Tuesday, August 16, 2016

A look at the 2015 Wounded Warrior Project Financial Statements

Since this blog previously discussed what can (and what cannot) be gleaned from the Wounded Warrior Project (WWP) financial statements from 2015, I figured I would revisit the question now that they have been publicly released.  The five things to look for were:

If you want to see how the crisis affected donations or changed WWP's spending approach, you’ll need to wait another year for it to show up in the financials.
As mentioned before, these financials cover the period prior to the fallout from media scrutiny, so there are not any operational changes here to note.  One feature worth noting, however, is that the disclosure on subsequent events does mention a reorganization planned for September 2016 to address concerns that have been raised.

If you want a complete picture, you will need to look at the consolidated GAAP (audited) financial statements.
As discussed before, the main reason GAAP financials are more informative for WWP than the IRS Form 990 is that they consolidate the activities of WWP and its controlled entity, the Wounded Warrior Project Long Term Support Trust (WWPLTST).  For 2015, this matters because WWP transferred $54,000,000 to WWPLTST, an amount that didn't register as an expense in the GAAP financials since they consolidate the two entities.  Surprisingly, the organization has decided to make a shift toward highlighting the results from the WWP Form 990, which lists this $54,000,000 as an expenditure devoted to programs.  This is perplexing, since it is hard to argue that shifting money from one of your organizations to another is spending money on veterans programs (that money shouldn't be viewed as spent until it is disbursed from WWPLTST).  I am not sure why the organization made this shift in focus, but I continue to stress that the Form 990 is misleading in this case and interested readers should stick to the GAAP financials.

Check the audited financials to see who conducted the audit and if they offer any mention of the developments in 2016.
Nothing earth shattering to report here.  Grant Thornton once again served as the auditor and provided an unqualified opinion on the financial statements.  As discussed above, the developments are described briefly as a subsequent event but there is no mention of a material consequence of them.  That said, Jim Ulvog noted the interesting tidbit that the audit report was issued by the Atlanta office in 2014 but switched to the New York office in 2015.

Examine the consolidated net asset balance to see how much of a financial cushion the organization built before the controversy.
As of September 30, 2014, the organization had accumulated over $283 million in unrestricted net assets (up from $173 million just one year prior). This number increased another $86 million in 2015 to $369 million.

Check to see if the organization chose to be more conservative in its accounting choices. 
The short story on this is it appears the organization largely continued its accounting choices from previous years, relying heavily on joint cost allocation and treating donated public service announcements as entirely program-related.  This remained a material aspect of their financials, with donated media, advertising, postage & mailing, and direct response efforts making up 50% of all of the organization's expenses; of that amount, 73% was recorded as program-related.

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