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

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: GuideStar.org. To quote Wikipedia:

“Anyone who is interested in reviewing a nonprofit’s recent Forms 990 can register at Guidestar.org 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; ‘Edge.org’ 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 filingsall 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 Edge.org:

‘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 Edge.org, 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 Edge.org 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; Edge.org 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.

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13 comments, sorted by Click to highlight new comments since: Today at 4:15 PM

While I'm at it, here are some brief thoughts I had after spending an hour or so looking through the Lifeboat Foundation filings:

I heard from Patri that Lifeboat is just a front for the guy in charge, to launder money or something.

Well, that's possible. Guidestar had 3 free filings for Lifeboat when I looked a couple months ago:

They were all pretty small budget (~50k), and I didn't notice anything obviously wrong in the expenses unless things like publishing expenses are being padded or the filings are simply wrong. (But then, I've only read the occasional filing and I've never read any intended to be deceptive; and note I didn't look at 2010 and 2011 filings. Apparently some leadership changes took place with Eric losing the CEOship?)

That said, I don't like Lifeboat myself. Matt Funk and Otto Rossler make any number of items on the crank checklist. I unsubscribed from their blog when they began removing my comments (eg. you'll notice no comment from me on http://lifeboat.com/blog/2011/04/a-relatively-brief-introduction-to-the-principles-of-economics-evolution-a-survival-guide-for-the-inhabitants-of-small-islands-including-the-inhabitants-of-the-small-island-of-earth ).

EDIT: In late December 2010, Lifeboat Foundation associated with an accused embezzler; this is rather suspicious, as non-accused-embezzlers aren't that hard to come by, and such a hire is easily fitted into a narrative of corruption ('we hire you despite the blacklist on you and in exchange you cook the books and keep quiet'). She's not clearly specified as being hired or working at LF and may just be another honorary member, but did they not bother to google her or something? Anyway, she's not mentioned in it, but the 2010 filing is now up at Guidestar:

Their printing expenses were much smaller that year, around $100. Of their $36k in donations, $25k went to 'fees and payments to independent contractors', $6.5k to rent, and $4k to misc expenses, with an overall slight surplus and an increase in their savings account to $10k. In accomplishments, 2 of 3 were $4k for designing their website (pg9 lists a slew of software licenses, a Mac & DVD stuff), and $600 for 'educational videos'. President Eric lists 60hr/wk at no compensation for him or the other employees. Unfortunately, like the previous filings this filing doesn't list where donations come from or any breakdown of the $25k in contractor fees.

It would actually be worthwhile to post a small analysis of Lifeboat. How they meet the crank checklist, etc. Do they do anything other than name drop on their website, etc?

Do they do anything other than name drop on their website, etc?

The filings said they were spending a lot on publishing materials, but didn't say what exactly they were publishing on.

2011 filing: http://www.guidestar.org/FinDocuments/2011/800/034/2011-800034805-08ce0e63-Z.pdf

I think this answers my original question about how could $25k went to 'independent contractors' and Eric Klien did 60/hr week without compensation: Klien was the contractors. In this 2011 filing, line 13 is $32.5k... and Klien's compensation on pg2 is listed as $29.8k. (The total LF revenue for 2011 was $50.2k.)

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.)

It's an umbrella company.

(Edit: I probably ought to hold my comments until I finish the article! But that was so obvious I was surprised it wasn't mentioned there.)

It's an umbrella company.


I always thought Edge.org was basically Brockman's way of getting cheap publicity for the intellectuals his literary agency represents and the books they are currently selling.

Thanks for the interesting investigation, which largely confirms my suspicion.

If anyone knows how to fix the spacing problem, I'd appreciate it. It looks absolutely correct when I go to edit it, which makes sense since I wrote it correctly and Pandoc generated its usual HTMl.

Fixed, and changed formatting on the chat log (was it sensible in your browser? In Chrome, it looked like a single very long line with a horizontal scrollbar).

Somehow the markup doesn't like

, which you used to set the anchors. Replacing those with fixed the missing spaces problem.

was it sensible in your browser? In Chrome, it looked like a single very long line with a horizontal scrollbar

It worked before in Firefox; Pandoc generates the correct code from multiple heavily indent lines, so I think this is just another Chrome rendering bug. (It does that a lot - for example, the MathML on gwern.net apparently breaks in Chrome.)

I saw the single large scroll bar in Firefox 5. In fact, I saved the old markup and it has a

 with no linebreaks inside. If you didn't see the scroll bar, it's because you didn't look at it on LW.

As a data point, it shows up correctly in the RSS feed.

More spaces? It looks like the html is eating the spaces around it, but not other characters - see where you linked to Amazon S3, for example. Maybe two spaces either side of the html links will result in only one getting eaten. More a bandaid than a fix, but eh.