On March 28, 2012, Emily Wang published an updated evaluation of DonorsChoose.org, maintaining its "BUY" rating. This report has been peer reviewed by Ruth Yen and Kent Chao.
Created by Charles Best, a former public high school teacher in the Bronx, DonorsChoose.org (“DC”) is an online funding website that connects U.S. public school teachers to multiple donors, who are able to choose the specific classroom project or supply they want to support. Once a project reaches its fundraising goal, DC purchases the materials and delivers them to the school.
1. NONPROFIT INVESTOR
INDEPENDENT RESEARCH FOR PHILANTHROPY
DonorsChoose.org SUMMARY
Created by Charles Best, a former public high school teacher in the
Nonprofit Investor Rating: Bronx, DonorsChoose.org (“DC”) is an online funding website that
connects U.S. public school teachers to multiple donors, who are
BUY able to choose the specific classroom project or supply they want to
support. Once a project reaches its fundraising goal, DC purchases
Mission Statement the materials and delivers them to the school.
DonorsChoose.org engages the public in public
STRENGTHS
schools by giving people a simple, accountable
▲ Integrity ensured via e-procurement system. When a project
and personal way to address education
becomes fully funded, instead of sending the school funds, materials
inequity. It envisions a nation where children
are bought through DC’s e-procurement system (“eSchoolMall”),
in every community have the tools and
ensuring accountability.
experiences needed for an excellent
education. ▲ Successfully creating public awareness. DC has established
partnerships with well-known companies, foundations, and public
Financial Overview figures such as Crate & Barrel, Bill & Melinda Gates Foundation, and
$ in MM, Fiscal Year Ended June 30 Oprah. These partnerships, as well as DC gift cards, corporate
matching, and Facebook “Like” campaigns have improved public
2009 2010 2011
awareness of DC and its mission.
Revenue and Support $17.3 $24.5 $32.9 ▲ Improving efficiencies. DC has worked on automating and
Operating Expenses $17.0 $24.5 $33.4 improving its internal processes. From fiscal year 2009 to 2011,
classroom processing expenses declined from 11% to 6% as a
% of Total: percent of total expenses.
Program Expenses 73.8% 81.8% 85.0% ▲ Self sufficiency. In addition to project contributions, donors are
Advocacy 17.5% 12.1% 10.1% asked to include an additional (optional) contribution towards DC
G&A 4.1% 3.3% 2.5% operating expenses. At the time of NPI’s last report, DC was 56% self-
Fundraising 4.6% 2.7% 2.3% sufficient. Currently, at 99%, DC is essentially self-sufficient,
representing an impressive accomplishment and milestone.
Year Founded: 2000
CAUTIONS
Contact Details
● Vendor pricing. eSchoolMall is comprised of roughly 20-25 vendor
catalogs and websites. While DC does receive some vendor discounts,
DonorsChoose.org given DC’s scale, DC may be able to exercise more pricing pressure
213 West 35th Street, 2nd Floor East on vendors to ensure lower and more competitive prices to donors.
New York, NY 10001
RECOMMENDATION: BUY
http://www.donorschoose.org
EIN: 13-4129457 Through many successful publicity campaigns, DonorsChoose.org has
gained popularity. As a result, contributions to DC have increased
dramatically in the past few years, helping more classrooms in need.
Analyst: Emily Wang There has been evidence of cost reductions and in fiscal year 2011, DC
Peer Review: K. Chao, R. Yen became self-sufficient in covering its operating expenses through
optional donations. We recommend donors to contribute to both
Publication Date directly to classroom projects and to DC through an optional 12-19%
March 28, 2012 contribution.
Nonprofit Investor Research | nonprofitinvestor.org
2. OVERVIEW OF DONORSCHOOSE.ORG ACTIVITIES
Created in 2000 by Charles Best, a former public high school teacher in the Bronx, DonorsChoose.org (“DC”) is an online
funding website that connects U.S. public school teachers to multiple donors, who are able to choose the specific
classroom project or supply they want to support. To ensure integrity, DonorsChoose.org has an internal Assurance
department that manages the authentication process by reviewing proposals, text descriptions, and requested materials.
Once a project reaches its fundraising goal, DC purchases the materials and delivers them to the school.
When a project becomes fully funded, instead of sending the school funds, materials are bought through DC’s e-
procurement system (“eSchoolMall”), ensuring accountability. eSchoolMall is comprised of roughly 20-25 vendor
catalogs and websites. Twice a year, DC reviews its vendors on 12 areas including responsiveness, catalog size, in-stock
availability, etc. While DC does receive some vendor discounts, given DC’s scale, DC may be able to exercise more pricing
pressure on vendors to ensure lower and more competitive prices to donors. That said, DC attempts to have at least two
vendors for a specific item, which naturally encourages competition amongst vendors.
