A High-Level Summary of ACM Finances
The Association for Computing Machinery (ACM) publishes annual reports in which it summarizes its publication finances. The most recent is available in Hall et al.2 However, this only discusses publication revenue and expenses. The ACM also files annual IRS disclosures, which are available with convenient summaries via ProPublic’s Nonprofit Explorer.a
The IRS documents are difficult to read and interpret. A major reason is intuitive categorization of expenses and revenue differs from the IRS definitions. For example, one might consider copyeditor salaries to be a publication cost, but these are salaries, not publication expenses, on the IRS documents. Still, they are useful in getting a high-level overview.
Here is a summary of ACM finances, as reported in the IRS Form 990, and as somewhat inexpertly summarized to a few significant digits by me. ACM financial years end in June, and the forms are usually filed by the following March. For example, FY2022 began July 2021 and ended June 2022; the form was filed in March 2023. I largely use the FY2019 numbers, as the later years are severely impacted by COVID and therefore atypical. I use FY2022 for some contemporary context. While FY2023 data should also be typical, it is not yet published.
The ACM has been making, on average, $8,000,000 in annual “net income” for the past 10 years, and on average $10,000,000 in “net income” for the past 5 years.
In FY2022, ACM had total assets of $211,000,000—the major categories being $144,000,000 in publicly traded securities investments and $39,000,000 in cash or cash investments.
In FY2019, ACM had total assets of $182,000,000—the major categories being $124,000,000 in publicly traded securities investments and $38,000,000 in cash or cash investments.
In FY2019, ACM had liabilities of $46,000,000—$16,000,000 in accumulated expenses and money owned and $30,000,000 in deferred revenue, which is revenue for services not yet provided, such as prepaid fees.
In FY2019, total revenue was $84,000,000, with a breakdown of the major sources below:
Publishing: $22,000,000
Conferences: $39,000,000
Gifts: $8,700,000
Membership fees: $7,100,000
Ads: $1,300,000
Investments: $4,100,000
Dividends: $3,340,000
Capital gains: $750,000
In FY2019, total expenses were $72,000,000, with a breakdown of some key categories below. There are quite a few other smaller categories.
Conferences: $36,700,000
Salaries (non-executives): $6,700,000
Publication production and services: $5,300,000
IT: $3,500,000
Gifts: $5,000,000
Executive pay: $1,700,000
Investment management: $400,000
An Opinion of ACM Finances
I was surprised by these numbers and felt uneasy about them.
The ACM is rich. In FY2019, the ACM had $28,500,000 in cash, $10,000,000 in other cash-like assets, and $124,000,000 in publicly traded investments. This is a huge amount of unspent money. Given FY2019 numbers, the ACM could afford to take in $0 revenue for more than two years and still would not be bankrupt.
As a quick point of comparison, arXiv in 2013 was aiming to cover half of its annual expenses in a rainy day fund.b arXiv is a very different organization than ACM, but useful for providing this policy document on cash reserves. That number, six (6) months of operating expenses, seems to be common around the Internet when trying to understand non-profit operating reserves, although I cannot find an authoritative source. For the ACM, this amount is easily covered entirely by the cash.
Such high assets are not only a concern to me, but some charity watchdogs. Charity Watch, which does not rate the ACM, downgrades non-profits with high assets, starting at more than three years of operating expenses and giving a failing grade to non-profits with assets of five or more years of operating expenses.c The ACM is quickly approaching high-asset class. The Canadian Revenue Agency (CRA) is strict about nonprofits compared to the U.S. IRS, and the ACM would likely be deemed to be operating for profit by the CRA.
The CRA statesd:
“If a material part of the excess is accumulated each year and the balance of accumulated excess at any time is greater than the association’s reasonable needs to carry on its non-profit activities, profit will be considered to be one of the purposes for which the association was operated. This will be particularly so where assets representing the accumulated excess are used for purposes unrelated to its objects such as the following: (a) long-term investments to produce property income;”
Understanding the ACM’s assets is complicated, since many of these assets are held for the SIGs and do not really belong to “the ACM” per se. The SIGs are also required to hold a reserve of 50% of annual expenses, including conference costs, and so forth. As discussed, 50% of expenses are covered entirely by cash and short-term cash investments, so this does not explain the huge reserves. Some assets may be restricted by the donor in how they can be used; the ACM may not be able to touch the principal and may be restricted in how it spends investment income from that principal. That could cause some complication in how money is spent. But that does not seem likely to account for all assets given the long-term high profit of the ACM.
