Wounded Warrior Project on the rebound financially following dismal 2017
By DIANNA CAHN | STARS AND STRIPES Published: April 20, 2018
WASHINGTON — The Wounded Warrior Project released dismal financial records this week for its 2017 fiscal year showing yet another precipitous fall in donations. But while the documents show a $91 million drop off in contributions and grants, the nonprofit organization said those figures don’t tell the story now.
Chief Executive Officer Mike Linnington said Thursday that the Wounded Warrior Project has finally turned the corner after a long and difficult slump in donations.
The organization, which offers a myriad of services to wounded veterans and their families, has seen four quarters of consecutive growth – compared to the same time frames in the previous year, he said. After a better than expected giving season at the end of 2017, WWP is ahead of its projected fundraising for 2018.
Those figures will not be reflected until financials are released in 2019.
“If you don’t know ’18 and you look strictly at ’15, ’16, and ’17 (financials), you’ve got to scratch your head,” Linnington said. “We are growing as an organization, growing in our impact to warriors.”
The 2017 records show donations plunged to $211.5 million in 2017, marking a drop of more than $160 million in the two years since scandal over spending rattled donors and sent the organization into a tailspin.
Linnington said donations in the first two quarters of the 2017 fiscal year, which started Oct. 1, 2016, were abysmal, bringing down results for the entire fiscal year. October through December usually mark the Christmas and end-of-tax-year giving season – the largest donation period annually for nonprofits. Financial records show WWP for the first time spent more than it brought in, with a deficit of slightly more than $5 million in expenses to revenue.
But as WWP continued its work to rebuild donor confidence, it has finally started to rebound, Linnington said. By the spring of last year, he said WWP’s donations were on the rise compared to the same period in 2016 and things have been improving.
Seeing the turnaround, WWP projected better numbers for 2018 – an estimated $25 million above the 2017 contributions – and donors have exceeded those projections so far, Linnington said. The 2017 giving season brought in more than $40 million in donations, and the first two quarters of fiscal year 2018 show that upward trend is continuing, he said.
Hoping to drive home the good news, Linnington revealed the organization’s projected 2018 budget – something he had previously been reluctant to do.
“We hit our low mark in ’16 and of course that is reflected in the 2017 [financial records],” he said. “In ’18, our budget [donations] is $236 million and we are $14 million ahead of glide path to get to that number. So we are really doing well in terms of revenue to budget.”
That’s not to say Wounded Warrior Project is fully out of the hole. Last year’s donations set a low bar compared to the charity’s glory days. The organization had reached contributions of $372 million before the scandal and it had projected to grow by now to a more than $400 million dollar charity.
But Linnington said the organization is “squeezing every nickel from every dollar” and reaching more veterans than ever – providing services for 132,000 veterans last year. The charity also benefited from a stronger economy, adding almost $10 million in earnings on publicly traded securities, according to the documents.
And it is finally looking at growing programs again.
“As revenues continue to surpass our expectations, we will spend more money on programs,” he said.
A hard road to recovery
The charity – founded after the Sept. 11, 2001 terrorist attacks – had been growing exponentially for years when, in early 2016, two major news organizations ran stories charging that WWP was spending lavishly on staff events and suffering a toxic work environment.
It also came under fire for spending too high of a percentage on fundraising – a criticism that landed it on the watch list of Charity Navigator, which evaluates nonprofits.
The spending allegations were later debunked by a forensic accounting of WWP’s finances, an independent examination by an expert on nonprofits and an investigation by the Better Business Bureau’s Wise Giving Alliance. Charity Navigator eventually removed it from the watch list. But with donations in free fall in March 2016, the WWP board fired its two top executives.
Linnington, who was brought in a few months later, took action to stem the hemorrhaging. He cut positions and trimmed excesses in event spending. The charity also cut a few programs, partnered with peer-to-peer, mental health and family-oriented veterans charities to share the burden and the benefits, and closed facilities in areas with smaller veterans populations.
For a while, the organization slowed its television ads but they have since returned to the airwaves, though Linnington said many of them now air late at night, when the ads are cheaper but still reach many veterans who are isolated. By investing in messages that reach not just their donors but also their beneficiaries, the organization can consider part of that fundraising expense in its programming budget – one of the issues that came to light during the investigations.
The 2017 financial records show cuts continued, with spending on programming at $165.8 million – a $47.2 million drop in program spending from the previous year and $96 million less than it was spending on programs in 2015.
The organization has maintained it continued to invest in mental health and physical wellness programs and Linnington said it will be growing program spending in 2018 to close to $200 million.
He said mental health programs will grow from $58 million to almost $63 million and physical health and wellness programs will grow by 20 percent. The organization also plans to increase spending from $24 million to $29 million for its independence programs that enable the most severely wounded warriors to remain living at home rather than being institutionalized, he said.
A worthy mission
With good news coming on the heels of such bad news, the 2017 financials raised some eyebrows. Nonprofit and fundraising expert Doug White, a former Columbia University professor who has just completed a book about the lessons for nonprofits on what happened at the Wounded Warrior Project, said he hopes the projections for the charity are accurate but is skeptical that the rebound will happen quickly after slowing its marketing the way it did.
“These kinds of things have long-term effects,” he said. “I think there is probably going to be some more fallout.”
In his examination, White concluded when the board fired its top executives though no financial wrongdoing was validated, it made a costly mistake that served to undermine long-term donor confidence. He said he wished Linnington could acknowledge that “bad decision” as he talks about rebuilding the organization. Linnington was not there at the time, and as CEO, he now answers to the board.
That said, White noted WWP still has a strong draw because its mission is sound.
“I tell people today that they should continue to donate to Wounded Warrior Project because it’s a really good organization,” he said. “I am hoping they will do well.”
Linnington said the full-year, month-over-month improvement gave him the confidence to believe that donors were back. He said he was so optimistic about Wounded Warrior Project’s positive turn that the organization has 70 job openings, which would bring the employee total to 700. At its lowest, WWP had cut to 532 positions.
“We are an organization that delivers programs through our employees,” he said. “I would not have 70 jobs on the street if I am not growing.”