Wednesday, May 18, 2016

The Fundamental Issue in the Wounded Warrior Project Inquiry

The recent letter released by Senator Chuck Grassley in his examination of the Wounded Warrior Project delves into, and seeks additional clarity on, the organization’s accounting practices, in particular those that give rise to its reported 80.6% program expense ratio.  As an accountant, I am tempted to delve into the details (Jim Ulvog does so deftly here).  However, I will instead focus on what I believe is the fundamental question being asked of the organization.

As noted here before and underscored in the letter from Sen. Grassley, much of the program costs that underlie the 80.6% figure are donated advertising as well as joint costs stemming from mailings, advertisements, and promotional items.  To this end, a pattern has clearly emerged when the organization’s spending decisions are questioned.  When critics accuse the organization of spending too little on meeting veterans’ needs, defenders quickly rush to note that over 80% of expenses are on programs for wounded veterans and their families.  Then, when questioned about a large portion of those costs consisting of advertising, mailing, and promotions, defenders often respond by noting the importance of such activities to grow an organization so it can scale to the size of the problems it confronts.

This brings us to the fundamental issue: growth is not a program.  If these activities are being treated as program costs, the defenders of these activities should be prepared to point out what was accomplished by them beyond raising funds or expanding the brand.  How did wounded veterans benefit from the advertisements and promotional items?  Was it money well spent or would veterans have benefited more from spending on different programs?  An alternative tack would be to state that fundraising is critical and that these are not current programs but rather efforts to raise money for future programs; this, however, would suggest the costs should be treated as fundraising, not program, expenses.  In short, the organization’s defenders can’t have their cake and eat it too – a clear and consistent answer seems necessary to move things forward.

In the coming weeks and months, we should expect some clarity on this fundamental issue, be it from additional communications by the organization itself, findings by the inquiry by Sen. Grassley, or both.

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