The ACM is very profitable. Normally, a for-profit business would call net income “profit.” The ACM is quite profitable, averaging $10,000,000 per year in profit, or roughly a 13% profit margin in FY2019. It is not unusual or bad for a non-profit entity to have net income in a given year; it would be a very precarious entity that was constantly breaking even or running a deficit. However, this long-term trend of surplus accumulating into an increasingly large hoard seems antithetical to the goals of the ACM.
Intuitively, the purpose of a non-profit is not to make profit, but to achieve its mission, although the IRS uses a more technical legal definition. The ACM describes its mission in the non-profit filinge as:
“…advancing the art, science, engineering, and application of information technology, serving both professional and public interests by fostering the open interchange of information and by promoting the highest professional and ethical standards.”
I do not think it is in the public or professional interest, nor does it advance art, science, engineering, and so on, to charge unnecessarily high publication and conference fees, taken out of public, research, and educational funding, and to hold that surplus income as an increasingly large pile of assets.
It is difficult to contextualize the 13% profit margin. The ACM is outperforming the S&P 500. Tesla’s “industry-leading” profit margin is 15%. Nestle’s is 14%. Tech companies on average are much more profitable; Apple’s is 24% and Microsoft’s is 36%. Certain other academic publishers are considerably more profitable; Springer’s is about 26% and Elsevier’s is 40%.
For a better view, we could look at related industries such as publishing. Using the Government of Canada’s Financial Performance Data,f I queried the 2022 data for the publishing industry for companies averaging revenue $5,000,000–$20,000,000 (the largest bucket in the generator). The publishing industry profit margin range is between -8.8% and +17.5%. But the ACM is not really just a publishing company, and its profit margin includes running conferences as a big component.
It is also difficult to understand exactly where the profit comes from, and therefore, what to do with it. According to the FY2019 publications finances report,1 publishing is not incredibly profitable—it more or less broke even. According to the FY2019 IRS filings, conferences more or less broke even (the conferences appear profitable on the IRS filings, but that fails to account for some expenses that might be related to conferences but not considered as such by the IRS, such as salaries). So these two major categories do not seem to be the source of profit.
It could largely be attributed to the donations the ACM raises, called gifts in my summary of the IRS forms. In FY2019, the ACM took in $8,700,000 from gifts and a had profit of $11,200,000. The ACM asserts that all gifts are spent for some specified purpose for which they are raised, so profit arising from gifts unspent in a given year is restricted in future years. This could explain some of the net assets. But as the total profit exceeds the entire gift amount, even assuming 100% of the gifts are restricted and unspent, we still have profit. So, the profit cannot be entirely a result of gifts.
It could largely be attributed to ACM membership fees. In FY2019, membership fees generated about $7,800,000 in revenue. That is not enough to account for all of it, but that plus the difference in gifts received vs. grants and awards disbursed almost equals profit. However, the IRS documents suggest that the membership program costs $11,000,000, so it seems unlikely that this is the source of profit.
Wherever it comes from, it seems unjust and not in keeping with the ACM’s mission for profit to continue to accumulate.
Conclusion
My conclusion is that the ACM is profiting at the expense of its members and/or the public it is meant to serve. On the bright side, the ACM is controlled by its members. If we object to this state of affairs, we can get involved.
I argue at minimum we should put policies in place to reduce profit. We could increase spending on grants and awards. We have the profit to double grant spending and still be profitable. We could subsidize publication costs. Given the switch to ACM Open, this should probably wait until more is known about how the switch affects publication revenue. How we spend profit could also depend on where the profit comes from, since return on investments of some donations may be restricted, so we need more information on why the ACM is profitable.
Some more radical changes could be put in place. We could spend down the current assets. It is reasonable to keep some cash in reserves, but it may be unreasonable to keep that much cash invested when our mission is not to make money. This would be difficult to implement. As discussed above, some of the money is restricted in various ways. We would need more information about these assets and their restrictions to understand whether and how they could be spent down.
Regardless, we members need to analyze details of ACM’s assets and budget, compare them to other organizations, and reconsider how and what we want the ACM to be. Personally, I don’t want it to be profitable.
Acknowledgments
I am grateful for the thorough review and other feedback by the reviewers, ACM staff, and executives on this article and its subject. I’m also grateful to Clarissa Littler, Jon Sterling, and Jonathan Aldrich for early feedback and discussions.
Join the Discussion (0)
Become a Member or Sign In to Post a Comment