With growth, Wounded Warrior Project faces growing scrutiny
By David Bauerlein | The Florida Times-Union, Jacksonville (Tribune News Service) | Published: March 6, 2016
In the decade that Wounded Warrior Project has operated its headquarters in Jacksonville, it has generated huge fund-raising numbers that have turned it into one of the largest charities in the nation — a blitz of growth that has brought heightened scrutiny of how Wounded Warrior operates.
Its spending habits were the subject of January reports by CBS News and The New York Times after which the organization’s board of directors said it would conduct an independent review of the issues raised.
Wounded Warrior’s success also has put it at the forefront of the non-profit sector’s increasing use of strategies drawn from business world: investing in the brand, data collection and aggressive marketing.
“That’s no longer a controversial way of thinking in the non-profit world,” said Rena Coughlin, CEO of the Nonprofit Center of Northeast Florida, which provides support services to charitable organizations.
She said that after struggling through the recession, non-profit groups are looking for business models that will be sustainable and “move the needle” on their causes.
“That sometimes takes more infrastructure dollars than people are used to seeing on the bottom line of the balance sheet,” she said.
In Wounded Warrior’s case, its fund-raising machine has brought in donations at such a fast clip that even with the organization expanding programs at 24 offices nationwide while serving tens of thousands of veterans, it still amassed more than $200 million in reserves at the end of the 2014 fiscal year, the most recent for which financial reports are available.
Former employees interviewed by The New York Times and CBS News portrayed Wounded Warrior as an organization that steers too much of its donor dollars into events and entertainment for its own employees while short-changing programs for veterans.
Wounded Warrior pushed back hard against the reports, disputing both the spending figures and the characterization. But the organization’s board of directors issued a Feb. 1 news release saying it “takes very seriously” the concerns and would use independent advisors to investigate.
The board said last week it has hired Simpson Thacher & Bartlett and FTI Consulting “to conduct a thorough review on the concerns that have been raised.” Simpson Thacher & Bartlett is an international law firm based in New York. FTI Consulting is a global business advisory firm headquartered in Baltimore.
The board’s statement added “it would be inappropriate to answer questions about the process or the review itself until all the facts are known.”
REVENUES AND RESERVES HAVE SOARED
Founded in 2003 in Roanoke, Va., Wounded Warrior Project’s message of honoring veterans hit home as the United States went to war in Afghanistan and Iraq and a wave of fighters returned from the battlefield with physical and mental wounds.
The organization moved its headquarters in 2006 to Jacksonville, selecting the city because of its large population of active and retired military personnel as well as better access to air transportation.
Wounded Warrior has grown tremendously over the decade. About 600 people work for the organization at 24 offices nationally and an office in Landstuhl, Germany, according to Wounded Warrior. Nearly 300 of those employees work in Jacksonville.
In the 2007 fiscal year, Wounded Warrior’s posted $18.6 million in revenue. That soared to $342 million in the 2014 fiscal year, the most recent year for which IRS reports are posted on the organization’s web site. Forbes magazine now ranks Wounded Warrior as the nation’s 38th-largest charity.
Spurred by widespread marketing campaigns such as television commercials featuring country singer Trace Adkins, Wounded Warrior built its net financial assets — the amount it had on hand to carry on its work — from $6 million in 2007 to $248 million in 2014. The bulk of the assets were cash and investments.
Wounded Warrior’s total expenses were $248 million in 2014, so by that measure, the organization’s assets would cover an entire year of its work.
The Nonprofits Assistance Fund, based in Minnesota, says a common goal in the non-profit field is reserves to cover three to six months of expenses. At the high end, reserves shouldn’t exceed two years of expenses.
Wounded Warrior said its reserves meant it could offer to send monthly checks to veterans if a threatened shutdown of the federal government in 2013 had cut off Veterans Administration disability payments.
The organization says it’s “doubly important” to have sufficient reserve funding as it expands programs geared for veterans throughout their lifetimes. All are offered at no charge to veterans injured during service after Sept. 11, 2001.
‘YOU MEET A LOT OF GREAT PEOPLE’
The same week that the New York Times and CBS News reports broke, Wounded Warrior announced the launch of Warrior Care Network. It will spend $100 million over the next three years to help veterans struggling with post-traumatic stress disorder treatment at four medical centers in Atlanta, Boston, Chicago and Los Angeles.
