New Veterans’ Charities Race Past Broader Sector
December 2, 2013 Mark Hrywna
The creation of veterans’ charities has outpaced the rapid overall growth of nonprofits during the past decade. Despite what seems like a regularity of some veterans’ charities to be in the news for alleged malfeasance, veterans-related charities have fared well relative to overall charitable giving. Some of the largest and oldest organizations are at least holding steady in terms of revenue while charitable giving plummeted sector-wide due to the recession.
The creation of charities boomed after the Sept. 11, 2001 terrorist attacks, so, too, has the proliferation of veterans’ charities during and after conflicts in Iraq, Afghanistan and elsewhere that have increased the numbers of military personnel returning home. The number of veterans’ charities established since 2000 is up almost 77 percent, compared with 43 percent for all charities. The gap is more pronounced since 2008, according to The Urban Institute in Washington, D.C.
The number of veterans’ charities since 2008 is up 41 percent compared with 19 percent of charities in general. Meanwhile, revenues are up 48 percent among veterans’ charities versus 15 percent for all charities started since 2000. And since 2008, revenue for veterans’ groups that were created is up 12 percent compared with 5.5 percent overall.
The NonProfit Times reviewed financial data from the Internal Revenue Service (IRS) Form 990 for 10 charities (see the accompanying chart on page 4) related to veterans or those that provide some services for veterans or activity duty soldiers and/or their families.
Few organizations — a mix of new and old as well as direct service and advocacy — had anything but positive growth since the recession. Some were essentially flat in terms of revenue while others experienced double-digit increases, far better than overall charitable giving.
The 10 charities examined had total revenue increase by more than 45 percent between the Fiscal Year Ending 2009 and Fiscal Year Ending 2012, with only Paralyzed Veterans of America (PVA) experiencing single-digit growth, at 1 percent. Contributions and grants increased 31 percent and total assets were up 19 percent. Total expenses jumped by almost 25 percent during that same period.
Few charities – veterans or otherwise – have experienced the type of growth as that of the Wounded Warrior Project (WWP). The Jacksonville, Fla.-based organization only recently marked its 10-year anniversary but has nearly doubled total revenue in each of the past four years.
Older, established veterans’ charities are making efforts to re-brand and re-introduce themselves to younger generations as the newer organizations on the block see revenue soar.
The wild growth for WWP was part of a concerted effort devised to reach 100,000 veterans and $380 million in annual revenue by 2017. “It was a conscious decision to grow at that rate,” said Executive Director Steven Nardizzi. Revenue doubled from $74 million to $154 million last year, and is on pace for $220 million in 2013.
“The executive team came together in 2008 and said we need to be able to expand at a much greater rate if we’re ever going to achieve the goal of making this the most successful generation of warriors. We knew that if we didn’t accelerate the rate of growth, we wouldn’t meet their needs,” Nardizzi said.
Like most veterans’ charities created during the past decade, founders of Wounded Warrior cited a gap in services that they sought to fill. “There were some generational gaps, services to my dad and uncle’s generations and the program models they had, which worked well for them. We didn’t believe they were as beneficial or served the needs of a new generation of warriors,” said Nardizzi. He helped found Wounded Warrior Project in 2003 and previously spent a decade at Eastern Paralyzed Veterans Association (since rebranded as United Spinal Association).
As other organizations invested less in fundraising, particularly direct response, Wounded Warrior did the opposite. “We said those are the givers who are going to stay with us during a tough economy,” Nardizzi said. “Individuals will find a way to continue to give to a cause they care about.”
Much of its success can be attributed to acquiring monthly donors through direct response television (DRTV). “Our DRTV campaign is very similar to others in the industry that really advocate for monthly giving campaigns. It’s incredibly effective to get donors who will commit to you in a longer period of time so you don’t have to re-solicit over time,” saving on that expense, he said.
WWP launched with an investment in direct response predominantly in 2008 but it wasn’t until 2010 that it started the DRTV campaign.
