Case Study: Reading Edge’s financial filings

Ab­stract: an ex­am­ple of how to read char­ity filings, us­ing

1 The problem

Re­cently, on #less­wrong:

epitron> and you’re right, Edge was a bit bet­ter back when peo­ple wrote es­says, and the mailing list of smart peo­ple cri­tiqued them
epitron> i guess we can chalk this up to the fall of jour­nal­ism. or more likely, the way the fi­nan­cial sys­tem broke (which Lanier talks about)
gw­ern> Edge seems quite prof­itable, pub­lish­ing pres­ti­gious pop in­tel­lec­tual books
epitron> o_O edge doesn’t look very prof­itable to me. they just re­designed their web­site, af­ter like 15 years
gw­ern> the videos, the din­ners, the books…
epitron> I think ad­ver­tis­ing pop-sci­ence books by con­trib­u­tors is the only way to bribe them to con­tribute
epitron> hmm ap­par­ently Brock­man has a thing for video­tap­ing con­ver­sa­tions with smart peo­ple. he’s been do­ing it since the 60′s
epitron> and pub­lish­ing books is not a very prof­itable ven­ture
epitron> maybe it’s some­what lu­cra­tive if you already have an au­di­ence who’s wait­ing to buy up the next book… so that you don’t have to ad­ver­tise it
epitron> ac­tu­ally, Edge is a non­profit. They have to pub­lish quar­terly re­ports, don’t they?

Yes! That’s quite true—Edge Foun­da­tion, Inc. is in fact a non-profit, and a 501(c)(3) char­ity to boot. So we can an­swer these ques­tions.

2 The solution

But how are we to do this?

As in pre­vi­ous ex­am­ples, we have to know where such filings can be found. We ask the great Google: “501c3 filing”, and it tells us: GuideS­ To quote Wikipe­dia:

“Any­one who is in­ter­ested in re­view­ing a non­profit’s re­cent Forms 990 can reg­ister at and down­load them for free.”

We reg­ister (it’s the nor­mal signup form), and now we can search and look at the Form 990s.

2.1 Which char­ity?

‘Edge’ turns up 5,933 re­sults; ‘’ turns up 0; ‘Edge Foun­da­tion’ turns up 354. We’ll start with that last one. There turn out to be 4 or 5 ‘Edge Foun­da­tion Inc’ on the first page, so here we have to ei­ther look at ev­ery one or ap­ply some out­side knowl­edge.

In this case, as Epitron men­tioned, the Foun­da­tion is pow­ered by book agent Brock­man, and where is the Amer­i­can book in­dus­try fa­mously con­cen­trated? In New York City. Ex­actly 1 of those 4 is in NYC. If we look at the filings, this is in fact the right Edge Foun­da­tion.

2.1.1 The filings

GuideS­tar has 3 Form 990s available for free:

We’re only re­ally in­ter­ested in the cur­rent situ­a­tion, so we look at the 2010 filing.

2.1.2 Overview

Tax filings have a bad rep­u­ta­tion for be­ing im­pen­e­tra­ble, but like pro­gram­ming, they’re fairly log­i­cal; you need to pay at­ten­tion to the la­bels and fol­low the lines with your eyes, and then they’re pretty clear.

The first page con­tains all the high­est-level figures and give us the over­all look at what kind of char­ity this is.

  1. In­come1: $159,000

  2. Ex­penses2: $191,000

  3. Net as­sets3: $192,000

Just from these 3 num­bers, what might we in­fer? (As in the Girl Scouts es­say, it’s a good idea to pause and re­flect. What does one ex­pect, what is one look­ing for?)

  • It’s a small char­ity, peo­ple-wise

    Even if they are ac­cept­ing rel­a­tively nom­i­nal in­comes for NYC, like $50k, there sim­ply can­not be more than 2 or 3 em­ploy­ees. And if they work for free, there still can’t be more than 30 or 50, sim­ply be­cause there would be the usual cor­po­rate/​busi­ness over­head for the com­put­ers, util­ities, in­surance, etc. Girl Scouts’s NYC head­quar­ters might spend $159k just on le­gal ad­vice or in­vest­ment fees. How­ever, Edge is some­thing like twice as large as an­other char­ity whose filings I’ve read through, the Life­boat Foun­da­tion, so there’s always room to get smaller.
  • Ex­penses > Income

    Wikipe­dia says Edge was in­cor­po­rated in 19884, which sug­gests Edge has a reg­u­lar cy­cle of in­creases and de­creases in its net worth. 2010 would seem to be in a ‘de­crease’ part of the cy­cle. This is sup­port for the book pub­lish­ing the­ory—dona­tions tend to be more con­sis­tent than the oc­ca­sional de­lay-filled in­fu­sion of roy­alties from a pub­lished book.
  • Edge has built up a sub­stan­tial cush­ion of as­sets—an en­tire year’s rev­enue.

