Juvenile Diabetes Research Foundation, Research Paper Example

The Juvenile Diabetes Research Foundation (JDRF) was founded in 1970 by a small group of parents of children with Type 1 diabetes.  Over the past 40 years, JDRF has grown to become the largest funding source for Type 1 diabetes research in the world.  According to JDRF (2010), the organization has affiliates in eight counties and satellite locations in over 100 countries around the world.  In 2009, JDRF funded over $100 million in Type 1 diabetes research, bringing its total efforts to 1.4 billion over the past 40 years.

The primary mission of JDRF is to find a cure for Type 1 diabetes.  This mission is pursued by offering research grants to doctors, universities, hospitals, and research facilities.  In 2009, JDRF funded research projects in 22 countries including 40 clinical trials (JDRF, 2010).  While the ultimate goal of the organization is to find a cure for Type 1 diabetes, it also funds a wide variety of educational and support programs as well as research into the development of better and more effective treatments for the disease until such time as a cure can be found.

JDRF has been registered as a 501(c)(3) organization since 1973 (IRS, 2010).  The organization is funded entirely through individual and corporate donations.  JDRF has an aggressive corporate sponsorship program that provides guidance and assistance for companies wishing to host JDRF fundraisers.

The most notorious fundraiser sponsored by JDRF is the “Walk for the Cure” walkathon.  This event is held annually at hundreds of locations throughout the country.  Walkers are encouraged to form “teams” and create their own team t-shirts.  One of the larger walks is held in Tempe Arizona.  The 2008 JDRF walk in Tempe raised 2.4 million and involved over 26,000 walkers (JDRF, 2010).  The organization claims that over 85% of all funds raised go directly to research and education.

Ethical Considerations

The words ethical and legal are not mutually exclusive, but they are also not synonymous.  It is not uncommon to find ethics statements for businesses or foundations that vow to obey the law.  Oil giant British Petroleum’s ethics statement promises to “adhere in letter and spirit to all laws” (B.P., 2007).  In their case, complying with applicable laws had nothing to do with “doing the right thing” which is what true ethics are all about.

JDRF is somewhat unique where public foundations are concerned.  While the foundation does accept large donations from corporate and individual sponsors, a great deal of their 9-digit annual budget comes from small individual donors.  Fervent supporters of the Sierra Club Foundation might be passionate about saving the trees, reserving the environment and of course protecting the spotted owl.  In contrast, many of JDRF’s most ardent supporters are parents sending money to an organization dedicated to saving the life of their son or daughter.

Notwithstanding the importance of the spotted owl, a financial indiscretion on the part of the Sierra Club Foundation would be disappointing at best, whereas the mishandling of funds within JDRF would be morally reprehensible. DJRF relies on their longstanding history of being ethical, financially transparent and trustworthy in order to continue pursuing their mission.

Each and every grant application or research project funded by JDRF must not only withstand scrutiny regarding scientific viability but must also be approved by JDRF’s ethics committee to ensure that contributor’s money is being spent in an appropriate manner.  JDRF does not have an official ethics statement carefully crafted by lawyers and marketing gurus.  The organization’s reputation rests on its history of financial responsibility rather than on a written promise for how the organization will function in the future.

According to Fard and Rostamy (2007), public trust is precipitated by the perception of an organization’s legal, ethical, financial and functional accountability.  This study also validated the importance of an organization’s use of media to provide pertinent and accurate information about the organization’s activities.  Satisfaction (trust) in an organization was shown to be predicated on both the organization’s levels of accountability in the specified areas, as well as on the organization’s efforts to “get the message out.”

Technological Considerations for Effective Budgeting

Technology plays a vital part in any organization or business that functions internationally. Real-time transfer of financial and other data is paramount in conducting business across multiple time zones.  JDRF also leverages technology to help reduce overhead costs which is very important when managing a charitable foundation.  The lower the overhead costs are, the more money can be forwarded to achieving the organization’s ultimate mission.

Using teleconferencing rather than live meetings reduces the strain that travel places on the budget.  Using VOIP for communication improves efficiency, tracking for reports, and lowers the budget line for phones.  The use of a well-designed, thorough and user-friendly website lowers the cost of answering public inquiries and provides an immediate method for receiving contributions.

