Experts Urge Wounded Warrior to Address Criticism Directly, and Fast

Note: This articles has been updated to add comments from Antony Bugg-Levine, CEO of the Nonprofit Finance Fund.

The Wounded Warrior Project risks suffering irreversible damage unless it moves quickly to address recent national media accusations of mismanagement and lavish spending, nonprofit experts say.

So far, the organization doesn’t appear to be doing enough, observers suggested, and that could have ramifications for other veterans charities.

Sarah Durham, president of communications company Big Duck, said she would advise Wounded Warrior’s board to investigate the allegations and address them head on. She might even encourage the president, board, and key staff to hold a press conference and take questions on specific allegations, then release any materials that help the public understand the organization’s response.

Ms. Durham, whose company specializes in nonprofit branding, said she would advise Wounded Warrior to move fast. "The longer you wait, the more it looks like you’re trying to ‘manage’ this, and that can be discouraging for donors," she said.

Ms. Durham said even if the allegations are untrue, and the group’s spending was appropriate, the nonprofit has a communications crisis on its hands.

Wounded Warrior took a one-two punch from major media this week, starting Tuesday with a CBS Evening News report that quoted former employees complaining of irresponsible spending on lavish parties, including a four-day conference in Colorado for about 500 employees that cost $3 million. The charity’s spending on events soared from $1.7 million in 2010 to $26 million in 2014, CBS reported, citing to tax filings.

On Wednesday The New York Times posted a similar story with additional allegations, including complaints that Wounded Warrior fired staff members who criticized the organization’s priorities.

Fighting Back

The nonprofit has a history of aggressively pushing back against detractors. CEO Steven Nardizzi is a vocal critic of charity ratings websites like Charity Navigator and Charity Watch, calling their use of overhead costs to assess nonprofits’ operations "ineffective" and "misleading."

As the new allegations piled up, Wounded Warrior immediately fought back. Jessie Gueterman, a spokeswoman for the organization, said it requested a retraction from CBS. Wounded Warrior also posted a statement on its website condemning the network’s "false news report." However, the statement did not address the Times story or any of the allegations by the news outlets about its spending.

The Wounded Warrior Project also took the fight to social media. On Facebook, representatives of the nonprofit took the time to respond to nearly every post, both positive and negative, related to the stories.

"Shame on you! Only 60% of donations going to the vets," one online critic scolded. Wounded Warrior disputes the 60 percent figure, which comes from Charity Navigator. The watchdog group’s data received prominent play in the Times and CBS reports.

When another Facebook poster asked "what’s the deal?" the organization replied that "the CBS News piece had numerous factual errors," among other retorts, but offered few specifics other than touting its services to veterans.

Doug White, director of operations at Columbia University’s Master of Science in Fundraising Management program, agreed with Ms. Durham that Wounded Warrior needs to get specific in responding to the media onslaught.

"If they don’t really come back and respond in intelligent and thorough ways, they’re going to be seen as trying to hide something," Mr. White said. "And they can’t ever be seen as trying to do that or else they’ll lose that trust."

Fundraising Powerhouse

Wounded Warrior has been a fundraising powerhouse and one of America’s fastest-growing charities. It is 65th on the Philanthropy 400 list, The Chronicle’s annual ranking of the U.S. charities that raise the most in private support. It was 331st on the list in 2012, and has climbed every year since then.

It may take months or years to see the impact, if any, of the media reports on individual giving to Wounded Warrior.

As for corporate support, there are no signs yet that it is wavering. Sports apparel and equipment maker Under Armour, a key corporate partner of the nonprofit, released a supportive statement: "Through our partnership with WWP, Under Armour has been able to positively impact the lives of our nation’s heroes by promoting their health and wellness."

But if such support starts to slip, it could affect similar nonprofits, some observers say.

David Coker, president of the Fisher House Foundation, acknowledged he had "concerns" about a spillover effect. Fisher House provides housing for the families of hospitalized veterans and service members. It has a four-star rating from Charity Navigator and reports spending 91 percent of its money on programs, 6.6 percent on administrative costs, and 2.4 percent on fundraising

Mr. Coker praised Wounded Warrior for helping thousands of veterans, and for raising the visibility of the cause. "I don’t want it to be lost that there is good that they have done," he said. "And our military veterans will continue to have needs."

Mr. White agreed that the Wounded Warrior situation had the potential to hurt other nonprofits. Veterans charities, Mr. White noted, already suffer from a perception that they overspend on administration and fundraising.

"There could be that ripple effect," Mr. White said. "It’s a very fragile sector. We have only trust, and even though it’s a big thing, it’s something that can vanish in a heartbeat."

Data Disputes

Mr. White also expressed concern that the media reports had failed to present a full picture of Wounded Warrior and its services.

For example, he said that if the allegations of employees being treated poorly are true, it shouldn’t necessarily affect how people view the charity’s work with veterans. "You’re going to find that kind of a complaint in almost any organization, or a lot of organizations," he said. "That doesn’t mean you take them down. That doesn’t mean they’re not worthy."

Mr. White was skeptical of the criticism of the group’s overhead and fundraising costs based on data from its Form 990, a tax document that provides general information on administrative expenses.

"I feel like we are going down this simple-minded slope of looking at charities based on what’s on their 990 without having any understanding of their impact, their transparency, their effectiveness — the things that are not easy to quantify," Mr. White said. "I’m not saying there’s nothing wrong, but this doesn’t make the argument."

Antony Bugg-Levine, CEO of the Nonprofit Finance Fund, said he was frustrated by the “over-simplistic” conversations about overhead as a metric of efficiency and legitimacy. Mr. Bugg-Levine said there has been a lot of discussion in the nonprofit sector over the past few years about getting beyond overhead when judging nonprofits.

“At the same time, I’m not one of the people who believes we should never ask what an organization is spending its money on,” he said. “I just wish that we focused first on the results of what an organization achieves with its money, rather than what it’s spending money on."

Still, Mr. Bugg-Levine said he understands why overhead has become such a big focus of charity watchdog groups and the public, and that it is legitimate to ask whether a nonprofit is spending extravagantly. He said the nonprofit sector has not offered any alternative for comparing and judging nonprofits, mostly because it’s complicated work.

“It’s just hard to do,” Mr. Bugg-Levine said. “But it doesn’t serve any of us well to use overhead as a measure of efficacy simply because it’s an easy one to measure.”

Heather Joslyn contributed to this story.