From All Sides

Yesterday I put together a new table of data to calculate what percentage of the YM-YWHA of Washington Heights & Inwood's income in the 1970s came from the government grants they received to provide social services to older adults. I wanted to know how dependent the Y was on this stream of funding, as compared to its annual allocation from the Federation of Jewish Philanthropies of New York (FJP) or to its revenue from membership dues and special activities fees. I was surprised to find that government grants made up an average of 57% percent of the Y's non-Federation income (Total Other Income, or TOI) between 1973-79. 

Government Grants as a Percent of the Y's Total Other Income (i.e. non-FJP income). All work is property of Avigail S. Oren. Please do not use without permission.

I was surprised because I had long hypothesized that the Y benefitted from these government grants, because they made the Y less financially vulnerable to fluctuations in their annual allocation from FJP. Clearly, although the government funds balanced out the risk of a possible decrease in their FJP allocations in any given year, it did not do enough to diversify the Y's sources of income. On average, between 1973-79 one-third of the Y's total income depended on the government, one-third on FJP's allocation, and one-third on membership dues and fees. Government money may have buffered the Y in years when their FJP allocation decreased, but it too was subject to fluctuations and possible cuts.

These numbers helped me to recognize a great truth in life: any given solution may not solve all aspects of a problem, and often it can create new problems. While government money provided a measure of financial stability to the Y in the early 1970s, the Y suffered doubly in 1975 when the toxic market forces of hyperinflation, spiking energy prices, and New York City's fiscal crisis led to cuts in both its government and FJP funding. It's a valuable reminder that income diversification is essential for individuals, businesses, and voluntary/charitable organizations alike, and that leaders must consider (and plan for) the consequences of pursuing each new stream of income.  

Cascading Benefits

When I began studying the historical budgets and accounting materials that I have discussed this week, my primary aim was to answer a central question of my dissertation. There have been some auxiliary advantages, however, that I did not expect:

1.     Between this work and the corpus analysis project I completed this summer, I got a lot more practice with Excel.  I already knew the basics—inputting data, adding and deleting rows and columns, and building formulas—but I learned a lot more about how to create graphs and charts. My sister created the first few line graphs for me, and by taking them apart and swapping data in and out, I learned how to create generate my own. I also played around with different formats and settings and discovered new ways to make my data visualizations more helpful.

2.     I have a better understanding of the value of money—both as currency with variable purchasing power, and as a resource that organizations and businesses carefully allocate. For most organizations, labor and personnel are both the most costly line items in their budget and the most necessary to keep their programs productive, successful, and innovative. To pay for staff and for high quality programs, there is always a balance to strike between raising income and raising barriers. For organizations that serve working class or lower middle class clients who do not qualify for subsidized or public programs, there is always a risk that clients will not be able to afford higher fees—leaving the organization with even less income and the client without a valuable resource.

3.     Finally, the biggest benefit to pursing this forensic accounting was the satisfaction of learning something new. I never expected to perform so much arithmetic in the course of my dissertation research! I’ve been surprised to find how much I enjoy using quantitative methodologies to analyze the past. I would now like to do even more quantitative work in future research projects.

Even though my foray into historical accounting and budget analysis was intimidating, I found it enormously valuable and would encourage other scholars to attempt similar inquiries in the context of their own projects. 

The Value of Money

The question that initially prompted my examination of four New York City JCCs’ accounting documents was: why did JCCs start taking government money to pay for programs and services? If, as I hypothesized, it was because JCCs needed the money, my analysis of the accounting documents had to show that these JCCs ran bigger and bigger deficits from year to year throughout the 1960s. I also hypothesized that these deficits occurred because, at the same time, the FJP was running bigger and bigger deficits and so was giving the JCCs less and less money.

Testing this guess required compiling and analyzing the FJP’s working account balance from between 1946 and 1973 (the year after which I had more difficulty finding this information). As I discussed in my post yesterday, I used Excel to compile FJP financial data into four columns. The first was the total amount that the FJP collected during its annual campaigns, and the second was the total amount of income FJP earned (the campaign contributions plus the income from  FJP's endowment and investments). A third column listed the total amount FJP disbursed in allocations to its beneficiary agencies plus the amount of money it spent on administrative overhead, and the final column listed the FJP’s end-of-year account balance.

