Tuesday, November 20, 2012

Helping Wounded Veterans

The American public has a strong desire to help wounded veterans as they return home.  In this vein, I have recently been struck by the prominence of the Wounded Warrior Project.  ABC/ESPN, Heinz, Under Armour, the NFL and the PGA Tour, among many others, have sponsored the Wounded Warrior Project and/or publicized its efforts.  It led me to wonder what other charities serve wounded veterans and how they differ from one another.  I decided to look into three prominent charities that seek to help wounded veterans: the Wounded Warrior Project, the Fisher House Foundation, and the Injured Marine Semper Fi Fund.  Before discussing what their financials reveal about each organization, a bit on their stated missions.

The Wounded Warrior Project (WWP) states the following mission:

The mission of the Organization is to Honor and Empower Wounded Warriors. Our purpose is threefold: to raise awareness and enlist the public’s aid for the needs of severely injured service men and women; to help severely injured service members aid and assist each other; and to provide unique, direct programs and services to meet their needs. Our vision is to foster the most successful and well-adjusted generation of wounded warriors in our nation’s history.

The Fisher House Foundation (FHF) explains its main objectives in the following:

Fisher Houses are facilities constructed for the purpose of providing temporary lodging for members of the armed services and their families receiving care in military and veterans hospitals.  The Foundation was formed for, and program services consist of, constructing and donating Fisher Houses to various branches of the U.S. armed services and the Department of Veterans Affairs (“Donees”), providing gratuitous guidance and supervisory, as well as monetary, assistance in connection with the Donees’ management and operation of the Fisher Houses.

Finally, The Injured Marine Semper Fi Fund (IMSFF) offers this:

The Fund’s primary goal is to provide financial grants and other assistance to Marines, Sailors, and/or family members of Marines and Sailors who have been injured or face critical illness in the line-of-duty, by assisting in meeting their financial needs.

Clearly, each organization has a similar overall goal but both the scope and approach of the missions are different.  What is of interest to me is how their financial statements reveal the degree to which their objectives are being achieved.

To get a sense of scale, the total revenues for of each organization in 2011 are presented next (all data is from the respective organizations' audited financial statements covering fiscal year 2011).

The prominence of WWP is apparent from the fact that its revenues are more than three times those of FHF and nearly eight times more than IMSFF.  In terms of where those revenues go, the primary measure of effectiveness of nonprofits is the program expense ratio, which indicates what percentage of the organization's expenses go to programs (as opposed to fundraising or administrative costs).  The program expense ratios for each organization are presented next.

Lest one conclude that WWP vastly underperforms the others, it should be noted that any program expense ratio above 80% is considered quite good, so this information alone should not be concerning. In fact, the 83% program expense ratio is a point of pride stated on the WWP website and was sufficient for WWP to be given the BBB seal of approval.  On the other hand, the data does point to the extreme efficiency of both FHF and IMSFF, which is commendable.

What the standard program expense ratio does not tell is what programs are being supported by these expenditures.  It is often the case that a charity will have multiple stated objectives, and efforts to achieve any such objective fall under the program expense category.  To get a feel for how these organizations really differ, consider the types of program expenses they incur.  The next three charts show what percentage of program expenses go toward advertising (i.e., awareness), grants, employee compensation, and other expenditures.

Clearly, both FHF and IMSFF are focused primarily on financial assistance and grants.  In particular, the grants for FHF consist of donated Fisher Houses, scholarships, and donated airline tickets for veterans’ families.  The grants for IMSFF are primarily financial assistance provided directly to injured Marines and their families.  WWP, however, paints a different picture, one of an organization primarily focused on raising public awareness.  While it is up to donors to decide which approach they prefer to support, hopefully all will become informed before making this choice.


  1. I do not watch TV ads much (thanks DVR), but the WWP ads even caught my attention. They are significantly longer, and are quite good in raising awareness. I was wondering how costly those were. As i understood the post, the ad spends do not lead to lower expense ratios because of WWP's "raising awareness mission." is that typical? Do all charities include marketing as part of their core expenses?

    1. Thanks for the comment. Yes, many charities include raising awareness and/or public education as part of their mission, and are thus able to include such costs as being "program-related". The amount of such awareness efforts vary widely, however, as in this case. In fairness to WWP, much of their ad expenses are associated with donated ad time. But, if you want to restrict attention to cash expenditures and exclude such ad time from consideration, their program expense ratio would be poor, even below what BBB considers acceptable (a low hurdle).

  2. I take issue with the statement that "the primary measure of effectiveness of nonprofits is the program expense ratio, which indicates what percentage of the organization's expenses go to programs (as opposed to fundraising or administrative costs)." In what universe is how much is spent on programs or the ratio of fundraising and administrative costs to all costs a measure of effectiveness. If I spend $5 to feed a family a meal but someone else feeds the same meal to a family for $10 does that mean I'm half as effective?

    If I offer total mind, body, and spirit training, counseling and educational programming to wounded warriors that result in 90% becoming employed in good paying jobs does that mean that the fact that I have larger administrative overhead and have to raise some serious funds to support that program makes that program less effective than giving out $500 grants to wounded warriors.

    Donors want programs that work - that solve real problems - that is what "effective" means. Don't confuse how much is spent (accounting) with how much good is done with what is spent (effectiveness).

    1. Geoffrey,

      I am inclined to agree. To be precise, I should state that the program expense ratio is the primary accounting measure that people rely on. As you'll see from reading on, I believe it falls short of telling the entire accounting story -- it only says what percentage of resources are expended on the mission but not precisely where those resources are invested. Further examination of the accounting can tell us that. What accounting cannot tell us is how effective those resources are. While there are good attempts at measuring impact, there is not yet a universally and objectively applied measure we can rely on. Perhaps that's on the horizon...