Sen. Charles Grassley said in a letter to the Wounded Warrior Project on Monday that the charity’s responses to his inquiries on its spending raised “serious questions” about the veterans organization’s statements that more than 80 percent of its expenses are for services and programs.
The Republican senator from Iowa said it appears from documents the charity sent him and reviews of its financial records that approximately $150 million of the $242 million the group said it spent on programs in fiscal 2014 was “not actually spent on veterans by WWP, and a large portion of it was in-kind donations.
“This calls WWP’s claim that it spends 80.6 percent of its donations on veteran programming into question,” Mr. Grassley wrote.
The letter, which was addressed to the nonprofit’s board chair, Anthony Odierno, was a follow-up to replies sent by Wounded Warrior to an initial letter from Mr. Grassley inquiring about the group’s activities and spending.
Mr. Grassley sent his first letter after news investigations released in late January alleged that the nonprofit spent far more on overhead and fundraising than other veterans groups and had splurged on conferences, meetings, and travel. The reports led to the firing of the nonprofit’s chief executive, Steven Nardizzi, and chief operating officer, Al Giordano, in March.
In his follow-up, the senator asked numerous questions about the organization’s spending on advertising, marketing, and events and about its estimates on the number of people it assists in obtaining benefits from the U.S. Department of Veterans Affairs.
Questioning Percentage
Mr. Grassley said the 80.6 percent figure that the nonprofit said it spent on programs appears to come from the organization’s 2014 consolidated financial statements, not its 990 tax form, which contains different figures. He said the group’s 990 shows that 76.4 percent of the charity’s expenses were reported as program spending.
Furthermore, the group’s consolidated financial statements show that $80.7 million — about 33 percent of the claimed program expenses — appear to be donated advertising and other free publicity the charity received, according to the letter. The expenses were not included in the 990, which may explain the discrepancy in numbers between the documents, the letter says.
“It is not clear whether the donated media was only outreach to veterans to help them access programs or whether it was for fundraising purposes,” Mr. Grassley said, adding that, absent the media donations, the nonprofit’s program spending falls to about 67 percent.
Mr. Grassley said that an additional $41 million was spent on joint educational and fundraising solicitations, which are allowed to be reported as spending on programs on its 990. Still, Mr. Grassley said that most charity watchdogs don’t count such spending as program costs, because it “generally does not provide any benefit in support of a charity’s mission other than fundraising.”
An independent review released in March of Wounded Warrior’s expenses commissioned by the organization’s board said “established accounting principles” were used in the nonprofit’s audited financial statement on which the 80.6 percent number is based. It noted that the charity indeed used “joint-cost allocation,” an accounting rule that allows nonprofits to label some fundraising appeals as program expenses if they educate people or are related to advancing the organization’s charitable mission.
Spending on Grants and Events
Mr. Grassley also questioned $37.1 million the group granted over two years to an affiliated nonprofit called Long-Term Support Trust, noting that the trust’s only reported expense in 2014 was $134,721 to the bank that manages it. In advertisements, Wounded Warrior says it has spent $65.4 million on long-term support programs for veterans, while “it appears almost $40 million of it was simply transferred” to the trust, the letters says.
Mr. Grassley also asked about Wounded Warrior’s $26 million in spending on conferences, conventions, and meetings. The letter notes that 71 percent of 4,485 events the nonprofit held in 2014 seemed to primarily consist of tickets to sporting events for veterans — some of which may have been donated. In 2013, 76 percent of events were also mostly tickets to athletics events.
“In light of these percentages, and the fact that many expenses could be in-kind donations to sporting events, it is important to determine with as much precision as possible, how much donor money was actually spent on veterans as opposed to in-kind donations,” the letter says.
Mr. Grassley’s office did not release the full documents and replies sent by Wounded Warrior to the senator’s initial letter. A spokeswoman for Mr. Grassley said in an email that his office was still reviewing the materials. The letter asks Wounded Warrior to respond to questions the senator raised by June 1.
Wounded Warrior officials have not yet responded to several calls from The Chronicle.
