Here are a few articles which will give you a different way of looking at the recent publicity surrounding Wounded Warrior Project. I’ve been swamped by several major projects so haven’t had much time to write recently. Those projects are still not done so I won’t be able to spend as much time on this post as I would like, yet I want to get some comments online for those who have been following the story.
The biggest article is The First Casualty: A report addressing the allegations made against the Wounded Warrior Project in January 2016 by Doug White, published September 6, 2016.
There is a lot of information about the entire story which has received minuscule coverage. Here is my quick recap of his major points:
- Many of the allegations in the initial coverage were wrong or misleading. The dollar amounts were overstated. Mr. White calls on two major news organizations to run a public apology.
- A disgruntled group of people who used to work at WWP had a Facebook page which revealed their agenda to damage the organization. Some of these individuals left the organization under ethical clouds, if not direct charges of financial improprieties. The author asserts he has screenshots of the main source for news coverage saying he would take down the organization.
- The organization had good metrics to measure programs. The study used to fire the two senior executives was neither in writing nor made public, a result the author calls stunning. Another misfocus, or perhaps even misrepresentation, is to focus on one particular disbursement as indicative of waste.
- A sole focus on spending ratios is destructive to individual charities and the nonprofit community as a whole.
For me, one of the distressing factors is self-appointed watchdogs who make up their own non-GAAP metrics which allows others to use the non-GAAP measurements to criticize audited financial statements because they are presented on a GAAP basis. Report also indicates the charity watchdogs don’t have any way to measure impact.
Now perhaps we need a discussion of whether GAAP was applied correctly, particular in regard to the donated ads, but that is a completely different conversation than criticizing the organization for reporting on GAAP basis. I have not seen any discussion of how the ads were allocated between program and supporting services.
This issue carries over to the discussion of differences in accounting on the 990 and on the audited financial statements. Certain transactions, such as donated ads or the transfer of funds to the long-term trust, are required to be presented differently on a GAAP basis than on a tax basis. Pointing out different reporting is a commentary on the different accounting basis and is not a criticism of a charity.
- Measuring impact is a major issue for all charities. Everyone in the nonprofit community and everyone looking at the charity world needs to come up with better metrics than simplistic overhead ratios. Ironically, WWP actually has tools in place to measure outputs and constituent satisfaction. I think some of those tools even touch on outcomes.
- The Board of Directors did not respond well. The report says the board did not allow either of the two senior executives to respond. The board also did not respond. The author has the perspective at the time that nobody was in charge and perhaps there might have been merit to the charges. From the author’s perspective confidence of the organization was strong until the board fired the two senior executives, the board seemed to say there was some validity to the reports, and then did nothing to respond or explain what had happened.
The biggest piece of information in that comment is that the board did not allow the two senior staff to reply. That would explain the silence that seemed odd at the time.
- A member of the Board of Directors, who was also the chair of the audit committee, was a senior executive at the news organization taking the lead in criticizing the charity. Report says he should have recused himself from discussion.
- The CEO was too flamboyant in his leadership. Report says that he overlooked the issue of how something will appear to outsiders. Even if there is no issue with substance, the optics of an issue can create serious problems. Report says he did not grasp that issue fully. That is a criticism that could be levied against a lot of leaders in charities.
I heartily recommend you read the full report for a completely different perspective.
Here are some more articles:
9/12 – Richard Levick – The Gutting Of Wounded Warrior: How To Kill A Charity – Article suggests that when two massive media organizations break the same story at the same time, there were likely fed information for the same source. Those likely sources in this situation are reported to be disgruntled former employees, a portion of whom were fired for what is reported to be quite legitimate reasons. (See details in Doug White’s report above.)
This article calls attention to the timing for when income dropped – after the two senior staff were fired and the board didn’t have much else to say. This article characterizes that moment of the story as a confession.
Article says a typical approach to a crisis is to make a sacrifice, which usually means firing high visibility people. In business that often works. In charities, not necessarily so.
In this situation the author suggests that firing the two senior staff, particularly in the way it was done, was essentially a confession, which is what directly caused the breach of trust. The author of this article perceives it wasn’t the reporting that broke trust, but the organization’s response.
Article dives into some guesses as to why the board responded this way. That issue by itself warrants additional study and reporting in the future. I hope someone will follow-up.
9/6 – Mark Hrywna at The Nonprofit Times – Independent Report Faults Media, WWP Board For Fiasco – Summary of above report. Conclusion highlighted from the author of the report is that this is as much an issue with the board as it was with senior executive staff. The report also suggests the board should resign en masse.
9/5 – Nonprofit Quarterly – Wounded Warrior Project Loses $100 Million and Its Swagger – New CEO has announced that income has dropped somewhere between $90M and $100M in the current fiscal year. Layoffs of about 85 staff are underway, which represents 15% of total staffing including half of the senior staff.