Wounded Warrior says it has more than 20 different programs that served 144,000 veterans, caregivers and family members in the 2015 fiscal year, which is a big jump from 97,000 people served the previous year.
The services ranges from fielding calls at the resource center to giving long-term support through The Independence Program, which helps those with worst injuries.
The overall goal is to help veterans and their families make the transition from the military to civilian life.
At a recent Transition Training Academy class in Jacksonville, a group of veterans was learning about information technology with the goal of getting industry certification in the field.
Among those in the class is Omar Romney, a retired Army staff sergeant who served in Operation Iraqi Freedom. He also has taken part in Solider Ride, the group bicycle rides where “you go as fast as the slowest rider. ... The collegiality doesn’t get any better. You meet of a lot of great people on those rides.”
Yvette Coley, who served as an Army sergeant in Iraqi Freedom, is accompanied as always by her dog, Blondie, which she got through another nonprofit, Soldier’s Best Friend, that gives trained dogs to vets. The dogs help vets deal with stress from their time in combat.
Coley said bringing Blondie to college classes would get double-takes and questions from younger students, but at Wounded Warrior, there’s no need to explain to her fellow students in the Transition Training Academy.
“It’s a lot more comfortable here,” she said.
Kevin Rasch, Transition Training Academy manager, said IT is a high-growth job area and Wounded Warrior is expanding the classes, both at offices around the country and online, so more veterans can gain certification to apply for the jobs.
SALARY, SPENDING QUESTIONS
Supporters of Wounded Warrior point to the impact of its programs.
Jacksonville-based Southeast Grocers, parent company of Winn-Dixie, has donated $3.8 million over the past year, including a Fourth of July event that gave that day’s profits from Winn-Dixie sales.
Southeastern Grocers directs all its donations to the charity’s Independence Program, a cause that has resonated with customers and employees, said company spokesman Zach Bingham.
Regarding the media reports on Wounded Warrior, Bingham said that from “what we know of WWP and from talking to wounded warriors themselves, we feel these investigations have not yet fully represented the good work” the organization does.
Wounded Warrior’s critics, who regularly post on the organization’s Facebook page, say more could be done with the donations.
In postings on the group’s Facebook page, they blast the salaries paid to the organization’s executives. CEO Steven Nardizzi earned $473,000 in 2014, an amount Wounded Warrior says is appropriate for the group’s size.
Wounded Warrior also faced questions about how much of its spending actually assists veterans.
After the New York Times and CBS investigations ran, Wounded Warrior said an independent financial audit showed that for the 2014 fiscal year, 80.6 percent of its spending went to programs.
But the audit notes that the figure showing program spending includes a large proportion of the expense for fund-raising activities, such as direct mail, online and television campaigns. Wounded Warrior spent $68.5 million on the fund-raising, and it counts $40.9 million of that expense as spending on program services.
If that nearly $41 million weren’t counted as a program expense, then the percentage of spending that goes to programs would drop to 67 percent.
Wounded Warrior says its fund-raising isn’t just about raising money because it also spreads the word about the challenges facing injured soldiers, sailors and airmen, and that translates to people volunteering to help in Wounded Warrior programs. The fund-raising appeals also inform veterans and their families about Wounded Warrior so they will register with the organization and get access to its programs.
The organization says it uses generally accepted accounting principles in how it determines what portion of its fund-raising costs will count as expenditures for programs.
Wounded Warrior has likewise pushed back on characterizations of lavish spending on events for its employees. Based on a review of tax forms, CBS reported the organization spent about $26 million on conferences and meetings in 2014. Wounded Warrior says 94 percent of that went to program expenses for veterans and their families, such as mental-health programs.
CBS reported Wounded Warrior spent $3 million on an annual “all hands” conference in 2014 for its employees held at the five-star Broadmoor hotel in Colorado Springs. Wounded Warrior called that figure “absurd and patently false.”
The non-profit has used Jacksonville-area hotels for training and meetings, but would not identify them. The group says it picks hotels based on getting discounted rates.
Wounded Warrior Project has not announced any changes in response to the national media coverage. Whether it results in shifts in how Wounded Warrior does business could hinge on the results of the board’s review.
The board has not said if the report will be made public.
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