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December 11, 2019

Where Does $100 to Home For Our Troops Go?

by Anne Paddock

Home For Our Troops (HFOT) is a non-profit tax-exempt 501 (c) (3) whose mission is to build specially adapted custom homes for severely injured post-9/11 veterans to help restore freedom and independence that was sacrificed defending our country.

To do this, HFOT raises funds, buys land, and builds homes but maintains a lien on the home for 10 years (to protect the veteran from losing the home to foreclosure/bankruptcy and to protect donors who made the home possible). Beginning in year 6, the veteran accrues 20% equity per year until they obtain full ownership in year 10. Since HFOT was established in 2004, 266 homes have been built (and only two veterans moved out before the end of their lien period).

Based in Taunton, MA (about 40 miles south of Boston), HFOT focuses on rebuilding the lives of veteran (not just building a house) by providing a pro bono financial planner for three years to assist in financial planning and household budgeting, education in home ownership, and warranty coverage to set the veteran up for success.

In 2018, HFOT raised nearly $30 million (compared to $24 million the previous year) of which $23 million were cash contributions, gifts, and grants while $6 million were non-cash contributions ($2.7 million of cars of which $1.8 million was retained by the fundraiser, National Charity Services netting HFOT $900,000, $2.8 million of home construction materials and $500,000 in marketable securities).

Expenses totaled $28 million (93% of revenue) and can be viewed two ways:  by broad general category (i.e. grants, program services, management and general expenses, fundraising) or by specific line item expense (i.e. compensation, office-related expenses, fees for services, etc) with the latter approach providing more detail on how revenue was spent.

Expenses by Broad General Category

The $28 million in expenses were categorized as follows:

  • $12 million (40% of revenue):  Grants
  • $10 million (33% of revenue):  Program Services
  • $ 2 million (7% of revenue):  Management and General Expenses
  • $ 4 million (13% of revenue):  Fundraising

The largest expense for HFOT was for $12 million in grants for 18 specially adapted homes followed by $10 million in program services (of which $6.5 million are classified as simply “other program costs.” These costs are too large a proportion of total expenses not to be detailed).

Management and General Expenses and Fundraising totaled $6 million, which equates to 20% of revenue. Fundraising costs are relatively high because HFOT relied heavily on a company, National Charity Services, Inc. – a professional car donation fundraiser – who acted on behalf of HFOT to obtain cars as donations. National Charity Services, Inc. obtained auto donations totaling $2.7 million but retained $1.8 million (67%) thereby netting HFOT only $900,000. HFOT terminated the relationship with National Charity Services, Inc. at the end of the fiscal year in 2018. (note to donors: to make your charity dollars go further, sell the vehicle yourself and donate the proceeds).

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

$100:  Revenue

-$ 13: Fundraising

-$  7:  Management and General Expenses

-$ 20:  Subtotal:  Fundraising and Management and General Expenses

 $ 80:  Revenue Remaining

-$ 40:  Grants

-$ 33:  Program Services

-$ 73:  Subtotal:  Grants and Program Services

 $  7:   Revenue Remaining:  To General Fund

As illustrated above, HFOT spent $73 out of every $100 on grants and program services and $20 out of every $100 on fundraising and management and general expenses. $7 out of every $100 was retained and added to the general fund which had $20 million at year-end.

Expenses by Specific Line Item Category

  • $12 million (40% of revenue):  Grants
  • $ 6.5 million (22% of revenue):  Other Program Costs – no detail provided
  • $ 5 million (16% of revenue):  Compensation
  • $ 2.4 million (8% of revenue):  Fees for Services (primarily professional fundraising to National Charity Services)
  • $ .7 million (2% of revenue):  Advertising and Promotion and Fundraising Events
  • $ .5 million (2% of revenue):  Office-related Expenses
  • $ .4 million (1% of revenue):  Travel
  • $ .3 million (1% of revenue):  Other Expenses
  • $ .2 million (1% of revenue):  Credit Card Fees/Deed Transfer Costs

As illustrated above, grants were the highest expenses followed by other program costs, which are not detailed (but should be because $6.5 million is too large a proportion of total expenses to not be detailed).  Compensation of $5 million was for the 76 employees (an average compensation of $66,000). 5 employees received ore than $100,000 in compensation:

  • $168,300:  H T Landwermeyer, President and CEO
  • $144,647:  William D Ivey, Executive Director
  • $130,462:  William D Easley, Construction Ops Manager (thru 7/2018)
  • $129,267:  Cynthia R Baptiste, Director of Finance
  • $127,470:  Richard A Pratt, Director of Construction Ops

None of the employees of HFOT flew first class or charter travel. In addition, HFOT did not pay for companion travel, social club dues or initiation fees, tax indemnifications or gross up payments, personal services, or residences for personal use.

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

$100:  Revenue

-$ 40:  Grants

-$ 22:  Other Program Costs

-$ 62:  Grants and Other Program Costs

$ 38:  Revenue Remaining

-$ 16:  Compensation

-$  8:  Fees for Services (primarily fundraising to National Charity Services)

-$  2:  Advertising and Promotion and Fundraising Fees

-$  2:  Office-related Expenses

-$  1:  Travel

-$  1:  Credit Card Fees, Deed Transfer Costs

-$  1:  Other Expenses

-$ 31: Subtotal:  Compensation, Fees, Fundraising, Advertising, Office, Travel, Fees, Costs, and Other Expenses

 $  7:  Revenue Remaining:  To General Fund

As illustrated above, $62 out out of every $100 was spent on grants (houses) and other programs costs. $31 out of every $100 was spent on compensation, fundraising fees, office-related expenses, travel, and other organization costs.

Summary

HFOT raises about $30 million annually but has spent less than they raised as evidenced by their general fund balance (which is often referred to as the endowment) of $20 million.  If expenses are viewed in general categories, approximately 73% of revenue was spent on housing while fundraising and management/general expenses accounted for 20% of revenue. However, it is important to note HFOT severed the relationship with a professional fundraising organization that solicited car donations, because the fundraise retained 67% of what they raised.  If you want your donation dollars to go further, donate directly to HFOT instead of donating a vehicle to a fundraiser representing a charity.

Expenses by specific line item categories show the largest expenses outside of grants and “other program costs” (which are not detailed) was compensation for the 76 employees, with only 5 receiving more than $100,000 (and none receiving more than $168,300). HFOT did not pay for first class or charter travel, social club dues, or other similar type expenses. All in all, a commendable non-profit with a well thought out plan, striving to be transparent (and change fundraising ways that are not working to the advantage of the organization), and paying their employees reasonable compensation.

To read the IRS Form 990 (2017 for the year ending 9/30/2018), click here.

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