Joe Lane
Nonprofit organizations in the United States hold a powerful and important place in our society. When problems face our communities that governments are unwilling, or unable, to solve, caring individuals and organizations step up and give meaning to the ancient cliché that “one person can make a difference.”
So when organizations that accept millions of dollars in donations on behalf of a particular cause do not act as expected, major issues arise.
Last week, the New York Times reported that the well-respected and rapidly expanding veterans’ charity the Wounded Warrior Project spent approximately 40 percent of its 2014 donations on overhead. The overhead expenditure amounted to roughly $124 million; many other veterans’ charities spent closer to 8 percent of donations on overhead that year.
While the work that the Wounded Warrior Project does makes up somewhat for its large overhead bill, the activities that contributed to this bill are concerning. According to the Times article, one example of such spending includes the organization flying its approximately 500 employees to the five-star Broadmoor Hotel in Colorado Springs for a three-day meeting kicked off by chief executive Steve Nardizzi rappelling down a 10-story bell tower into the conference.
The scenario unfolding at the Wounded Warrior Project is not a new one — many organizations have been accused of such exorbitant spending, such as the Red Cross’s handling of the Haiti disaster. But the issue has been made more interesting with the rise of Sen. Bernie Sanders and his push for democratic-socialism a and bigger federal government. The question has to be raised now of whether the government should regulate exactly what percentage of donations can go to overhead for nonprofits.
According to a list published by Forbes in December 2015, the Wounded Warrior Project is the 38th largest charity in the country. The registered 501(C)(3) brought in more than $372 million in 2015. A 501(C)(3) nonprofit is an organization that is exempt from federal taxes. 501(C)(3) nonprofit organizations are highly regulated, to be sure.
However, it is difficult to restrict exactly where funds go in nonprofit organizations. Though the 500-person event that Wounded Warrior held did not specifically benefit one individual, claims can be made that it was an unusual use of funds.
The question of whether nonprofits should be regulated, to the extent of what amount of charity goes to overhead, is a complex issue. At its core, setting higher mandates for what percentage of donations are used in actual charitable giving is a question of human nature.
Should the federal government take a role big enough to eliminate trust in these organizations? It seems unlikely. However, a mandate that requires these organizations to report exactly what percentage of donations is spent on overhead — and a mandate created not by watchdog groups but by the federal government — could go a long way in elevating those nonprofits that maintain a dedication to charitable giving.
However, these organizations not only use the money they receive as donations to do good, they have to use the money to operate the organization, to keep the doors open so they can attract the best talent and continue to do the good work. If we eliminate trust and mandate how an organization can spend its money, it may prove difficult for these organizations to survive.