Nearly five months has passed since the CBS News and New York Times investigations of the Wounded Warrior Project (WWP) generated a crisis of confidence surrounding the organization's spending practices. During that time, we have seen long-serving executives removed and new executives hired, an external review initiated by the organization, questioning by Senator Chuck Grassley, and a vow to bring in new board members, but no new financial information. However, since the previous financials were released in the spring of 2015, new financials are sure to be in the offing. Here are a few tips for reviewing the financials when they are released.
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.
Believe it or not, the current financials only cover October 1, 2013 – September 30, 2014, so the new financials, when released, will cover October 1, 2014 – September 30, 2015. Thus, the time period covered by the new financials ends nearly four months before the crisis so won't reflect the fallout.
If you want a complete picture, you will need to look at the consolidated GAAP (audited) financial statements.
In 2013, WWP established the Wounded Warrior Project Long Term Support Trust (WWPLTST), to house funds that will support veterans' long-term needs. Since then, WWP has been increasingly transferring funds to WWPLTST to invest. The two organizations, though closely intertwined, file separate form 990 financial statements, meaning those transfers from WWP to WWPLTST will appear as grants made by WWP even if they remain invested at WWPLTST. Such transfers between related parties are eliminated in GAAP financial statements, which will instead consolidate the two entities and thereby provide a more complete picture of their combined activities.
Check the audited financials to see who conducted the audit and if they offer any mention of the developments in 2016.
Though shocking revelations in audit opinions are rare, it is possible the auditor’s report or financial statements will offer some language discussing the controversy at the organization in the form of a footnote on subsequent events and their potential impact on the organization. Further, WWP in particular has the interesting feature of having three different auditors over the past three years (LBA Group in 2011-2012; BDO in 2012-2013; and Grant Thornton in 2013-2014). To have yet another auditor change for 2014-2015 would be notable.
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). How high did this number get by September 30, 2015?
Check to see if the organization chose to be more conservative in its accounting choices.
Though activities after the crisis are not covered in the financial statements, many of the accounting choices that underlie the statements could have been made after the crisis (after all, the financial statements are not being released until well after year-end). In particular:
- The organization’s largest expense item in 2013-2014 was donated media ad value, representing over 23% of all expenses. The entire amount of this line item was recorded as a program expense. Did this practice of treating the ads as only a programming-related expense continue?
- Beyond donated media ad value, the organization recorded another $51.6 million (17% of all expenses) for postage, mailing, and other advertising-related expense items in 2013-2014. Among these costs, over 62% were treated as related to programming. Did the organization continue to treat such a large percentage of advertising and mailing costs as programming?
In short, though the new financial statements for Wounded Warrior Project will not tell us everything, particularly about the organization's future direction, they can nonetheless be informative if viewed with care.