NONPROFIT INVESTOR I N D E P E N D E N T R E S E A R C H F O R P H I L A N T H R O P Y

Nonprofit Investor Research | nonprofitinvestor.org

SUMMARY

Project GRAD Houston (GRAD) is an education reform model at work in five feeder patterns (Davis, Sam Houston, Reagan, Wheatley and Yates) within Houston Independent School District (HISD), serving 64 schools and over 44,000 economically disadvantaged children – 23% of the school district's total school population and approximately 24%of its total at-risk population.

STRENGTHS

▲ 20+ year track record. GRAD has been providing low-income, first-in-family-to-attend-college individuals with academic and social opportunities since 1994.

▲ Strong partnership with HISD. GRAD offers subject matter expertise and economy of scale to help HISD schools to increase college awareness.

▲ Robust program. GRAD covers all aspects of students’ growth from elementary school through college, featuring scholarship, summer institute, fine arts program, college mentorship, and parent involvement.

CAUTIONS

● Key program metrics have been defined but specific data points have yet to be released. GRAD made certain statistics available but we would like to see (1) statistics on individual participants to understand cost per beneficiary served and (2) detailed spending on Wages & Salaries (~$2MM).

● Lack of detail regarding programs provided. NPI suggests that GRAD provides more detailed information regarding its program activities on its website and/or through annual reports.

RECOMMENDATION: NEUTRAL Project GRAD has a longstanding history with HISD, providing programs such as scholarship, mentoring, and education. While a small sample of results provided by GRAD indicates increased graduation rates and decreased dropout rates, lack of broader disclosures of results and lack of detail regarding program services provided by GRAD limit the ability to draw a causal link between programs provided and results achieved.

Project GRAD Houston Nonprofit Investor Rating:

NEUTRAL Mission Statement The mission of Project GRAD is to support a quality public education for all students in economically disadvantaged communities so that high school and college graduation rates increase. Financial Overview $ in MM, Fiscal Year Ended December 31 2008 2009 2010

Revenue and Support $5.7 $5.1 $5.5

Operating Expenses $5.0 $5.0 $5.0

% of Total:

Program Expenses 86.1% 87.4% 85.8%

G&A 12.3% 11.1% 12.4%

Fundraising 1.5% 1.5% 1.9%

Year Founded: 1994 Contact Details Project GRAD Houston 3000 Richmond, Suite 400 Houston, Texas 77098 832-325-0325 http://www.projectgradhouston.org/ EIN: 76-0450397 Analyst: Sheng Xu Peer Review: Kent Chao, Ruth Yen Publication Date September 27, 2012

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OVERVIEW OF GRAD ACTIVITIES

GRAD provides college awareness and readiness programs for HISD schools. The charity leverage community network and subject matter expertise to address its mission. The following are GRAD’s main programs:

• Scholarship: o The Project GRAD Houston Scholarship Program provides financial assistance toward a college education

to eligible high school seniors in Houston, Texas. Each qualifying student is awarded up to $1,000 annually, for a total of four years. The scholarship is intended to be used continuously over four consecutive years.

o GRAD students must attend two College Institutes while in high school to receive their $4,000 Scholarship. The College Institute offers the uniqueness of being their first college experience.

• Service: o Walk for Success utilizes thousands of volunteers on a Saturday morning each fall to conduct a door-to-

door campaign visiting the homes of every new ninth grade student's family in GRAD-partnering high schools. Volunteers inform parents of college access opportunities while encouraging their involvement with each child's school.

o College Success Programs through support systems that network mentors and peer leaders with college freshmen. College Access is a library of materials and resources to better prepare students for college. Mentorship programs support entering freshmen and upper classmen, including face-to-face

meetings and connecting students to on-campus resources. GRAD Ambassador Program allows successful upperclassmen to serve as college peers. They

meet with lower classmen for at least once a month to advise them through experience and resources.

