CharityWatch is unable to provide a rating for TroopsDirect (the Organization) based on its fiscal year ended 06/30/2024 due to the charity's small size. CharityWatch's inability to provide a rating for the Organization at this time does not imply a negative or positive evaluation. According to its fiscal 2024 IRS Form 990, the Organization raised $712,479 in cash contributions. Per IRS Form 990, Schedule I, the Organization reports distributing $656,053 of donated goods and supplies during fiscal 2024. Once donated goods and supplies are subtracted from the charity's total reported 2024 expenses of $1,755,591, CharityWatch computed that the Organization incurred roughly $1.1 million in cash expenses during fiscal 2024. The most recent letter grade rating of the Organization was a "F" on CharityWatch's A+ to F rating scale based on our analysis of its IRS Form 990 for the fiscal year ended June 30, 2022. For that year, CharityWatch found that the Organization spent only 26% of its cash budget on Programs and that it cost the charity $67 to raise each $100 in cash support. The Organization reports that it formed in 2010, according to its IRS tax Form 990. Also according to Form 990 reporting, it raised approximately $21.2 million in cash and in-kind contributions during the five-year fiscal period of 06/30/2019 through 06/30/2023, which averages to approximately $4.2 million annually (IRS Form 990, Schedule A, Part II, Section A). By comparison, the charity raised only about $1.4 million in cash and in-kind contributions in fiscal 2024, of which only $712,479 consisted of cash. The financial reporting of small charities is often not comparable to that of larger ones for several reasons: Lack of Independent Audited Financial Statements Most charities forego hiring external auditors to produce annual audited financial statements until they reach a size that subjects them to regulations requiring them to do so, such as to satisfy state fundraising regulations, to obtain credit, or for insurance purposes. Audits conducted by Certified Public Accountants (CPAs) can cost thousands of dollars, which is relatively expensive for small charities. The lack of an audit, however, means that a qualified outside party has not subjected the charity's financial reporting to auditing standards that would test the effectiveness of its internal controls and assess whether or not the charity's financial information is fairly presented and free of material misstatements. In its 2024 IRS Form 990, the Organization responds "No" to the question: "Were the organization's financial statements compiled or reviewed by an independent accountant?" It also responds "No" to the question: "Were the organization's financial statements audited by an independent accountant?" (IRS Form 990, Part XII, lines 2a & 2b). Economies of Scale Economies of scale occur when the size of an organization's operations allow it to operate more efficiently. As an organization grows it costs it less (per unit) to produce its goods or services due to its overhead and other fixed costs being spread over a larger volume of output. For example, a small charity that serves 500 poor people per year may need to pay $8,000 for its annual financial audit. A larger charity that serves 3,000 poor people per year may need to pay $10,000 for its annual financial audit. The first charity spent $16 per person served for the overhead cost of its audit, while the second spent far less at only $3.33 per person served. Charity rating methods suitable for larger organizations often cannot be fairly applied to much smaller charities given that the latter lack the economies of scale necessary to operate at the same level of efficiency. |