WWP now has about three million donors, focusing on traditional direct mail but its fastest-growing segments are online and DRTV. “We do a lot of cross-channel appeals. The true benefit we’re getting from direct response channels is not just the amounts we make through traditional solicitations. It’s also the other ways donors find to give, coming out to events if you’re a direct mail donor, online if you see us,” Nardizzi said.
DRTV is “a game changer in opening up another audience that has scientific methodology to track, project future growth in revenue and return on investment,” Nardizzi said. “It’s much more effective to convey on television. You see warriors and their families talking about their struggles,” he said. If a great story on video were all it took to raise money, however, all veterans’ charities would be seeing revenue surge. “I think it’s a mix. It’s a top of mind issue. You don’t want to detract from that, but we differentiated our ability to grow, our scope and our ability to achieve,” he said.
A lot of veterans groups target solicitations toward former military but he said Wounded Warrior went for a broader base of appeal.
“This is probably the patriotic response. On the one hand it makes sense, on the other hand, it’s going to be the kind of thing they’re going to have to work at sustaining. With the war winding down, and less media attention, it will take some additional energy,” said Patrick Rooney, associate dean for academic affairs and research at the Lilly Family School of Philanthropy at Indiana University-Purdue University in Indianapolis, Ind. From a fundraising perspective, he said a lot more military veterans are surviving, with fewer deaths but possibly more wounded soldiers returning home.
“The level of need we see is going to continue beyond combat operations in Afghanistan,” said Jim Knotts, president and CEO of Operation Homefront in San Antonio, Texas. That will make post-2015 critical to charities such as Operation Homefront because of the scheduled withdrawal of all troops from Afghanistan next year.
Knotts is afraid that the American people won’t be hearing about the war in Afghanistan and will think that families don’t need help. “After 12 years of war, families will need help. Program needs might change but military families, particularly our wounded, will need help for years to come,” he said.
Knotts said there tends to be another spike in need five to six years after military personnel have left the services, reaching a critical life change of some kind.
The primary focus for Operation Homefront is emergency financial assistance in the form of cash grants to cover the most basic needs such as rent, utilities and car repairs. After expanding eligibility requirements last year, the organization this past summer had three times the requests for emergency assistance that it normally does.
The organization began the process of converting from about 20 chapter-affiliates to one national organization during the past calendar year, driven by a strategic plan that requires a different model to be sustainable. It has had revenue, both from contributions and in-kind, jump during the period from almost $25 million to $67 million.
Knotts doesn’t expect a rash of mergers or acquisitions among military charities if support fades. “A lot of them will close their doors once the war ends due to a lack of funds,” he said. Most are very small or local or regional in nature and didn’t expect to still be in existence a decade later.
“We know need is going to be there. The question will be whether the resources will be there,” Knotts said.
Like all nonprofits, established veterans’ organizations for years have leaned on robust direct response and direct mail programs for fundraising. At Paralyzed Veterans, the mail program last year accounted for $59 million of the charity’s $101 million in total expenses, with $28 million classified as fundraising expense. For Veterans of Foreign Wars (VFW), expenses classified as “direct mail and dues notices” totaled $45 million ($24 million as fundraising) of its overall $91 million in expenses last year.
When the economy declined in 2008, however, some charities looked for ways to cut expenses and one of those ways is typically to reduce acquisition mail, the search for new donors.
Disabled American Veterans (DAV) mailed about 31 million acquisition pieces in 2007, which dipped by a third to 22 million in 2008. Today, DAV mails about 25 million pieces, still about 20 percent less than five years ago “You just can’t cut back too much for too long. You have to pay for the acquisition. You need to get additional donors and future donors,” said Controller Anita Blum.
The biggest challenge are response rates, something all nonprofits are experiencing, according to Blum. DAV’s response rates in 2007 ranged from 2.8 to 3.2 percent and now acquisition response rates are more like 1.5 to 1.8 percent. With the natural attrition of a donor file, there’s a need to keep replenishing names that are lost each year, she said.
VFW’s mail volume is down almost 11 percent from 2010-11 to 2012-13 to 56 million, and acquisition is down more than 37 percent, from 12 million to 7.5 million this year, according to Quartermaster General Bob Greene.