Laws, Regulations and Policies

JDRF is registered with the U.S. Government as a 501(c)(3) organization and has been designated as a public foundation.  The difference between a public and private foundation is primarily found in how their revenue streams are formatted as well as the type or nature of the activities that they fund.  Public foundations receive their money from donations by the general public as well as from grants from public or private entities.  Private foundations typically receive their revenue through a single benefactor such as an individual, family, trust, or business (F.C., 2010).  Public foundations (charities) also tend to offer grants to others or engage in research or charitable activities of their own.  The term “foundation” has no legal meaning of its own but is often used in the names of various “Public Charities” which is their legal definition according to the IRS.

According to the IRS website (I.R.S., 2010);

To be tax-exempt under section 501(c)(3) of the Internal Revenue Code, an organization must be organized and operated exclusively for exempt purposes set forth in section 501(c)(3), and none of its earnings may inure to any private shareholder or individual. In addition, it may not be an action organization, i.e., it may not attempt to influence legislation as a substantial part of its activities and it may not participate in any campaign activity for or against political candidates…

The organization must not be organized or operated for the benefit of private interests, and no part of a section 501(c)(3) organization’s net earnings may inure to the benefit of any private shareholder or individual.  If the organization engages in an excess benefit transaction with a person having substantial influence over the organization, an excise tax may be imposed on the person and any organization managers agreeing to the transaction.

Reporting

There are numerous reporting requirements that JDRF must follow to maintain its status as a public foundation.  These regulations are set by the IRS.  The JDRF website contains links to all the requisite reporting documents including its letter of determination, income statements, and full tax filings for the past three years as well as their most current annual report.  Financial transparency is important to the organizations reputation.

Budget Process and Revenue Sources

JDRF’s budget for 2009 was $178 million.  Eighty two percent of gross budget expenditures went directly to fund education and research projects (JDRF, 2010).  G&A costs were just under $12 million, or about 6% of total expenditures.  Fundraising activities account for about $20 million, or 11% of the budget.

Revenue sources include private and corporate donations (about $40 million), just under $19 million from international affiliates, and $120 million from fundraising events including the Walk for the Cure events.  As with all 501(c)(3) organizations, the budget processes overseen by the Board of Directors, and is audited by an independent accounting agency.

Factors Impacting Strategic Financial Planning

There are both internal and external factors that affect budgeting and financial planning within JDRF.  Internal factors include G&A costs but are primarily driven by the demand for research and education grants.  In situations where grants are available, there are typically more applications than available funds.  In the case of JDRF, money must be split between research into finding a cure, research into better treatments, and education and support for families dealing with Type 1 Diabetes.

Each research grant application is reviewed for scientific viability as well as for ethical concerns.  It is also important that research efforts are coordinated to reduce redundancies.  JDRF reviews potential yearly and multi-year programs to determine how much fundraising will have to be done to accommodate the chosen efforts.

External factors such as the general condition of the national economy can have the same affect on non-profit foundations as on regular businesses.  There is certainly a supply verses demand factor that impacts fundraising efforts.  When the supply of money in the economy decreases, individual spenders must be more discriminate about what organizations they contribute to and how much they can give.  Financial planners at JDRF must keep all these factors in mind when planning the organization’s short and long-term financial strategy.

According to Barcan (2010), public organizations are best served by leveraging a holistic approach to changing economic environments much the same as regular businesses.  The most current trend in responding to change is the concept of change management.  This concept views the organization as if it were a unified entity rather than a combination of independent departments.  Barcan suggests that change is not an unwelcome event to challenge bureaucratic rigidity, but should be embraced as an integral part of the organization’s philosophical model.

Cost Benefit Analysis

The use of cost-benefit analysis is a critical component of JDRF’s operation.  Even with a nine-digit budget, funds are still finite.  JDRF cannot afford to fund all organizations seeking money regardless of how worthwhile the project might seem.  There is also a need to monitor those entities receiving grant money from JDRF to ensure that donated money is properly spent.  Researchers cannot have excessive overhead or salary payouts.

All funds provided by JDRF are forwarded for research or education only after each grant application or internal program is evaluated in terms of cost verses benefit.  Any organization considers the relative cost of financial expenditures in terms of their ultimate value to its stakeholders.  In the case of JDRF, stakeholders are mostly children who are suffering from a yet-incurable disease.

In their article, Bryson et al. (2007) suggest that the stakeholders of public organizations can achieve the most value when the organization identifies distinctive competencies to help evaluate ongoing effectiveness.  This is a method of monitoring the “benefit” portion of the cost/benefit equation.  Such metrics should be quantifiable wherever possible.

