Tuesday, March 22, 2016

Is Wounded Warrior Project an Example of Too Much Money?

The CEO and COO of the Wounded Warrior Project were fired a few weeks ago over spending practices at one of the nation’s largest charitable organizations for veterans.

It appeared to stem negative stories circulated after reports by the New York Times and CBS-TV.  Stories such as these:
The story highlights two issues facing associations and nonprofits:
1) the “too much money” syndrome and
2) the challenge of news media reporting (or mis-reporting) on nonprofit finances

Too Much Money Syndrome

Years ago, a board member and farmer told me ...
  • “Nothing ruins a good organization like too much money.”
I was thinking about this issue before the Wounded Warrior Project news broke because the executive director of a small nonprofit asked me for help in responding to board members suggesting they were spending too much on fund-raising. She shared with me that the World Wildlife Fund (WWF) was spending only 10% of total revenue on fund-raising.
Here’s what I shared with her:
  • Note that WWF’s “accountability” page uses % and not dollars. In 2014, they spent $221 million … if they allocated 10% to fund-raising, that would be $22 million … not bad for fund-raising, right. Their 2014 IRS990 shows they spent $98.5 million on salaries, employee benefits, payroll taxes and office expenses. That is 44.5% of their total expenses. Here is link to their IRS 990 form.
I also shared with her the information on Ducks Unlimited.
  • Note that DU shows it spends 15% on fund-raising. With a budget of $172.6 million, that means DU is spending about $25 million on fund-raising.  Here's the link to their IRS 990.
When I worked at a large, international association, our CEO’s advice was simple, “don’t spend even one dollar without considering what would a member say about how you are spending his/her funds.” Great advice even through a "small percent" of a multi-million dollar budget amounts to a lot of money for most people.

Media Misreporting

The story also highlights the media’s use of simplistic metrics when covering organizations. After the New York Times and CBS reports on the Wounded Warrior Project, the Charity Defense Council issued a comprehensive analysis headlined Material Errors and Omissions Uncovered in Media Reporting on Wounded Warrior Project.  Highlights included:
  • What’s better: a bake sale with 0% overhead that raises $10 for the poor, or a professional enterprise with 15% overhead that raises hundreds of millions? 
  • The New York Times and CBS overlooked a fundamental tenet of fundraising, which is, the more you invest in it, the larger your revenues will be.
  • Overhead and fundraising ratios are simplistic financial metrics that tell donors nothing about what good the organization is doing. 
  • Reporting Fundraising Ratios Without Revenue Misleads and Inflames the Public and Damages the Environment for Giving. 
If you are an association professional, what steps do you take with the issues of too much money and media misreporting?

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