Direct mail, as well as acquisition mail, have declined each year since 2010, according to Greene, with a more targeted approach and stepped up reactivation strategies to achieve a stronger mix of new donors and reactivated donors to ensure file health.
Since peaking in 1992 at 2.1 million, membership in VFW is down to about 1.4 million, declining about 40,000 per year, according to Greene. More than 1.1 million members are age 60 or older, with membership dominated by Vietnam-era vets. Veterans of the Gulf War and Iraq and Afghanistan make up about one-fifth of membership.
In July, VFW approved an increase in annual member dues of $10, roughly 37 percent on average, according to Greene. Approximately 80 percent of the increase is allocated for veterans’ services. Service officers with VFW helped more than 125,000 veterans obtain $3.7 billion in Veterans Administration (VA) benefits, according to the organization.
DAV served approximately 215,000 veterans last year, which represents a pending caseload of about 300,000 claims — more than the American Legion and VFW, according to Barry Jesinoski, DAV’s executive director.
“We’re aggressively, through our new awareness efforts, trying to get more folks into the fold who are younger but still concentrate efforts on the bread and butter segment of 55-plus,” Jesinoski said. During the past five to eight years, Vietnam veterans have become the largest segment of those served by DAV. The organization was founded in 1920 and was Congressionally chartered in 1932.
Cold Spring, Kent.-based DAV changed its logo last year — “something that stands out more, not just to younger folks, but to all” — and might expand efforts to include special events, starting with a 5K last month across the Ohio River in Cincinnati. The first one is a template that might be used in other places to raise awareness and raise funds, Jesinoski said. With a goal of registering 500 participants, DAV had more than 1,000 within three weeks of the event.
“This is not just about awareness of DAV for revenue stream building, but to get folks involved and to get them wanting to get out and spend the free time they have as a volunteer,” he said. He hopes to make November resonate around Veterans Day like what October has become for breast cancer awareness.
Founded in 1947, PVA said it helps more than 30,000 veterans annually, specifically those with spinal cord injury or disease. Direct mail revenue once accounted for 95 to 97 percent of overall revenue for PVA but today that figure is closer to 85 percent, according to CFO John Ring.
Acquisition has been consistent because generally PVA will lose donors through attrition and fatigue that need to be replaced, Fanning said. Acquisition has remained within 5 or 10 percent during the last few years, with PVA last year mailing some 41 million acquisition pieces, including lapsed donors. The mail program has been reduced, from $68 million in expenses in 2011 to $59.5 million last year, of overall expenses of $114 million and $101 million, respectively.
PVA has expanded into planned giving and major gifts, in addition to rolling out its own DRTV campaign in early October. A new branding effort was to be unveiled around Veterans Day.
“We saw that the rest of the industry was doing it (DRTV) almost without exception,” said Senior Development Officer Dave Fanning, pointing to St. Jude Children’s Research Hospital and the Humane Society of the United States and other DRTV campaigns, as well as other veterans groups like Wounded Warrior. “All of our media, via television was PSAs or interviews. This really was a new endeavor for us,” he said.
Wounded Warrior also has made corporate giving and cause marketing an integral part of their marketing efforts. A stroll through your local supermarket will yield the charity’s logos on more than a few products. “The best corporate relationships do more than just raise cash; they raise awareness and get involved in our programs,” Nardizzi said, pointing to partnerships with apparel maker Under Armour, U-Haul, Heinz and Brawny, among others.
Nardizzi is not shy about spending money to make money. It’s common to find six-figure salaries in addition to six-figure bonuses for some WWP executives, which can sometimes draw the ire of online message board comments and charity watchdogs.
“We don’t pay a lot of attention to them (ratings agencies), because if we got a C or three stars, it’s because we chose to. If you follow them, you make choices. If you followed them, you’d never be talking about the pace of growth we’ve had over the last four or five years, or the tens of thousands of warriors we’ve helped. We wouldn’t have invested in fundraising because it’s costly.”
One of the greatest handcuffs on charities now, is the idea not to spend money on fundraising and infrastructure “as if somehow they’re different from the cause,” Nardizzi said. “You may have good intentions but you’re not going to help a lot of people.” NPT