    Like above, this sug­gests a reg­u­lar ex­cess of rev­enue. It’s also pos­si­bly in­ter­est­ing from an or­ga­ni­za­tional point of view: why such re­serves? It’s not as if Edge main­tains an ex­pen­sive in­fras­truc­ture where the slight­est dis­rup­tion is dis­as­trous (eg. the power grid). This sug­gests maybe Edge sim­ply can’t think of any way to re­spon­si­bly spend it. There is only so much one can spend on a fancy din­ner/​ban­quet be­fore it is ob­scene, and Edge’s par­ti­ci­pants tend to the mer­i­to­cratic, and might ob­ject to overly lav­ish set­tings. Of course, this could just be a warn­ing sign of some skul­dug­gery.

2.1.3 Income

After page 1, we’ll skip around a lit­tle. I’m in­ter­ested in where their money is com­ing from. We have to skip all the way down to page 12 be­fore we see any­thing about their in­come. Baldly on line 1 of Part XIV-A on page 12, we see ‘Book con­tract’ and $83,777.

Well, that ex­plains a lot! It’s not listed as roy­alties, and it’s a fairly reg­u­lar look­ing num­ber, so we can prob­a­bly in­fer that this money is a book ad­vance, and a re­mark­ably high one—Edge has pro­duced many books by this point, so this ad­vance would not be gam­bling but a good in­di­ca­tor of how much the pub­lisher thinks they will sell. At a dol­lar or two in roy­alties per book, that im­plies sales in the scores of thou­sands; per­haps not best sel­ler list, but a very good show indeed

That leaves ~$75,000 of the $159,000 un­ac­counted for. We con­tinue skim­ming un­til we hit page 15, the sec­ond page of ‘Sched­ule B’/​‘Sched­ule of Con­trib­u­tors’. There are two en­tries:

  • ‘En­hanced Ed­u­ca­tion’, $50,000 Ad­dress is in the Bri­tish Vir­gin Is­lands; this is in­ter­est­ing, inas­much as the Bri­tish Vir­gin Is­lands are one of the lead­ing cor­po­rate havens and the listed ad­dress is shared by a great many other non-prof­its.

  • ‘Para­solhold­ings’, $25,000 This strange en­try doesn’t list a real ad­dress—just ‘c/​o Edge Fdn’. Googling doesn’t help at all; there are a num­ber of ‘Para­sol Hold­ings’ wor­ld­wide, none of which have much in­for­ma­tion on­line. (One New Zealand en­tity pro­vides co­pi­ous filings… all of which say noth­ing what­so­ever be­yond the share­hold­ers’ names & ad­dresses.)

Bingo. So Edge’s en­tire in­come is de­rived from its book con­tract and two odd-look­ing dona­tors.

If we check the 2009 filings, En­hanced Ed­u­ca­tion donated $53,000 that year, but Para­solhold­ings did not; in­stead, $25,000 came from ‘J.E. Safra’ (again ‘c/​o Edge Fdn’). This is more helpful; a J.E. Safra was the father of billion­aire Ed­mond Safra, but this seems to be a red her­ring (that J.E. is dead) - retry­ing the Google search as ‘edge safra’ leads us straight to a bi­og­ra­phy on

‘Ja­cob E. “Jac­qui” Safra, a Swiss in­vestor, is the Chair­man of En­cy­clo­pe­dia Bri­tan­nica, and owner of Spring Moun­tain Vine­yards, a large wine-grow­ing es­tate lo­cated in Saint He­lena, Cal­ifor­nia.’

Well, that set­tles Para­solhold­ings—it’s some sort of tax dodge or cor­po­rate cutout for Ja­cob. Noth­ing wrong with that. En­hanced Ed­u­ca­tion re­mains a mys­tery; it does not show up in Google, GuideS­tar, or a few other places I checked.

2.1.4 Expenses

We back­track to the be­gin­ning. The first hit is page 6, where we find the em­ploy­ment data: Part VIII, 1. Re­mem­ber the ob­ser­va­tion that the ex­penses could not sup­port many em­ploy­ees? It is borne out, with Edge hav­ing just 3 em­ploy­ees, each work­ing a quar­ter of an hour a week, for free. (The sec­re­tary, Kat­inka Ma­son, dou­bles as the book-keeper too.) Very laud­able.

