News and analysis
July 21, 2014

Video-Game Giant Puts Veterans Groups Under the Microscope Before Giving

Salvation Army-Haven

The Salvation Army group the Haven helps a veteran (left) customize his resume and apply online for a federal job.

Since its inception in 2009, the Call of Duty Endowment has maintained a single-minded mission—get as many veterans as possible into high-quality jobs.

But the results of early funding efforts were a mixed bag, so the endowment has turned to an unusually intensive screening process before making grants, one it hopes will spur transparency among charities and more scrutiny from donors.

"We look at these grants like investments, but the return we expect is social return, and that return is vets in high-quality jobs," says Dan Goldenberg, executive director of the endowment.

The endowment is the philanthropic arm of video-game giant Activision Blizzard, which produces the popular military simulation game Call of Duty.

There are more than 40,000 veterans-related nonprofits, all "well-intentioned, very few well run," Mr. Goldenberg says. In the past, the Call of Duty Endowment sometimes relied on the advice of experts or gave to well-known organizations. The outcome was a portfolio of grants that failed to deliver the measurable results its leadership wanted, says Mr. Goldenberg, who spent 21 years in the U.S. Navy and Navy Reserve.

So in 2012, the endowment set about to create a new approach to unearthing and funding mostly little-known nonprofits that were seeing a lot of success in finding jobs for veterans. It partnered with the accounting firm Deloitte, which developed a comprehensive audit program and a "scorecard" for potential grantees. The result is a vetting process believed to have few equals among veterans nonprofits, say independent nonprofit professionals who reviewed the process.

A High Level of Scrutiny

The process starts like many other grant-making operations, with an application in which grantee hopefuls answer questions regarding their job-placement numbers, the quality of those jobs, and the cost per placement, among other things.

Deloitte conducts on-site audits pro bono. The scorecard focuses on four areas: administrative expenses and payroll costs, performance indicators and deliverables, background checks on executives and policies and training, and financial stability.

"Deloitte, I think, has done a first-rate job," says Naomi Levine, executive director of New York University’s George H. Heyman Jr. Center for Philanthropy and Fundraising, who reviewed the vetting tools on behalf of The Chronicle. "When you have a lot of these little groups, particularly the veterans groups that have sprung up all over, the oversight is shoddy. That worries me."

Ret. Col. Miguel Howe, director of the military service initiative at the George W. Bush Institute, says that the need for accountability is intensifying with the military drawdowns in Iraq and Afghanistan. The number of veterans and their families will grow to about 10 million in the coming years, he points out.

"We agree there is a need to better align intent and outcomes, particularly now," says Mr. Howe, who helped oversee an extensive research project at the Bush institute on veterans nonprofits, with the goal of producing a set of tools that could help them be more effective.

Nonprofits that weather the Call of Duty Endowment vetting are given what the endowment has dubbed its "seal of distinction." In 2013, the inaugural year, it gave out $1.2-million in grants to 12 groups under the seal. The endowment plans to award more than $4-million this year. Grantees are required to file quarterly reports, with opportunities for additional money for jobs well done.

Mr. Goldenberg hopes that one added benefit of the endowment’s endorsement is that it helps shape other donors’ opinions, driving more gifts to the vetted charities and away from those that are less effective.

"Hopefully they attract those limited resources and can grow, and other organizations that can’t show impact will consolidate and go away," Mr. Goldenberg says.

Proving Results

Not long after Deb Kloeppel, chief executive and founder of the veterans group Corporate America Supports You, or CASY, applied for a grant from the Call of Duty Endowment last year, a representative from Deloitte was on her group’s doorstep in Missouri, she says.

The auditor stayed a week in October, studying the organization’s operations and meeting with its board members and accountant.

"They really dig through the bull hockey," Ms. Kloeppel says. "They are not impressed by slick marketing campaigns. They know when numbers are bolstered. They know when numbers aren’t real."

After being given an initial grant of $30,000, CASY has received additional sums of $250,000 and $500,000 from the endowment, Ms. Kloeppel says. And the endorsement has attracted the attention of another foundation that might result in $1.5-million over the next three years, she says.

Hire Heroes USA, another veterans group with offices in Plano, Tex., and San Diego, has received about $1.5-million from the Call of Duty Endowment and is in a position for additional funding next year, says president and chief executive Brian Stann.

"It is all based on actual output," Mr. Stann says. "We have to hit certain performance metrics to receive all of their grants, which is how we prefer it. We can prove all our methods."

The financial support has allowed him to increase his staff from five to 40, Mr. Stann says. He knows of about 10 veterans nonprofits that he believes do good work and five that spend money wisely.

"It is absolutely necessary to have this kind of vetting process," Mr. Stann says. "At the end of the day, you are playing with other people’s money."

Send an e-mail to Megan O’Neil.