Until it amended its returns, Film Independent had the lowest program-spending ratios by far -- 50% and 49% -- in fiscal 2004 and 2005, with the rest of its budget going to the Spirit Awards, festivals, fundraising expenses and administration. Ratios for the other six nonprofits ranged from the Sundance Institute's 74% and 72% to American Cinematheque's 90% and 87%.
Barring unusual circumstances, a well-run charity spends at least two-thirds of its budget on programs, say Charity Navigator, the American Institute of Philanthropy and the Better Business Bureau.
When program spending falls below 65% or so, the raters assign charities poor grades as a heads-up to donors. The IRS requires no set percentage for program spending, although if a charity's numbers remain low from year to year, it risks a government audit -- and, in extreme cases, loss of its tax exemption.
Thus nonprofits tend to report as much of their costs as possible as program expenses, and the IRS gives them wide latitude, tax attorneys and accountants say.
Of the charities examined by The Times, Film Independent spent the largest portion of its budget on its awards show in 2005 -- $1.3 million of $6.3 million, or 20%, according to its amended tax return. Its film festival cost $2 million. The Times is a festival presenter and publishes an advertising supplement to promote it.
In 2005, Film Independent reported spending $1.5 million on the workshops and other services for filmmakers. Since 2003, that amount dropped by about $500,000, while expenses for the awards show and festival climbed by $880,000.
"It doesn't look good," Borochoff, the American Institute of Philanthropy president, said of Film Independent's spending priorities.
Film Independent says the reported decline in program spending actually reflected new accounting methods, not service cuts.
In two letters to The Times, Hall also said the newspaper's inquiries about the nonprofit seemed to ignore the importance of the Spirit Awards, which recognizes movies with budgets of under $20 million.
"Indeed, it is fair to say that over the past 20 years, the Spirit Awards have done more than any other single event to put independent film on the map and in the public consciousness," Hall said.
Formerly known as Independent Feature Project/Los Angeles, Film Independent says it is the largest group serving indie moviemakers, with 6,300 members. It leases a suite of offices near Beverly Hills and offers 278 screenings, seminars, forums and other programs annually, not counting the awards show and festival.
