The Wounded Warrior Project seems to be sticking with accounting practices that have led to scrutiny in recent months, with critics noting potentially inflated program spending and understated fundraising expenses.
The organization continued to report as program spending large portions of expenses on mailings and television advertisements that contain fundraising appeals and messages that the charity says help it achieve its mission, according to financial filings released Monday. It’s also still counting in-kind donations of airtime on radio and television and space in print for public-service announcements and other promotions as part of its programs in one of its reporting documents. Such accounting has been questioned by observers of the nonprofit, including Iowa Republican Sen. Charles Grassley.
The numbers in the documents, including the group’s Form 990, which it’s required to submit to the Internal Revenue Service, are from fiscal 2015, before news investigations into the nonprofit’s spending rocked the organization this year.
The Form 990 listed total revenue at $398.7 million, up from $342.1 million the previous year. The charity reported that 75 percent of its spending last year was on programs, according to its Form 990, while program expenses came in at 77.5 percent, based on figures in its audited financial statements. The audited financials include in-kind gifts related to airing public-service announcements and other promotions, while the Form 990 does not. Given that previous financial documents have contained program expenses that some have found questionable, some people have wondered whether there might be a change in how Wounded Warrior reported its finances.
“They could have chosen to be more conservative,” said Brian Mittendorf, a professor of accounting at Ohio State University who specializes in nonprofits, adding that charities have broad flexibility in how they report certain types of program spending. However, changes to its reporting could been construed as an acknowledgment that its past financial statements were problematic — an admission the organization has refused to make.
Wounded Warrior’s troubles could be seen as a cautionary tale for other nonprofits that rely heavily on accounting practices that some find objectionable. The organization could now find itself with no option for moving forward without provoking additional criticism.
New Data Provided
A Wounded Warrior spokeswoman responded to questions by email, noting that the group follows “generally accepted accounting principles” in its filings.
Wounded Warrior seems to be trying to satisfy its critics without changing its basic accounting practices. With its new release of financial documents, it has published graphics on its website that show how its money is spent, along with “frequently asked questions” with responses to queries like, “Why do we invest money in fundraising?” Most of the graphics and information, however, tout the expense ratios and program-spending totals that critics are likely to object to.
In the past, Wounded Warrior has said that the promotions and public-service announcements it counts as part of its program expenses help spread awareness to veterans and the public about its services.
Two weeks ago Wounded Warrior announced that details of a restructuring will be released in September. The changes at the nonprofit could lead to layoffs and reduced salaries for some executives, officials have said.
Transfer Questioned
The charity calculated the 75 percent program-spending figure from its Form 990 in part by classifying $47.1 million in fundraising spending as program expenses using an accounting rule called joint-cost allocation, which is allowed if the appeals help educate the public or achieve a programmatic goal. Another $54 million in program spending was a grant to a fund operated by Wounded Warrior called the Long-Term Support Trust — which some may see as a grant to itself, experts say. Tax documents list no disbursements from the trust last year.
“I find it a little perplexing that they’ve decided to view a transfer from their right hand to their left hand as a program expense,” Mr. Mittendorf said about the grant. “It’s obviously being invested for future use, but it’s not currently being used.”
Watchdogs Respond
In an email, a spokeswoman for Charity Navigator said the nonprofit watchdog pegged Wounded Warrior’s program spending at 61 percent based on the latest Form 990, noting that expense allocations appeared “consistent with numbers they’ve reported in the past.” Charity Navigator does not count the joint-cost figures when calculating program costs.
After a preliminary review of the latest audited financials, Daniel Borochoff, president of nonprofit evaluator CharityWatch, said his organization will likely put Wounded Warrior’s program spending closer to 54 percent, and the nonprofit would probably continue to receive a “C” rating. Mr. Borochoff explained that his organization doesn’t count spending on joint-cost spending or donated media as program expenses because most donors don’t think of them as programming.
The Better Business Bureau’s Wise Giving Alliance takes a more generous view of donated media and joint-cost reporting than other watchdogs, allowing nonprofits to report such costs and in-kind donations as program expenses as long as the organization meets accounting standards, said Bennett Weiner, chief operating officer of the alliance. The organization suspended Wounded Warrior’s Wise Giving Alliance accreditation in March citing news stories about the group. Since then, staff members have been reviewing documents from Wounded Warrior, including public-service announcements, advertisements, and fundraising appeals, to determine if the group’s reporting meets general accounting standards.
So far, it looks like it does, Mr. Weiner said, adding that Wounded Warrior has readily shared documents with his organization and has been willing to meet in person to answer questions. It plans to release a decision on whether to reinstate the charity’s accreditation in the coming weeks and is reviewing Wounded Warrior’s latest filings, he said.
Mr. Borochoff noted that while Wounded Warrior does not receive top ratings from his organization, there are charities that receive far worse grades, including other veterans groups.
“It’s really not worse than most charities,” he said
Media Scrutiny
Still, the group is reeling from negative news coverage it’s seen this year. A series of media stories have rocked Wounded Warrior since January, when The New York Times and CBS released the results of separate investigations into the charity’s spending. The news organizations alleged that the charity spent less on helping veterans than similar nonprofits and said that employees had splurged on conferences, parties, and expensive travel.
Wounded Warrior officials have said the media reports of its finances and practices were largely exaggerated and stated that the organization spent more than 80 percent of its expenses on programs.
In March, the group’s trustees fired Steven Nardizzi, its chief executive, and Al Giordano, its chief operating officer. They hired retired Army Lt. Gen. Michael Linnington as chief executive in June to replace Mr. Nardizzi.
The organization faces big challenges due to the criticism of its spending. In an interview in June, the charity’s chief financial officer, Ron Burgess, said donations had started to slide and noted that it may take years for the organization to recover. Still, he said he remained optimistic and hoped to see a strong year-end fundraising push.
Mr. Linnington’s salary will be $280,000, according to news reports, much lower than the more than $430,000 Mr. Nardizzi was paid in fiscal 2015, which included a bonus of $88,000, according the group’s 990.
