WWP Revenue Declined 20% After Controversy
May 18, 2017 Mark Hrywna
Contributions to Wounded Warrior Project (WWP) dropped almost 20 percent last year but future declines could be more precipitous given the timing of the charity’s fiscal year.
WWP reported $321.8 million in total revenue according to its Internal Revenue Service (IRS) Form 990 for the Fiscal Year Ending September 2016, filed this past April 4 and posted on the organization’s website. That’s down more than 19 percent from $398.6 million reported for the year ending September 2015.
Virtually every revenue category on the Form 990 reported a decline from 2015 to 2016:
- Federated campaigns, -18 percent, to $3.8 million;
- Fundraising events, -96 percent, $49,931;
- Noncash contributions, -32 percent, $3.7 million;
- Royalties, -14 percent, $9.6 million; and,
- Investment income, -46 percent, $7.2 million.
Weeks after stories in The New York Times and on CBS News, Chief Executive Officer Steven Nardizzi and Chief Operating Officer Al Giordano were fired and WWP instituted changes to certain policies and procedures but found no wrongdoing in an audit by attorneys and accounts. Another study by nonprofit expert Doug White also found no illegalities but took issue with some of the board’s handling of the crisis, as well as the media’s coverage.
White, the former director of Columbia University’s fundraising management graduate program, expects the 2017 Form 990 to look worse. “I believe it will continue to go down before it goes up,” said White, who last year authored a report about the turmoil and decisions made at WWP after the controversy. The loss in revenue could have looked greater if annualized because it was the second half of the year when the drop took place, he added.
Negative media attention hit the Jacksonville, Fla.-based organization in early 2016, after the holiday giving season, which is typically the busiest time of year for fundraisers and within the first quarter of the charity’s fiscal year. This past holiday season would have been the first since the turmoil and executive turnover at WWP and won’t be revealed publicly until the next tax form, likely filed in April 2018.
A spokeswoman for WWP said via email that the organization is “ahead of projections” so far in the middle of this fiscal year. The organization does not release annual revenue results until the fiscal year is over and auditors complete their annual audit work.
On the expense side, programs took the brunt of the cuts, down $49 million, almost 19 percent, to $213 million. Expenses attributed to direct response television (DRTV) and online saw a reduction of 53 percent, declining from $36 million to $16.6 million. On the balance sheet, net assets were up 11 percent, to $314 million, including unrestricted net assets of $308 million.
The organization announced widespread cuts toward the end of the most recent fiscal year, September 2016, including 15 percent of its 600-person workforce and almost half of its executive staff. Retired Army Lt. Gen. Michael Linnington, who took over as CEO in July, said at the time that the moves were aimed at consolidating “operations to reduce administrative costs and streamline the workforce to focus on areas identified as greatest in need.”
Staff reductions were mostly in health and wellness programs, including cutting a Soldier Ride team, eliminating the Transition Training Academy (TAA), and closing nine offices. New positions were added within mental health. Declines of 56 percent in office expenses and 45 percent in travel expenses were attributed to cutbacks announced in September.
At the time of the layoff announcement, Linnington estimated that the year’s revenue total would be about 75 percent of the previous year, or about $300 million, disputing estimates by Nardizzi at the time of more like $200 million. The difference in those estimates could be based in how one takes into account the fiscal or calendar year.
White noted that direct response television (DRTV) ads for the charity are “a lot less edgy,” and direct mail that he has seen does not include the logo or the fact that the piece comes from WWP. DRTV was one of the largest investments and fundraising tools, powering one of the fastest-growing charities in the country the past several years.
WWP had pulled DRTV ads in the wake of the negative media coverage. That could have an impact on acquisition and the donor pipeline in the near future, which would affect revenue in the coming years. New DRTV spots also seemed to have toned down the emotional appeal of previous ads.
White would expect other veterans’ nonprofits to try to cut into WWP’s market share but their mission is so broad, with such a long-term horizon, it remains to be seen if any other veterans’ organization is “fiscally capable of undertaking that.” Another organization to step up would need a much more vigorous profile and expansive mission, he added.
“I do feel that they’re a great organization and hoping the leadership is able to bring it back,” White said.
The timing of the fiscal year in relation to the controversy and the change in leadership that occurred after financials closed make it more difficult to assess the financials, according to Brian Mittendorf, a professor of accounting at Ohio State University’s Fisher College of Business, who followed the charity’s saga.
“The drop in contributions is less than many expected but we’re only really know after we see a full-year’s financial statements, post-controversy,” he said, adding that a 20-percent decline would reflect a 40-percent annualized decline if funds come in evenly across the fiscal year. “Especially given they had been raising more than spending for some time, the fallout seems manageable,” he said.
Net assets went up and with more than $400 million in unrestricted net assets, Mittendorf said, “the level of financial cushion is substantial.”