As part of our financial analysis, CharityWatch makes certain adjustments to figures reported by a charity in its tax filing and/or audited financial statements to better reflect for donors how efficiently a charity is spending its donations.
Operation Finally Home provides homes and home modifications to veterans and their families, spending a significant amount of the resources it receives on construction and acquisition costs related to building and remodeling these homes. Due to accounting rules, the hundreds of thousands of dollars spent on constructing these homes, which may occur over a multi-year period, are not reported by the charity as a program expense in the year the funds are spent on construction. Rather, the program and other expenses from construction costs are recognized in the year the charity transfers ownership of a completed home to a veteran or other qualified individual. The result is that the charity may appear to be spending very little on its programs during years of construction, and a much larger amount on programs in subsequent years when construction is deemed complete and ownership is transferred.
CharityWatch understands that while these accounting rules are appropriate for audit and other financial reporting, taking them at face value when computing financial efficiency percentages for any single reporting year would produce volatile results that are not reflective of how efficiently or inefficiently this charity is operating. Therefore, we make adjustments to reported figures by including the charity's construction costs in its program percentage in the year the funds are spent. Similarly, we subtract from reported program spending the funds the charity spent on construction in prior years that were recognized in a subsequent year. These adjustments produce program efficiency and fundraising ratios that are more helpful for donors who want to know how efficiently the charity is raising and spending public dollars in a given year.
(Please see the Our Process page for more information about other adjustments CharityWatch analysts make to a charity's reported financial figures during our evaluations.)
According to the Operation Finally Home audit of December 31, 2020 (Note D, Construction and Acquisition Costs for Veterans' Homes and Commitment to Transfer Homes to Veterans):
"Construction and acquisition costs for veterans' homes represent construction costs of homes that will be transferred to veterans upon completion. When constructing a new home, title and ownership of the property is retained by the Organization until such time the Organization transfers ownership to the veteran. Prior to transfer of ownership, costs incurred and donations of materials and services received by the Organization for these activities are recorded as an asset of the Organization in the statements of financial position."
"To the extent that all significant conditions are met, a liability representing the commitment to transfer the home to a veteran is established in the same amount as the related asset. Upon transfer of ownership, the full cost of the property and the corresponding liability are both reduced to zero. Construction and Acquisition Costs for Veterans' Homes and the related liability Commitment to Transfer Homes to Veterans totaled $616,111 at December 31, 2020 and $503,645 at December 31, 2019."
According to the Operation Finally Home (OFH) 2020 tax filing, OFH reports building 12 homes and remodeling/modifying 29 homes for wounded veterans in 2020. In addition, OFH reports placing a non-cash value of $2,762,105 on the "Homes built and remodeled or modified" in 2020 (IRS Form 990, Part III, lines 4a & 4b and Schedule I, Part III).