All work is property of Avigail S. Oren. Please do not use without permission. 

I was surprised by what I found when I reviewed this fourth column. Without even needing a graph, I could see from the data that there was no clear pattern in the balance of working capital that FJP had at the end of every fiscal year. I had expected that they would begin to run big deficits in the late 1960s, explaining why JCCs began to need another source of money in the early 1970s. Surprisingly, however, deficits became neither more frequent nor more severe in the 1960s--in fact, FJP ended only three fiscal years with a surplus during the 1950s, but yielded a surplus in at least six years during the 1960s! More interestingly, the deficits occurred despite the fact that, with a few exceptions, the annual campaign brought in more and more money every year. 

I realized that the existence of a deficit was not the best indicator of the Federation's health. Using Excel, I was able to create a formula that calculated what percentage of FJP's total income came from their annual campaign contributions. In 1947, it was 88%, meaning that Federation was very reliant on its annual campaign that year, but twenty years later, in 1967, the campaign only accounted for 61% of FJP's total income. That revealed that not only was campaign income increasing overall, but revenue generated from the endowment and other investments was as well. If the Federation working account balance ran a deficit, it was not because they were taking in less money. Deficits were a function of FJP spending--if they chose to allocate more money to their agencies than they predicted they would make from their campaign and investments. That showed me that deficits may not have been the biggest concern of the FJP when it made its allocations to its beneficiary agencies, because they never reduced the total amount of their spending to close a deficit (for example, reducing their expenditures by $100,000 the year after running a $100,000 deficit). Usually they continued to increase their allocations, or perhaps made a marginal cut in order to prevent future losses.  

So if FJP was not concerned with running a negative balance in their operating budget, I wondered if there was another way to understand their fiscal health. It was clear from the language used by the Federation Distribution Committee that they felt concerned about financial losses--and even more clear, from the pleas made by the JCCs, that agencies needed more money and were having to cut programming and staff. So what was causing the consternation, if the numbers all appeared copacetic? I decided to turn from the FJP’s finances and look at the JCC’s.

In an attempt to figure it out how much bigger the JCC’s deficits were growing from year to year, I asked my sister, who works with accounts and budgets every day, to help me create an Excel formula that would show the percent change in the account balance that the individual agencies reported at the end of each year. She pointed out that this measure was not particularly helpful, because the value of money is not static.

I confess that this comment blew my mind. I had not even considered how inflation was warping the comparisons I was making from year to year. Now, after examining hyperinflation in the 1970s, I recognize how fortunate I am to live at a time when the dollar has experienced reasonable levels of inflation. I do not acutely feel the purchasing power of my income decreasing on a daily basis, and so I completely neglected the role of inflation in my historical analysis of JCC budgets.

As it turns out, inflation played a very significant role in why JCCs felt constrained by the tiny incremental increases (or, yes, sometimes decreases) in their FJP allocations. My colleague and friend Kevin C. Brown taught me how to use the U.S. government’s Bureau of Labor Statistics CPI Inflation Calculator to adjust the nominal value of each allocation for inflation (I used 2016 as my comparative year to make it easier for readers to understand). I found that although FJP allocations were increasing, the purchasing power of these dollars decreased. And, at the same time, JCC’s personnel costs were increasing due to union contract renegotiations winning better pay for Jewish Center workers. FJP’s money did not go as far as it used to!

FJP Disbursements to Affiliated Agencies, Nominal versus Adjusted for Inflation to 2016 Dollars. All work is property of Avigail S. Oren. Please do not use without permission. 

As a result of this finding, my current answer to my initial question is that New York City JCCs did begin taking government money because their FJP allocations were decreasing—but not in nominal value. The allocations were no longer keeping up with JCC’s costs. Although I had assumed the issue was that FJP was not raising as much money during their annual campaigns, contributing to a deficit, the truth is that they raised about the same amount of money from year to year. Unfortunately, it just was not enough to keep up with inflation. 

