualifying factor for nonprofits to receive PPP funding.
Prior to being downgraded to a "C-" rating due to maintaining 4.2 years of available assets in reserve, Marine Corps Scholarship Foundation earned a "B-" financial efficiency rating from CharityWatch for fiscal 2020. It spent a computed 67% of its cash budget that year on programs, with overhead spending on fundraising and management and general expenses accounting for the 33% balance. MCSF spent $21 to raise each $100 in cash contributions in fiscal 2020.
According to Marine Corps Scholarship Foundation’s fiscal year ended June 30, 2020 audited financial statements (Note 1 re: Scholarships):
“Scholarships are awarded for a period of one academic year. It is the Foundation’s policy to accrue scholarships at the date awarded. During the years ended June 30, 2020 and 2019, the Foundation awarded 2,750 and 2,360 scholarships totaling $8,500,000 and $8,200,000, respectively, for use during the 2020-2021 and 2019-2020 academic years. The award amount is prior to any current year reductions, refunds, and withdrawals. Total scholarship expense for the years ended June 30, 2020 and 2019, was $7,560,233 and $8,223,262, including an allocation of indirect costs of $2,277,634 and $2,182,092, respectively.”
According to MCSF’s December 12, 2022 public statement: “MCSF awards about 2,600 scholarships annually but estimates there are more than 24,000 eligible children of Marines nationwide. The sizeable gift from Smith will immediately enable MCSF to significantly increase the number of scholarships awarded annually and hastens their long-term efforts to provide support to the entire eligible population of Marine children.”
The statement continues: “The organization is committed to ensuring increases in scholarships are sustainable long term. For the next academic year alone, Smith’s gift with cover the costs of more than 100 additional scholarships with a long-term outlook of covering the costs of thousands.”
Given the timing of the $65 million gift, donors and the general public will need to wait for Marine Corps Scholarship Foundation’s fiscal 2023 and 2024 financial statements to become available before understanding if MCSF has followed through on its promise to substantially increase its scholarship spending.