• Parent Involvement o Parent University is a series of workshops developed by GRAD to help parents become knowledgeable

about the academic, financial, social and emotional aspects of preparing for, applying to and succeeding in college.

o Parent Convention is an annual event held on a different Houston area college campus each year offers parents an array of sessions on college preparation, admission, financial aid as well as new and emerging career opportunities.

PROGRAM RESULTS AND EFFECTIVENESS

In the first four high schools with GRAD programs, school dropout rates decreased by about 9% from 2006 to 2009, compared to 5% for schools without GRAD programs. From 1997 to 2009, the first four GRAD high schools increased graduation rates from 42.5% to 66.6% while other high schools remained flat at 55.1%. In 2010, GRAD served ~1,700 students, 91% of which were first generation College bound. However, since GRAD does not comment on the statistical significance of the results of the four schools with GRAD programs vs. the 66 schools currently served by GRAD, it is not possible to understand whether these results are representative of GRAD’s overall effectiveness. Additionally, due to lack of detail on specific program offerings, it is unclear whether the programs services provided to the first four GRAD programs function similarly to other schools served by GRAD.

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TRANSPARENCY

The programs of GRAD are determined by the Board of Directors and developed and managed by the directors of the senior management. Therefore, transparency into the GRAD activities and successes is available at the website with specific program results via the website, including high school graduation rates, dropout rates, college acceptances and graduation rates. GRAD made available 2010 annual reports directly on its website which were helpful in communicating notable contracts with HISD and government grants. The charity has also filed its Form 990s on a regular basis. To further increase transparency, we would like to see statistics on individual participants in various programs and more detailed expense breakouts for employee salaries.

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FINANCIAL OVERVIEW

Revenues

GRAD generates the majority of its revenue from service contracts, which are contracts with HISD schools, making up approximately 68% of total revenue in 2010. The contract is a six year GEAR UP grant awarded to HISD from the U.S. Department of Education. The grant award is $3,122,400 per year for the period 2005-2011. In 2010, GRAD also entered into a one-year agreement with HISD to provide program service to 66 campuses. The contract is expected to be renewed in 2011. In 2008, U.S. Department of Education awarded GRAD a four year Federal grant (FAME) to continue funding certain fine arts programs. The award is $252,363 per year. While revenue decreased 10.5% in 2009, the service contracts helped GRAD to grow 7.8% in 2010 with $5.5MM in revenue.

Expenses

Approximately 86% of GRAD’s total expenses is spent on Program Services. 12% of total expenses is spent on G&A, and 1.5% is spent on fundraising. The low percentage spent on fundraising is a result of multi-year contracts with HISD and government grants mentioned in the revenue section. The large percentage of program expense is primarily comprised of wages and salaries (~$2MM) for staff, teachers, and mentors. GRAD prides itself in recruiting excellent talent, leveraging its expansive community outreach and network. Human capital is considered to be the backbone of GRAD’s success and therefore making up a large portion of its expense. However, GRAD does not disclose the specific allocation of the $2MM of wages and salaries on a per program basis. NPI recommends that GRAD track and disclose this allocation in order to provide donors with an understanding of how program costs relate to program services delivered.

In the Program Services numbers, grants and summer institute program expense increased slightly while other program expense remained flat. The increase of grants to $1MM from $0.87MM is the result of growth due to the addition of a government grant.

Revenue Mix Over Time 2010 Revenue Mix $ in MM

$0.0

$1.0

$2.0

$3.0

$4.0

$5.0

$6.0

2008 2009 2010

Service Contracts Government Grants Contributions Investment Income Other

$5.1 $5.5 $5.7

27%

5%

68%

0%0%

Contributions Government Grants

Service Contracts Investment Income

Other

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Expense Breakout Over Time $ in MM

GRAD’s ability to leverage its network and expertise to maintain the relationship with HISD will be critical to its success. Approximately 68% of GRAD’s revenues is on a termed contract basis and has provided stability for the past three years. GRAD needs to maintain the contract revenue stream (~$3.5mm) in order to support the large portion of expenses (~$2MM) allocated to the program staff. After the expiration of the contracts, fundraising expenses at $95,000may increase if existing contracts are not renewed.

