Key Ratios quiz: Chi Town v. DC battle
It's time for the Form 990 Key Ratios battle royale: DC v. Chicago; Chicago v. DC. But first, I want to thank those who have been following the quizzes all week (and I'm talking to all three of you!). I'd like to tell you the point was to show you some of the ways you can slice and dice the 990 Key Ratios database to develop benchmarks that are most meaningful for your organization. And in the interest of full disclosure, I absolutely timed this series to be the week before you could get in an play around with the tool yourself at the Finance, HR & Business Operations Conference.
But mostly I'm just kind of an association nerd, and I find poking around in the database fascinating. I've enjoyed researching the questions. Anybody who wants to guess at answers to this final quiz should do so in the next four hours (and oh yes, I do have a fantabulous prize for the person who does the best or provides the funniest or most shocking answers), after which I'll be putting the answers up.
First, a little information to help you answer the questions. Overall, the database found 242 qualifying associations in the Chicago area and 399 in the DC area for the 2009 tax year (those numbers will likely go up with the next update as many associations are still filing their 2009 returns). The median size in DC is 11 employees and $1.7 million, the average (which does not correct for outliers) is 32.6 and $6 million. In Chicago, the medians are 11 and $1.2 million, with averages of 37.9 and $3 million. Wow! What a difference right there--which tells you there are some really large associations in DC that skew its averages. And now...
1. You have to start with the compensation right? Which area has the higher median compensation costs per employee (remember, medians correct for outliers)?
ANSWER: Not even close: DC $63,574, Chi: $39,976
2. Is that difference in median compensation costs closer to 5%, 20% or 40%?
ANSWER: That's 40%. FORTY PERCENT! That's just not right.
3. Do the compensation differences hold when you control for the revenue of the association (i.e., compare only associations in each market that are, for example, between $1 million and $2 million in revenue.)
ANSWER: I looked at $1M to $2M and $2M to $5M and $5M to $10M, etc. DC was always ahead. By a lot. Maybe not 40 percent in every case, but by a wide margin.
4. I'm going to give you a piece of information that might sound like it helps answer the first three questions, but I wouldn't count on it if I were you. The information is this: compensation costs as a percent of overall expenses is pretty even for both regions. Does the same hold for compensation of officers, trustees, and key employees? If not, who pays the top staff a higher percent of overall expenses?
ANSWER: This is much closer, but DC still is ahead, with the medians being 11.7 percent and 9.9 percent.
5. Ok, enough about compensation. Which area has more profitable associations?
ANSWER: DC is threatening to make this a rout--they're more profitable then their Chicago counterparts in the 2009 tax year (remember, associations were still reeling from the recession). DC had a profitability of 1.2%, Chicago was -1.5.
6. Who has more assets tied up in land, buildings & equipment?
ANSWER: Don't know if it's good or bad, but Chicago has more than twice as much--as a percent of expenses anyway--tied into land, buildings, and equipment: 5.9% to 2.5%.
7. Who has a higher percentage of unrestricted net assets?
ANSWER: Chicago looks to be the healthier big-picture position with unrestricted net assets of 81.3 percent compared to DC's more pedestrian 59.2 percent.
8. Who pays higher occupancy costs as a percent of total expenses?
ANSWER: It's close, but DC does, 4.8% of expenses vs. 3.6%.
9. Who has lower conference and meeting expenses as percent of total revenue?
ANSWER: Chicago comes in at a lean 1.0%; DC is 4.1%
10. Who got better returns on their investments?
ANSWER: No ties in a battle royale, so Chicago takes this question, but by the slimmest of margins: 0.6 to 0.5.
Bonus Question: In which town is it better to work for an association?
ANSWER: Yeah, I'm not touching this one with a 39.5-foot pole. Feel free to weigh in though.
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