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December 24, 2018

Where Does $100 to Hope For The Warriors Go?

by Anne Paddock

Hope For The Warriors (HFTW) is a 501 (c) (3) based in Springfield, Virginia that strives to help those affected by military service. Assistance is primarily through staff support from the 68 employees who were compensated $4 million (an average of $59,000 per employee with only three employees compensated more than $100,000). Grants were also awarded ($1.3 million or 17% of total revenue) in 2017.

In trying to understand how a $100 donation is spent, it is helpful to look at the IRS Form 990 (2017) which reports revenue, expenses, information on executive compensation, fundraising, assets, liabilities and net fund assets.

REVENUE

$7.8 million in revenue was reported in 2017 which primarily came from contributions, gifts, and grants ($7.5 million) followed by fundraising events, investment income and registration fees.

EXPENSES

$7.2 million in expenses were reported in 2017. There are two ways to look at expenses:  by broad general category (grants, program services, management, and fundraising) and by looking at specific line item categories (i.e. compensation-related expenses, office-related expenses, grants, travel and conferences, etc). Both provide beneficial information with the latter approach providing more detail on expenses.

Expenses by Broad General Category

The $7.2 million in expenses were categorize as follows:

  • $5.2 million (66% of revenue):  Program Services
  • $1.3 million (17% of revenue):  Grants
  • $0.4 million (5% of revenue):  Management Expenses
  • $0.3 million (4% of revenue):  Fundraising Expenses

Approximately $600,000 was not spent and added to the fund balance which had $5.7 million at year-end, compared to $5 million at the beginning of the year (an unrealized gain on investments added nearly $100,000).

Using the above information, $100 in revenue was spent as follows:

$100:  Revenue

-$ 66:  Program Services

-$ 17:  Grants

-$  5:  Management Expenses

-$  4:  Fundraising Expenses

-$ 92: Total Expenses

$  8:  Revenue Remaining:  To Net Fund Balance

As illustrated above, HFTW spent $92 out of every $100 on expenses. $8 of out every $100 in revenue received was left unspent and placed in the net fund balance (think savings account).

Expenses by Specific Line Item Category

The $7.2 million in expenses were spent in the following specific line item expenses:

  • $4.0 million (51% of revenue):  Compensation-related expenses
  • $1.3 million (17% of revenue):  Grants
  • $0.7 million (9% of revenue):  Office-related Expenses
  • $0.5 million (6% of revenue): Travel and Conferences
  • $0.4 million (5% of revenue): Advertising and Promotion
  • $0.3 million (4% of revenue): Fees for Services (primarily other with no detail provided, acct, legal, and investment fees)

As illustrated above, the largest single expense and where more than half of revenue ($51 out one very $100 in revenue) was spent is to pay for compensation for the staff.  An additional $25 out of every $100 is used to pay for office-related expenses, travel and conferences, advertising and promotion and fees for outside services. Nearly $300,000 was spent on fees for outside services but no detail is provided for approximately $260,000 of these fees (and the IRS does not require the organization to provide detail because this line item is less than 10% of total expenses).

Using the above information, $100 in revenue was spent as follows:

$100:  Revenue

-$ 51:  Compensation-related Expenses

-$  9:  Office-related expenses

-$  6:  Travel and Conferences

-$  5:  Advertising and Promotion

-$  4:  Fees for Services

-$ 75:  Subtotal of Compensation, office, travel, conferences, advertising,promotion, and fees for services

 $ 25:  Revenue Remaining

-$ 17:  Grants

$  8:  Revenue Not Spent – To Net Fund Balance

As illustrated above, $75 of out every $100 in revenue was spent on organizational costs while $17 out of every $100 was used for grants to veterans and their families.

EXECUTIVE COMPENSATION

HFTW employed 68 individuals in 2017 who were compensated $4 million (an average of $59,000 each). Three individuals received more than $100,000 in compensation:

  • $186,469:  Robin Kelleher, President and CEO
  • $149,238: Christopher Sharon, COO
  • $125,786: Emma Walsh, Chief Strategy Officer

FUNDRAISING

HFTW relies primarily on contributions, gifts, and grants for funding. In addition, the organization relies on fundraisers to a lesser extent. In 2017, HFTW held 18 fundraisers that raised $629,477 (about 8% of total revenue). After deducting contributions (which the IRS requires) of $213,919 and the event costs (rental facility costs, food and beverage, entertainment, and prizes) of $168,057, HFTW had a net income of $247,501 from these events. The question that arises is:  How much staff time and resources (i.e. office-related expenses, advertising, and promotion, and travel) are spent on these events that result in 8% of total revenue and less than 6% after event costs are deducted? The bottom line is that these events provided less than $500,000 in 2017.

GRANTS

$1.3 million in grants were awarded in 2017, which are summarized as follows:

  • 181 service members received food and rental assistance in cash ($351,845 or an average of $1,944 each. In addition the 181 service members received non-cash assistance of $15,845 or an average of $87 each.
  • 147 individuals received gifts and support in cash ($428,958 or an average of $2,918 each) and non cash ($73,740 or an average of $500 each)
  • 205 service members received travel assistance in cash ($206,997 or an average of $1,010 each).
  • 7 service members received adaptive equipment in cash ($31,309 or an average of $4,472 each).
  • 78 recipients received entertainment and respite in cash ($39,396 or an average of $505 each) and non-cash ($23,300 or an average of $300 each).
  • 3 recipients received home furnishings and renovations in cash ($5,634 or an average of $1,878 each) and non-cash ($300 or $100 each).
  • 5 recipients received moving expenses in cash ($2,397 or an average of $479 each).
  • 8 recipients received scholarships in cash ($31,090 or an average of $3,886 each).
  • 55 recipients received event supplies in cash ($21,526 or an average of $391 each) and non-cash $2,305 or an average of $42 each).
  • $ 10,000 grant was provided to Fisher House Foundation for the 2017 Warrior Games Family Program.

ASSETS

HFTW reported $6.3 million in assets at year-end that were concentrated in five areas:

  • $3.1 million:  Cash
  • $1.5 million:  Publicly traded securities
  • $1.5 million:  Pledges and Grants Receivable
  • $0.2 million:  Equipment, inventory, and other assets

As illustrated above, the organization is very liquid with $4.6 million of the $6.3 million in cash and publicly traded securities.

LIABILITIES

HFTW reported approximately $600,000 in liabilities, almost all of which is accounts payable and accrued expenses.

NET FUND ASSETS

HFTW has gradually through the years (since 2006) been spending less than they receive in order to build the net fund assets.  At the end of 2017, HFTW had $5.7 million in net fund assets, $4 million of which is unrestricted and $1.7 million of which is temporarily restricted.

SUMMARY

HFTW  is a staff intensive 501 (c) (3) whose focus is more on providing assistance through their staff and office than through grants. Although several hundred recipients received grants in the form of both cash and non-cash benefits, grants were limited to less than $1.3 million or about 17% of revenue in 2017.  The question that arises is how much staff time, office costs, and travel expenses were spent to award less than $1.3 million in grants?  Ditto the same question for fundraising events. 18 fundraising events were held across the United States with HFTW netting less than $500,000. The question becomes how much staff time and associated expenses (office, advertising, travel, etc) were spent to obtain that $500,000? And, lastly, why did HFTW put approximately $600,000 in the net fund assets instead of helping more veterans?

To read the IRS Form 990 (2017), click here.

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