86.1% 87.4% 85.8%

0%10%20%30%40%50%60%70%80%90%100%

$3.8

$4.0

$4.2

$4.4

$4.6

$4.8

$5.0

$5.2

2008 2009 2010

Total Program Expense Total G&A Expense

Total fundraising expense Program Expense % of Total

$5.0 $5.0$5.0

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Detailed Financial Information $ in MM

Source: IRS Forms 990

Fiscal Year Ended December 31 2008 2009 2010

Operating Revenue:Contributions $1,759,163 $1,233,336 $1,483,883Government Grants 280,434 287,438 267,343 Service Contracts 3,351,202 3,547,386 3,738,633 Investment Income 3,224 63 44 Other 268,069 - -

Total Support and Revenues $5,662,092 $5,068,223 $5,489,903% Growth -10% 8%

Expenses:Program expenses

Grants and other assistance $781,500 $867,751 $1,008,102Summer Institute Program 355,386 571,062 563,031 Other Salaries and wages 2,075,088 2,052,118 1,937,407 Service Fees 324,709 272,804 252,573 Office Expenses 545,747 388,917 400,510 Other 185,578 241,001 167,156

Total Program Expense $4,268,008 $4,393,653 $4,328,779

General and Administrative expenseCompensation $208,201 $203,106 $207,059Other Salaries and wages 228,384 250,942 272,964 Service Fees 49,979 40,396 46,083 Office Expenses 38,795 28,258 44,926 Other 86,213 35,565 52,888

Total G&A Expense $611,572 $558,267 $623,920

Fundraising expensesOther Salaries and wages $66,057 $70,816 $77,286Service Fees 2,476 100 - Office Expenses 5,041 5,140 14,791 Other 1,159 1,429 3,217

Total fundraising expense $74,733 $77,485 $95,294

Total Expenses: $4,954,313 $5,029,405 $5,047,993% of Revenue 87% 99% 92%

Revenue Less Expenses $707,779 $38,818 $441,910

Program Costs as a % of Total Expenses 86% 87% 86%G&A as a % of Total Expenses 12% 11% 12%Fundraising as a % of Total Expenses 2% 2% 2%

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THIRD PARTY RATINGS

Charity Navigator rates the organization 3 out of 4 stars, receiving a 66 out of 70 score for accountability and transparency. GRAD receives a 48.04 out of 70 for financial and has an official representative registered with Charity Navigator.

Guide Star has awarded GRAD with the Guide Star Exchange Seal for commitment to transparency. (http://www.guidestar.org/organizations/76-0450397/project-grad-houston.aspx)

Project GRAD Houston is not currently reviewed on Great Nonprofits.

GET INVOLVED

Donate: https://npo.networkforgood.org/Donate/Donate.aspx?npoSubscriptionId=1000791

Volunteer: http://www.projectgradhouston.org/pace/walk-for-success.php

DISCLOSURES

Sheng Xu certifies that she does not have any affiliation with Project Grad Houston and has never made a donation to the organization. Additionally, Sheng has not supported directly competing organizations in a greater capacity than a nominal donation. NPI analysts and NPI as an organization do not receive any form of compensation from reviewed charities. This report is for informational purposes only and does not constitute a solicitation for donations. While the reliability of information contained in this report has been assessed by NPI, NPI makes no representation as to its accuracy or completeness, except with respect to the Disclosure Section of the report. Any opinions expressed herein reflect our judgment as of the date of the materials and are subject to change without notice. NPI has no obligation to update, modify or amend any report or to otherwise notify a reader thereof in the event that any matter stated herein, or any opinion, projection, forecast or estimate set forth herein, changes or subsequently becomes inaccurate, or if research on the subject organization is withdrawn. Opinions and recommendations in our reports do not take into account specific reader circumstances, objectives, or needs. The recipients of our reports must make their own independent decisions regarding any organization mentioned by NPI.

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