Using Excel to Examine Historical Accounting Data

In yesterday’s post, I discussed how difficult it was to learn how to read the accounting tables in the multi-page budget worksheets submitted every year by each JCC (and all FJP beneficiary agencies) to the Federation Distribution Committee (FDC). I felt a brief moment of satisfaction when I managed to decode all the information included in these tables, but it quickly gave way to anxiety when I realized that there was much more data in each budget worksheet than my mind could keep track of—not to mention that I wanted to compare over twenty years of data. I needed to find a way to separate out the data I wanted to study from data that was a distraction.

Excel worksheets were the obvious solution to this problem. In one sheet, I could easily replicate the parts of the accounting tables that I wanted to study and input the relevant data for multiple years. For example, the first worksheet I created was to track the success of FJP's fundraising efforts. I began by compiling data on the total amount that FJP raised each year during their annual campaign. In the first column, I listed each fiscal year (FY), and in the second column I inserted the amount of dollars raised (which I found, with difficulty, in intermittent financial reports included in the minutes of the FJP Board of Trustees meetings, which the AJHS conveniently compiled and digitized for public use). This allowed me to track growth over time, without having to repeatedly consult individual archival documents. I made similar Excel sheets for each JCC that I am studying, to track the amount of the annual allocation they received from the FDC from year to year.

Federation Annual Campaign Totals By Year, 1946-1973. All work is property of Avigail S. Oren. Please do not use without permission. 

Even more valuable to me was the ability to modify the worksheets while I was working on them, particularly to add new columns as I realized that I wanted more data, or to generate new data with a formula. I did not anticipate how frequently I would use the formula functions, but I have found formulas especially helpful for calculating percentages. For example, when I began to wonder how dependent the FJP was on the success of its annual campaign, I decided to see if they had other forms of revenue. They did, and so I created a new column listing their total revenue each year, and then another new column where I calculated what percent of that total was made up of the annual campaign contributions. Unsurprisingly, as FJP’s various endowments and investments matured, the annual campaign comprised a smaller percent of their income. I would not have necessarily seen this, or intuited just how dramatic the decline was, if I had not used the formula function to calculate this percentage. 

Federation Annual Campaign Totals By Year, 1946-1973. All work is property of Avigail S. Oren. Please do not use without permission. 

The most helpful part of using Excel, for me, has been the ability to create graphs. Like most people, I find that data visualizations are easier to interpret than a long string of numbers. My sister, who has a B.A. in Business Administration, helped me create line graphs that respond to a number of different questions: some compare streams of income, some track surplus and deficits over time, and others compare the nominal value of a dollar amount (for example, the total amount of an agency’s allocation) to its value once adjusted for inflation.

Budget Details for the YM-YWHA of Washington Heights-Inwood, 1954-1970. All work is property of Avigail S. Oren. Please do not use without permission. 

Through the process of collecting and compiling this accounting data, I discovered so many new questions that I had never thought to ask before taking a deep dive into the weeds. It had never occurred to me, for example, that all income is not created equal. When I began my analysis, I simply looked at “total allocation” and “total income” as basic measures of a JCC’s financial health—similar to learning a human’s Body Mass Index and declaring them healthy or obese without examining the relationship between their height, weight, and age. It is significant whether a JCC ended its fiscal year with a deficit because they received a smaller allocation from the FDC or because they made less money from membership and special activities fees (their “other income”). I began calculating the allocation as a percent of the total income to see how dependent a JCC was each year on the money they received from Federation, as well as measuring the allocation as a percent of the total amount spent by the JCC that year to see how much of that allocation they needed in order to pay for their programs.

Without spending the time compiling, organizing, and creating visualizations of the historical accounting data from four different JCCs, I would have an overly simplified understanding of how each agency made its financial decisions. Check back tomorrow, when I will elaborate on how I discovered the important role that inflation played in JCC's financial decision making!