Santa, Inc.: By the Numbers
This holiday season, ParenteBeard, a top 25 U.S. accounting firm, is helping to balance the books of what would be the largest nonprofit in the world: Santa, Inc. While Santa’s magical powers eliminate many of the typical business fundamentals such as production and employee costs, ParenteBeard’s financial experts analyzed what it would take to actually operate Santa’s North Pole. The leader in providing CPA and business advisory services determined that it would cost more than 42 billion dollars to operate Santa, Inc. annually.
“Children around the world are dazzled by Santa Claus and many parents are asked exactly how Santa’s workshop operates,” said Jeffrey Ferro, ParenteBeard president. “As experts, we thought why not determine what it would cost to run Santa’s North Pole operation.”
Santa, Inc.: by the Numbers
ParenteBeard began its audit of Santa, Inc. by delving into its hard costs. The firm first calculated the cost of the backbone of Santa’s business — the gifts.
Gift Production: $39.5 billion
ParenteBeard determined there are approximately 526 million kids under the age of 14 who presumably celebrate Christmas. With an average estimated $75 value for each gift, it would cost Santa, Inc. roughly $39.5 billion to produce one gift for every child.
Employee Costs: $2.77 billion
Employee Salaries: $2 billion
Next, ParenteBeard reviewed the cost of employing the gift makers themselves — the elves. While the exact number of elves in the North Pole has never been revealed, it would take quite a few to produce a world’s supply of toys. Even with magic, the firm estimates Santa would need 50,000 elves. ParenteBeard’s team found the average salary for a toymaker in the United States is $35,859. Due to Santa’s kindhearted spirit, the firm estimated he pays his elves above the national average, or $40,000 a year, bringing his total elf payroll to $2 billion a year.
Health Benefits: $774 million
The average health plan for an employer the size of Santa, Inc. would cost $15,475 per employee, assuming that most of the elves would need a family plan. That brings Santa’s annual healthcare costs to roughly $774 million.
Electricity Costs: $98 million
Santa’s workshop would have to be huge. Currently, the largest manufacturing plant in the world is 4.3 million square feet. Let’s assume Santa’s workshop is double that if he needs to provide toys to everyone in the world. That equals 8.6 million square feet of workshop space. How much would it cost to power his workshop? The average manufacturing plant uses 95.1 kWh of electricity per square foot annually. The cost of electricity per kWh in the United States’ northernmost city- Barrow, Alaska -is $0.12. If we apply those numbers to 8.6 million square feet, Santa would be looking at an annual bill of $98 million.
Reindeer Costs: $54,000
Finally, ParenteBeard calculated the cost of caring for Santa’s nine famous reindeer. The firm compared the cost of owning reindeer to caring for horses annually, since food and veterinary bills are similar. With an average annual cost of $6,000 a reindeer, Santa’s yearly care for Dasher, Dancer, Prancer, Vixen, Comet, Cupid, Donner, Blitzen and Rudolph would cost $54,000.
Total Cost to Operate Santa, Inc.: $42.4 billion
Santa, Inc: operating as a private foundation
Once ParenteBeard determined how much it would cost to run Santa’s business, the firm discussed how Santa, Inc. would be classified. Given that Santa exists not to earn revenue but to promote a mission that enhances public welfare and presuming that he is self-funded, it would most likely be incorporated as a private foundation. But even if Santa, Inc. achieved nonprofit status, incorporating would create a variety of issues to address.
- Avoid Self-Dealing: This means no big bonuses for Mrs. Claus. Santa can’t excessively pay himself or his spouse with money that is intended to be used for his charitable endeavors. Violating this could result in Santa and Mrs. Claus paying a substantial penalty.
- Salary Limits: Although Santa might be generous, he couldn’t pay his elves $80,000 a year if the average toymaker only makes $35,000. Even the slight increase to the $40,000 salary could put Santa, the elves and Santa, Inc. at risk.
“Although nonprofits are tax exempt, they still have risks to consider,” said Julius Green, practice leader for ParenteBeard’s exempt organization tax group. “Santa still needs to be careful about how he distributes payments and how he runs his operation. Hopefully, he has a trusted business and tax advisor he can rely on.”
Luckily for Santa, his entire business runs on holiday magic.
ParenteBeard is ranked among the top 25 accounting firms in the U.S. A leader in providing CPA and business advisory services to small businesses, middle market companies, nonprofits and SEC registrants, ParenteBeard has 1,100 professionals located throughout the Mid Atlantic region. As an independent member of Baker Tilly International, ParenteBeard is proud to provide the highest level of service to clients nationally and internationally.
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