Increased discussion of Wounded Warrior Project financial statements

 

Let's do a few calculations. Image courtesy of DollarPhotoClub.com

Let’s do a few calculations before finishing this post. Image courtesy of DollarPhotoClub.com

Looks like the coverage of the Wounded Warrior Project financial statements has blossomed in the last few days. I will discuss that coverage and then discuss WWP’s public comments. Will throw in a reasonableness test of the conference expenses for no extra charge.

Rewriting the initial coverage

One of the things I have learned through blogging is that when a big story breaks there will be a few major articles covering the issue immediately. Over the next several hours many media outlets will repeat the initial coverage verbatim. I think this is done by buying republish rights from the major wire services or major newspapers.

The more fascinating thing I have learned is that over the next several hours there will be dozens of papers and wire outlets who rewrite the initial coverage. It will be done under the byline of their writer and with their copyright.

Having observed this multiple times and having read dozens of articles of follow-up, I have learned the rewrite jobs rarely bring in new information. They merely rephrase and reorganize the initial coverage, with a reference or two back to the initial article. If that was the only thing you read, you would have the impression the paper did their own original research.

I did a search on the net for coverage of WWP and noticed several dozen articles out on the same day which were nothing more than a rewrite of the initial Washington Post and CBS stories. Maybe it has always been that way and I’m only now catching on. I do find it amusing.

New coverage

Here is some coverage that goes beyond a mere rewrite:

1/28 – The Hill – Wounded Warrior charity pushes back against allegations of waste – Two of the major accusations by The Washington Post and CBS against WWP are spending $26M on conferences in total and spending $3M on a training conference in Denver. The overriding issue is essentially the same conversation about the functional expense allocation that has been in play for years.

WWP provided additional information.

On the total conference number, a WWP representative says 94% of that was on conferences for wounded warriors and their families themselves to participate in services.

I have been wondering if that might be the case. If you host a conference and the people attending are program participants, then it would be appropriate to categorize the conference facility and meals as program expense on the conference line item of the 990.

The issue requires more detail and more clarification. It is possible the overwhelmingly vast majority of the amount of the allegedly wasteful conference line is actually for services delivered to wounded warriors.

The WWP representative said the cost per person for the conference in Denver was $1,500 per participant. CBS asserts 500 people attended. That means the cost of the event was $750,000, not the unsupported amount of $3,000,000. The $1,500 includes hotel, meals, and transportation. The cost per person for four days would be a daily average of $375.  CPAs, like me, wish we could go to a four-day conference and only spend $1,500.

The representative said that information was provided to CBS while they were researching the story.

Representative says the organization didn’t pay for any booze at the conference. The mass quantities consumed would have been paid out the participant’s pocket. Have you even been to a military banquet or party? Or a conference of CPAs? Or a national training event of a Big 4 or Big 8 CPA firm? It’s not my thing, but trust me, there are barrels of booze flowing and bushels of currency left at the bar.

At a minimum, there is more clarification needed regarding the accusations. It is possible there is excessive spending. It is also possible there is no substance to the story.

Oh, can you say undisclosed conflict of interest? WWP representative says a senior executive of CBS is on the board of directors of WWP and is in fact the chair of the audit committee.

Reasonableness test of conference costs per person

Let’s do a reasonableness test. (Yeah, yeah, I know. The auditor brain in me always surfaces, huh?)

The 2014 990, available here, shows conference costs of $26,054,363 on line 19 of page 10. Let’s go with the publicly available employee count of 500.

Let’s see what that looks like if all of those conference dollars are for outlandishly expensive staff events:

  • $26,054,363 – 2014 costs for conferences
  • 500 – approximate number of employees
  • $52,108 – average cost per employee if all the conferences are for employees

That is a huge amount per person. Fifty grand for every employee.

Let’s say they actually spend at the rate claimed by CBS, which is $3M for 500 people for 4 days. That is an average of $1,500 per day. At that rate, how many conferences would be attended by every one of the WWP staff? Check out this calculation:

  • $52,108 – average spending per employee if conference expense is all for staff events
  • $1,500 – spending rate alleged by news reports
  • 34.7 – days that every employee spends at a conference
  • 5 – work days per week
  • 6.9, round to 7 – number of weekly conferences attended by every employee in the organization based on above assumptions

So for the accusations to be true as stated, WWP would need to send every one of their employees to 7 lavish conferences per year, with each conference lasting 5 work days. That is a week-long conference attended every seven weeks. Or call it 8.5 conferences at 4 days each.

Revise my calculations based on any assumptions you wish to change. Reduce the average spending rate. Cut the average conference to 4 days. Either of those revisions will give you more conferences. Increase the average spending rate. That will reduce the number of days.

Here is my audit-brain formed question after having walked through the above reasonableness test: Do you think the conference costs are all for lavish events for staff or is the vast majority of the cost for program participants?

Followup question: Ponder whether the answer to the first question impacts how you interpret the two major articles of media coverage.

1/28 – Chronicle of Philanthropy – Experts Urge Wounded Warrior to Address Criticism Directly, and Fast (not behind a firewall as I write this post) – Consultant to charities for brand management says WWP needs to the various accusations quickly. As time passes damage to the brand will increase unless WWP tries to address it. In the media world today you can’t that these kinds of stories stand unopposed, even if they were completely unwarranted.

1/28 – editorial by Doug White at Chronicle of Philanthropy – Charity Navigator Must Grow Up or Shut Down (full article dropped behind the pay wall by the time I wrote this post) – Article suggest that Charity Navigator has not helped and in fact has harmed many charities by focusing primarily on their definition of overhead ratios .

Update: A new link may take you to the full article. Two additional ideas in the article. First, by reinforcing the ‘overhead myth’ since its inception, Charity Navigator has not helped donors assess which charities are having an actual impact and the overemphasis on overhead has created an incentive for charities to either shortchange their infrastructure or fudge their numbers.

Second, in a cutting criticism, the author comments about the organization hiring a technology executive as new executive director. He suggests an organization designed to understand and advance the nonprofit community might need someone who understands philanthropy and how nonprofit organizations work.

Based on browsing the stories out on the ‘net today (Friday), looks like the coverage is all a rewrite of the first round of articles.

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