Donations to the Wounded Warrior Project veterans' charity plummeted in the second half of the 2016 fiscal year, down $70 million, according to newly released financial records. The drop reflects a charity in crisis after last year's uproar that led to the ouster of the top two executives.
But Chief Executive Officer Mike Linnington says the sharp decline in donor confidence has leveled out. WWP has a long, slow recovery ahead, he said, but it is no longer in freefall.
"We have turned the corner, and donations over the last six months have exceeded the goal we set for ourselves," Linnington told Stars and Stripes, declining to release figures from the last seven months. Without the 2017 figures, it's difficult to assess the fiscal health of the charity.
Linnington took the helm at WWP in August, six months after CBS News and The New York Times came out with reports that found lavish spending and a toxic organizational culture. The charity -- founded after the Sept. 11, 2001, terrorist attacks -- had been growing exponentially for years and offered a myriad of programs for service members. But it came under fire for spending too high of a percentage on fundraising -- a criticism that landed it on the watch list of Charity Navigator, which evaluates nonprofits.
That assessment was later debunked by a forensic accounting of WWP's finances, an independent examination by an expert on nonprofits and an investigation by the Better Business Bureau's Wise Giving Alliance. But with donations in a tailspin over spending perceptions in March 2016, the board fired CEO Steve Nardizzi and Chief Operating Officer Al Giordano.
Linnington came in last summer promising to right the ship and quickly announced a reorganization, cutting 85 of 600 employees and trimming excesses in event spending. The charity also cut a few programs and closed facilities in areas with smaller veterans' populations.
The goal was to "cut deep, cut once, then restore whatever confidence was lost to quickly build programs," he said.
"It was a tough time," Linnington said. "I get a little emotional just thinking about it. Folks were very uncertain."
WWP's tax forms from fiscal 2016 reveal just how quickly the spigot stopped.
Revenue fell $77 million, from $398.9 million in 2015 to $321.8 million -- a 19 percent decline in line with what leaders at WWP predicted. Donations during that period dropped nearly $70 million, from $372.6 million to $302.7 million.
According to its Form 990 filing for charities, WWP spent $213 million on programming in 2016, a drop of $49.4 million from the prior year.
The biggest cut to expenses was a $48 million decrease in grants to a trust for members of its Independence Program. With over 600 warriors enrolled, the Independence Program serves those with severe traumatic brain injury, spinal injury or other severely disabling permanent injuries, enabling them to receive needed services while living at home.
The trust, which serves 278 veterans, ensures that they can remain at home even after their caregiver dies. Not funding the trust could harm the long-term viability of that effort, but did not impact anyone enrolled, WWP Chief Financial Officer Eric Miller said.
Other cuts involved closing a transition training academy that Linnington said was having good impact but was only available in two locations, and tightening expenditures on alumni programs like Soldier Ride, a signature event in which wounded veterans cycle across the country and visit with the president at the White House.
As the organization moved into fiscal 2017 in October, Linnington said it was not clear how deep the losses would go. They budgeted based on their assessments. WWP would not release its budget for 2017, but Linnington said donations are up and have surpassed their expectations. Support is now consistent, he said, and there are "positive indicators that generous Americans and small, medium and large corporations are supporting us again," he said. "I certainly don't plan on cutting any more programs."
That's not to say Wounded Warrior Project is out of the woods. Linnington said it will take several years to get back to the $400 million in donations that the organization reported two years ago.
Spend money to make money
After Nardizzi and Giordano were ousted, they strongly defended their spending methodology, arguing that they were pouring money into mass mailings and TV ads because the returns were huge. Donations were climbing year over year, and that was reflected in more programs and expanding reach.
But the optics were a problem. WWP appeared to be spending lavishly on events for warriors and for staff -- something that didn't sit well with donors who wanted to see the value squeezed out of their dollar. The organization came under fire for spending only 74 percent on programming.
In recent months, the BBB report cleared the organization of any wrongdoing and Charity Navigator and GuideStar raised its rating.
The newly released financial documents show that WWP continued to invest in fundraising. In fiscal 2016, spending on programming dropped to 70 percent, down over 4 percent from the prior year, while fundraising increased 2 percent to 23 percent.
"We know that at the end of the day, if you want to have the impact we want to have, you have to spend money to raise money," Linnington said. "If we didn't spend money on direct mailing and direct solicitation, we would be a $50 million organization. To be the one that has the biggest impact and support others, we have to continue our investment in fundraising. BBB, Charity Navigator and GuideStar all agree."
The allegations that led to the crisis were "either grossly exaggerated or incorrect," he said, although the organization learned some lessons about optics.
WWP is now spending less on alumni activities, he said, by running them more humbly. It is partnering more with veterans organizations like Team Rubicon, Mission Continues and Team Red White and Blue to reduce engagement expenses.
The crisis, he said, has forced everyone to devise ways "to do things better."
Without a release of the 2017 figures, it's difficult to assess the fiscal health of the charity. But Linnington insists that WWP is on the mend.
It just advertised to fill 50 new positions, Linnington said, and more than 2,000 people applied.