PROGRAM RESULTS AND EFFECTIVENESS
The average public school teacher spends $500 annually in out-of-pocket expenses to acquire basic classroom materials.
Since inception, DC has raised over $108 million, supporting over 260,000 projects, and helping over 6 million students.
Roughly 52% of resources provided are books and technology, 38% towards classroom supplies, and 11% to other
resources such as field trips.
About 70% of projects become fully funded and 89% of donations include the optional donation to DC’s operations.
Most importantly, 94% of teachers surveyed noted that their funded projects increased their effectiveness in the
classroom.
TRANSPARENCY
DonorsChoose.org provides financial information from 2008 to 2011 in its financial statements and Form 990s on its
website. Its website also provides a detailed overview of dollars raised, number of students helped, and its impact across
subject, grade, and resource. These statistics are updated on a daily basis.
FINANCIAL OVERVIEW
Revenue
Project contributions include contributions for Funding (GAAP Basis)
classroom projects such as project materials, donor $ in MM
thank you package and delivery costs, and third
$35.0 $32.8
party credit card fees. Contributions for operating
$30.0
expenses pay for all expenses other than classroom $24.4
$25.0
project materials and are divided into three
components: a $35 per project fulfillment fee, a $20.0 $18.2 $17.1
payment processing fee, and an optional $15.0
contribution donors can make. This optional $10.0
donation helps pay for all other expenses, including $5.0
classroom project advocacy expenses, general and $0.0
administrative expenses, and fundraising expenses. 2008 2009 2010 2011
Contributions for Classroom Projects Contributions for Operating Expenses
Contributions for program services are unrestricted Contributions for Program Services Donations In-Kind
or temporarily restricted. If unrestricted, DC will Investment Income Other
DonorsChoose.org | Nonprofit Investor Research 2
3. decide where the funds will be used. If temporarily restricted, the funds will be used in accordance with the donor’s
restriction. In fiscal year 2008, Other represents contributions for expansion, as raised by a small group of donors and
the Board of Directors.
Expenses
DC defines program services expenses as classroom project expenses, class project processing expenses, and project
advocacy expenses. Since advocacy expenses do not directly benefit the project itself, NPI views these expenses as
operating expenses rather than program expenses. As a percent of total expenses, program costs have steadily
improved over the years from 69% in fiscal year 2008 to 85% in fiscal year 2011, or the equivalent improvement of a 7%
compound annual growth rate (CAGR). Notably, included in program costs are classroom processing expenses, which
have declined through the years due to automating and improving several internal processes to further reduce costs. DC
continues to aims to grow through scale without adding people. Finally, as a result of widespread popularity of
partnership campaigns, advocacy costs as a percent of total expenses have declined yearly since 2008.
Total Expense Breakdown (GAAP Basis)
$ in MM
$40.0 100%
85.0% 90%
$35.0 81.8%
73.8% 80%
$30.0 68.9%
70%
$25.0 60%
$20.0 50%
$15.0 40%
30%
$10.0
20%
$5.0 10%
$0.0 0%
2008 2009 2010 2011
Classroom Project Expense Classroom Project Processing
Classroom Project Advocacy General & Administrative
Benefit per student
In fiscal year 2011, over $33 million was spent on roughly 65,000 funded projects, equating to $514 as the average
project cost. With around 1.6 million students helped, the average cost per student benefiting from DC projects was $21.
Self-sufficiency
At the time of NPI’s last report (October 12, 2011), DC was 56% self-sufficient. Currently, at 99%, DC is essentially self-
sufficient, representing an impressive accomplishment and milestone for an organization formed in 2000. By DC's
definition, self-sufficiency is achieved when the sum of contributions for classroom projects and contributions for
operating expenses is greater than total expenses. This is achieved by donors including an additional (optional)
contribution towards DC operating expenses. NPI's calculation of self-sufficiency excludes "contributions for program
services and supporting services" as some funds may be temporarily restricted. Based on conversations with
management, this exclusion may be overly conservative.
Optional contributions to operating expenses increased from 8% of total support in 2008 to 21% in 2011, or $5.6 million.
Additionally, DC was able to control total advocacy, general and administrative, and fundraising expenses over the past
DonorsChoose.org | Nonprofit Investor Research 3
4. few years. The total of such expenses increased only 11% from 2008 to 2011, or about $717,000. The combination of
increased contributions and relatively flat expenses helped DC achieve self-sufficiency. If DC is able to continue to grow
while keeping its fixed costs relatively constant as it historically has, the organization's self-sufficiency should further
improve.
In fiscal year 2011, DonorsChoose.org expenses exceeded total support and revenues by $502,709. Given the
organization's balance of cash and cash equivalents of $15.6 million and its improvements in operating efficiency, this
deficit does not significantly impact the organization's sustainability.