Cash Management and Investment Strategies

JDRF receives revenue in the form of cash donations as well as pledged donations.  Cash donations are monies that individuals or businesses give directly to JDRF.  Pledged donations are monies promised to be paid by contributors over time.  A person could for example, pledge to give $20 per month for a year.  According to the notes on JDRF’s financial statements, pledged donations are recorded as income during the month in which the pledge was received.

The exception to this rule is contributions that carry a time or purpose stipulation.  Contributors can stipulate that a certain contribution is to be used for a specific purpose such as for training programs that train teachers to recognize the signs of insulin shock.  Such a donation is recorded as a temporary restricted net asset until such time as the focus of the stipulation occurs.  Therefore conditional contributions are not recognized as regular income until they become unconditional.

JDRF operates what could be described as a financial revolving door.  They tend to spend zost of the money they receive as soon as they receive it.  The organization does not hold on to large sums of cash for investment purposes.  Any investments the company does make (including capital assets) are reported at fair market value based on the evaluation of external investment managers.

Overall Financial Condition

JDRF has a reputation for maintaining the highest degree of financial accountability and reporting transparency.  This fact has contributed to the organization’s ongoing financial strength and ability to maintain its flow of charitable donations.

In the charity world, reputation is everything.  Ongoing financial strength depends on the trust that contributors place in the organization.  JDRF has existed for 40 years and continues to grow in financial strength every year.

In the retail world, repeat customers stick with a product because of their perception of value.  Starbucks fans for example, feel that the quality of coffee, the ambiance of the locations, and the deportment of the employees is worth the cost.  If any of these factors were to deteriorate, loyal customers might take their beverage money elsewhere.

The same holds true for charitable organizations even to a higher degree.  Contributors to charities such as JDRF do not receive any direct, personal, or tangible benefit from the service that organization provides.  The investment they make is in hope for the future.  Such an ethereal investment goal requires a great deal of trust.

JDRF operates a public foundation that has been successful for so many years because it takes great care to be trustworthy.  A financial scandal of any kind could crush the organization’s ability to raise funds and would dash the hopes of the millions of people who contribute to this worthwhile cause.  JDRF’s financial condition is dependent on maintaining the trust of the general public.

References

(Barcan L 2010 Current issues on change management in public organizations)Barcan, L. (2010). Current issues on change management in public organizations. Retrieved from http://web.ebscohost.com.ezproxy.apollolibrary.com/ehost/pdfviewer/pdfviewer?vid=4&hid=113&sid=2201f055-94bd-46d0-82c4-d427b5156637%40sessionmgr113

(BP 2007 Statement of ethics and business practes)B.P. (2007). Statement of ethics and business practes. Retrieved from http://www.ogdcl.com/UploadFolder/financial/statEthics07.pdf

(Bryson J Ackerman F Eden C 2007 Putting the resource-based view of strategy and distinctive competencies to work in public organizations)Bryson, J., Ackerman, F., & Eden, C. (2007). Putting the resource-based view of strategy and distinctive competencies to work in public organizations. Public Administration Review, July/August, . doi:702-717

(Fard H Rostamy A 2007 Promoting public trust in public organizations; Explaining the role of public accountability)Fard, H., & Rostamy, A. (2007). Promoting public trust in public organizations; Explaining the role of public accountability. Public Organization Review, 7, 331-344. doi:10.1007/s11115-007-0041-4

(FC 2010 What is the difference between a private foundation and a public charity?)F.C. (2010). What is the difference between a private foundation and a public charity? Retrieved from http://foundationcenter.org/getstarted/faqs/html/pfandpc.html

(IRS 2010 Exemption requirements 501(c)(3) organizations)I.R.S. (2010). Exemption requirements 501(c)(3) organizations. Retrieved from http://www.irs.gov/charities/charitable/article/0,,id=96099,00.html

(IRS 2010114 Letter to JDRF)IRS. (2010, January 14). Letter to JDRF. Retrieved from http://www.jdrf.org/files/General_Files/501_C3_JB_.pdf

(Jdrf 2010 Juvenile diabetes research foundation – Fact sheet)JDRF. (2010). Juvenile diabetes research foundation – Fact sheet. Retrieved from http://www.jdrf.org/index.cfm?fuseaction=home.viewPage&page_id=836668DD-2A5E-7B6E-18A9192DB8720808