Wounded Warrior Project reveals how criticism over spending and overhead costs could threaten more nonprofits
By now, chances are good that you have probably heard about the shakeup earlier this month at The Wounded Warrior Project.
The already well-known nonprofit became something of a household name earlier this year when a certain outspoken presidential candidate by the name of Donald Trump shone the prime time spotlight on the organization.
Founded in 2003, The Wounded Warrior Project (WWP) had been doing very well in recent years, raking in nearly $350 million in 2014 alone.
But it wasn’t how much money WWP was earning in donations that finally caught the public’s attention. It was just how much it was spending and more importantly, what they were spending on.
According to WWP’s most recent 990 IRS filing, it was shelling out over $26 million on conferences, conventions, and meetings alone. That single WWP expense is greater than the entire annual operating budget of most nonprofit organizations. (Over 68%, in fact.)
Wounded Warrior is just one example of how profligate spending can bring an organization down.
But does the real problem lie within large operating budgets?
Or, as some suggest, do donors really only care about nonprofit overhead when it concerns spending that donors consider to be wasteful?
How much is too much?
As the story on WWP developed, the narrative shifted from the percentage of its budget it was spending to the types of things it was spending its donations on.
One notable over-the-top example was the WWP’s annual “all hands” meeting. The organization spent lavishly to fly its staff to distant destinations.
WWP’s former CEO, Steve Nardizzi, even once famously made his entrance by abseiling 10 stories down the side of a building at one of these annual meetings, which reportedly cost the organization over one million dollars.
With this type of spending in mind, it’s a good idea to find out just how much leading industry experts recommend nonprofit groups should spent on operational and program costs.
The following table from the National Center for Charitable Statistics breaks down the most common figures:
According to Charity Navigator, Wounded Warrior was spending upwards of 40% of its revenue on non-program related expenses. (Even though the organization itself claimed it was only spending 20%.)
This level of spending is considered the norm among for-profit businesses, a routine average that is often referred to as “reinvestment costs.”
And according to a recent interview with Guidestar president and CEO Jacob Harold, he laments that “groups that obsess over lowering expenses can lead to under-investment in equipment, technology and leaders.”
Bottom line: the Wounded Warrior Project scandal shouldn’t have to do permanent damage to philanthropy. Help your nonprofit learn from their mistakes so that your organization will be in a better position going forward. By increasing transparency and accountability,
Let it be a lesson to the nonprofit industry that, while many modern donors see nonprofits the same way as for-profits in that they understand “it takes money to make money,” allowing that idea to take on a life of its own has real consequences.