Detailed Financial Information
Fiscal Year Ended June 30 2008 2009 2010 2011 Source:
Revenue and Expenses (GAAP Accounting Basis)
Support:
Contributions for classroom projects $8,557,127 $13,274,332 $17,776,627 $24,689,888 Audited Financial Statements (GAAP)
Contributions for operating expenses 1,439,517 2,360,924 3,708,410 7,061,076 Audited Financial Statements (GAAP)
Contributions for program services and supporting services 2,651,540 1,043,793 2,418,473 913,716 Audited Financial Statements (GAAP)
Contributions for expansion 5,800,000 - - - Audited Financial Statements (GAAP)
Revenue
Donated services, facilities and equipment 262,842 353,623 524,388 160,394 Audited Financial Statements (GAAP)
Provisions for uncollectible unconditional promises to give (500,000) - - - Audited Financial Statements (GAAP)
Interest Income 351,263 262,355 89,819 69,538 Audited Financial Statements (GAAP)
Net Assets Released from Restrictions - - - - Audited Financial Statements (GAAP)
Total Support and Revenues $18,562,289 $17,295,027 $24,517,717 $32,894,612
% Growth -6.8% 41.8% 34.2%
Expenses:
Program Costs:
Classroom project expense $9,145,333 $10,739,446 $17,899,879 $26,250,601 Audited Financial Statements (GAAP)
Classroom project processing 1,586,334 1,792,598 2,131,357 2,146,948 Audited Financial Statements (GAAP)
Classroom projects advocacy 3,166,531 2,980,298 2,960,326 3,373,225 Audited Financial Statements (GAAP)
General & administrative 963,516 697,733 817,831 849,375 Audited Financial Statements (GAAP)
Fundraising 712,923 774,839 666,332 777,172 Audited Financial Statements (GAAP)
Total Expenses: $15,574,637 $16,984,914 $24,475,725 $33,397,321
% of Revenue 83.9% 98.2% 99.8% 101.5%
Revenue Less Expenses $2,987,652 $310,113 $41,992 ($502,709)
Program Costs as a % of Total Expenses 68.9% 73.8% 81.8% 85.0%
Advocacy as a % of Total Expenses 20.3% 17.5% 12.1% 10.1%
G&A as a % of Total Expenses 6.2% 4.1% 3.3% 2.5%
Fundraising as a % of Total Expenses 4.6% 4.6% 2.7% 2.3%
Self-Sufficiency %* 22.4% 37.8% 56.4% 98.8%
Cost per Project / Beneficiary
Projects Funded 27,172 34,000 46,000 65,000 Form 990
Total Expenses $15,574,637 $16,984,914 $24,475,725 $33,397,321 Audited Financial Statements (GAAP)
Average Cost Per Project $573 $500 $532 $514
Total Students Benefited 900,000 1,100,000 1,600,000 Form 990
Average Cost Per Student $19 $22 $21
*Self-Sufficiency %: Contributions for operating expenses / (Total expenses - Classroom project expense)
DonorsChoose.org | Nonprofit Investor Research 4
5. GROWTH
Replication of DC model
The multi-user funding model whereby donors can choose by state, subject, grade level, and resource the project that
most appeals to them can be replicated to other community and social agendas such as police officers, medical needs,
etc. While DC has had several project requests for such agendas, the organization has no plans to expand its model to
other efforts and instead, plans to further strengthen its model specifically in the United States, in public schools, in low-
income communities. That said, DC regularly hosts webinars to interested parties on their various business operations,
such as procurement, marketing, and technology. DC’s collaboration to help external sources replicate their successful
business model is viewed extremely positively.
Information sharing
While DC’s website provides very comprehensive details of dollars raised, students helped, etc., beyond this, there are
no studies showing how such information has been shared with other organizations or to influence education resources
or policy—arguably, an area DC can make an even larger impact. That said, DC is aware that their clout and organization
following could potentially be leveraged for this purpose.
THIRD PARTY RATINGS
DC is positively reviewed by Charity Navigator, receiving four-stars (out of four-stars), reflecting high accountability and
transparency scores, as well as strong financial scores. The primary difference in NPI’s analysis and Charity Navigator’s
analysis is in reference to program expenses. While Charity Navigator includes processing and advocacy expenses in its
calculation of program expenses, NPI has excluded it. As a result, Charity Navigator calculates program expenses at 95%
of total expenses versus NPI at 85%.
GET INVOLVED
• The primary way to support DC is monetarily, by supporting a classroom project. Roughly 24,000 projects are
currently in need of funding.
• DC offers a gift card which allows the recipient to select classroom projects to support (gift cards can be purchased
by individuals and corporations)
DISCLOSURES
Emily does not have any affiliation with DonorsChoose.org and has made one donation to DC prior to the writing of this
report. NPI analysts and NPI as an organization do not receive any form of compensation from reviewed charities. NPI
has held a call with DonorsChoose.org's CFO and a member of DC's Financial Operations team.
DonorsChoose.org | Nonprofit Investor Research 5