Page 7 tan­ta­l­izes us with Part IX-A, lines 1–2, but they prove a bust:

  1. ‘Devel­op­ment of com­mu­ni­ca­tion ve­hi­cles for the liter­ary world over the In­ter­net’, $172,999

  2. ‘Publi­ca­tion con­cern­ing In­ter­net com­mu­ni­ca­tion ve­hi­cles’, $13,144

The first is just the canned mis­sion state­ment you would have no­ticed el­se­where in the filing. The sec­ond is opaque; ex­penses some­how re­lated to the book ad­vance? Page 8 tempts us with a differ­ent num­ber, the ex­penses at $178,226 (differ­ent from the just quoted #1), but no more de­tails.

Page 10 gives us in­ter­est­ing de­tails like the found­ing day of, and ex­penses from 2010–2007:

  • 2007: $123,672

  • 2008: $99,217

  • 2009: $98,249

  • 2010: $178,226

No­tice the cycli­cal trend here—high to low to high. Maybe this is the ex­pla­na­tion for the cash re­serve pre­vi­ously men­tioned: there might be a $20,000 and then an $80,000 sur­plus in the two belt-tight­ened years, that would make up at least half of the re­serve.

Back to page 1 for the de­tailed ex­penses:

  • Ac­count­ing fees: $5,227

  • Other pro­fes­sional fees: $14,700

  • De­pre­ci­a­tion & de­ple­tion: $13,144

  • “Travel, con­fer­ences, and meet­ings”: $100,861

  • Other ex­penses: $57,438

Page 18 and page 20 fi­nally give us some meaty de­tails about the setup. On an ‘un­ad­justed cost or ba­sis’, Edge spent:

  1. $1,299 on ‘equip­ment’

  2. $70,0385 on ‘com­puter soft­ware’ (must be a Microsoft shop)

  3. $55,0346 on ‘com­puter equip­ment’

  4. To­tal: $126,371

Of that, a per­centage be­comes the de­pre­ci­a­tion & de­ple­tion above. And the ‘Other ex­penses’? From page 20, 2010-only:

  1. Web host­ing: $8,993

  2. Web newslet­ter: $6,000

  3. Mis­cel­la­neous: $902

  4. Video host­ing: $4,500

  5. In­ter­view tran­scrip­tion: $4,068

  6. Soft­ware and hard­ware: $14,092

  7. NYS Dept of Law filing fees: $50

  8. Office sup­plies: $1,333

  9. Web­site de­vel­op­ment: $17,500

  10. To­tal: $57,438

While Edge spent a fair bit on all the tech­ni­cal stuff and on the ba­sic over­head of a cor­po­ra­tion, it spent even more on ‘meet­ings’ - all the din­ners and func­tions that make up the grist for the mill-web­site. Which is pretty much as one would ex­pect.

Some of the ex­penses seem on the high side; seems to be a fairly un­de­mand­ing web­site, some­thing which could be hosted very cheaply on a cloud ser­vice like Ama­zon AWS (and one that could be done al­most en­tirely as a static site and hosted even more cheaply on Ama­zon S3) - a host­ing bill of $750 a month seems a bit high to me, es­pe­cially when that isn’t even the cost of host­ing videos, a sep­a­rate $375 a month. The hard­ware ex­pense of $55,000 seems ex­tremely high if they are just pur­chas­ing lap­tops, but would make sense if these were pur­chases of cam­eras or big au­dio-vi­sual rigs; there’s no way to tell just from the filing. The soft­ware ex­penses, though, seem amaz­ingly high; with costs like $70,000, it might be worth­while to in­ves­ti­gate the gratis or Free op­tions for video pro­cess­ing (what I as­sume they are pay­ing for—if that’s just for things like Microsoft Win­dows or Microsoft Word…).

3 Fi­nal thoughts

So what pic­ture has emerged? From the num­bers, I read Edge as this: ‘a pretty well-run quasi-pub­lic so­cial club for in­ter­est­ing peo­ple that has re­ally nice din­ners and which turns them into prof­itable books to pay for it all’.

4 Other examples

Look­ing at fi­nan­cial filings for char­i­ties can be in­ter­est­ing from the points of view of sus­tain­abil­ity and effi­ciency. Here are some links where peo­ple at­tempt lay anal­y­sis similar to the fore­go­ing:

  1. Part 1, line 12

  2. Part 1, line 26

  3. Sec­tion ‘I’, above Part 1

  4. 21 Au­gust 1988, ap­par­ently, since that’s the date listed in 1a of Part XIV on page 10; but I’m get­ting ahead of my­self.

  5. This is adding up 5 en­tries.

  6. Sum of 2 en­tries.