In recent days, the Wounded Warrior Project (WWP) has come under fire for the way it uses donations. It has been pointed out that key personnel have high salaries and that the headquarters of the organization is quite nice. What I don't think was as well covered was all the good done by this organization or how nonprofits really work.
I have worked with a number of nonprofits in my career, including WWP, and all of them have done good work. The problems arise when a nonprofit has to explain their budget line-items in a kind of vacuum to its supporters. There is a rule of thumb that says the "overhead" for a nonprofit should not be more than 15 percent of it's total operating budget. Everything else should go toward direct services to the intended recipients. In the nonprofit world having money left at the end of the year is frowned upon.
Look at what has to fit into overhead: the salaries of the executive director, his or her secretary or assistant, an operations manager, a bookkeeper, the development officer and any grant writers, and depending on the individual organization, there might be other, necessary, jobs that are not directly related to service for recipients. Then there is the cost of whatever facility is involved. And the cost of any services that are contracted out, such as advertising for donations or an annual audit. Even janitorial services cost money.
Then the nonprofit has to pay whoever provides the services to clients. These are likely professional people such as social workers, psychologists, nurses, etc. Even volunteers represent a cost to an agency. They must be trained, supervised, supplied with space and equipment and some come through programs, such as AmeriCorps, that charge a fee.
In the private sector, a business would be considered practically
insolvent if it ended a year without some funds left in the bank. As
individuals we all know the value of having savings we can tap for
emergencies, special needs, or upcoming costs. Why should we expect
nonprofits to simply trust that if their plumbing requires repairs or
some other unbudgeted expense arises, someone will donate them? Having a
little surplus at year's end for a nonprofit is not a bad thing. It is
a hedge against falling donations, recession, rising salaries due to
competition, and emergency expenses.
As an example, let's look at a modest nonprofit, one that raises $500,000 a year. Let's say it provides after-school care for at-risk kids. The executive director has a PhD in child psychology and has never worked for less than $65,000 a year. Her office assistant requires $30,000 and she doubles as the bookkeeper. A part time counselor needs another $20,000 and the agency pays two people each $10 an hour to help out with the kids after school. So on an annual basis, the overhead salaries total $95,000 out of a $500,000 budget. That's nearly 20 percent right there and no one is getting rich. And that doesn't even begin to touch the liability insurance the nonprofit must provide or any modifications necessary for handicapped children, or attorney fees or security costs to protect against angry parents who don't like the services. Reasonable costs can count against a nonprofit.
People think nonprofits run on volunteer labor and they do not. They need skilled executives to make excellent decisions about the money collected. These executives need to make good hires. They need to see that services are provided and they control the quality of the organization. These people do not come cheap. Professionals of every stripe expect to be paid according to the market for their profession. Lots of small nonprofits start with a well-meaning person and an idea. Most of them fail because running a nonprofit is no different than running a business. Someone has to pay the light bill; someone has to sweep the floors; someone has to fix the driveway.
The larger a nonprofit becomes, the more important it is to get and keep excellent people in key positions. People who work at nonprofits are no different from those who work at a tire factory or in advertising, or at a security firm. They all have to pay mortgages, buy insurances, save for retirement. They may work for a nonprofit out of passion for the cause, but their families still have needs. If we expect a well-run nonprofit, we must expect to pay competitive salaries to all who work there.
Granted, some nonprofits are simply scams. These donate just a few cents on the dollar to those who are supposed to receive assistance. But we should not lump successful nonprofits such as WWP in with them simply because their costs are high or because they pay their people market rates or because they have a positive balance at year's end. Most people in that organization are veterans themselves. WWP has helped countless veterans overcome war injuries and find their way back to their families and communities. They have helped the families of veterans. They give out grants every year to other nonprofits that provide all kinds of services, all over the nation.
WWP does a lot of good, not just on its own, but also with other organizations. One organization with which I work has received funding through WWP and due directly to that funding, more than 19,000 veterans have received homes, jobs, employment, counseling, healthcare, and other services. That is no small thing and it is just one of the many efforts paid for by WWP.
The nonprofit sector is not without its flaws, certainly, but let us not throw the baby out with the bathwater. Let us evaluate them as the businesses they are. As businesses they have legitimate costs. They cannot get office supplies for free and they cannot get excellent executives and directors for less than what the market offers. They must pay for the services they render.
It is far too easy to look at a handful of salaries or a nice building and think, that money should have gone somewhere else. Comparing nonprofits is also risky. A multi-million dollar concern can't be compared to a mom-and-pop nonprofit where one or two people do everything for a few clients. Let us develop discernment. Let us ask ourselves, if I had those qualifications, how much would I expect to be paid? Let us be realistic. Nonprofits must compete for our money against not only each other, but also against our own desire to keep every dollar we earn.
When feeling charitable very few of us go under the bridges where we can find the homeless and start passing out tens and twenties. We don't go up to a mother on the street as ask if her child has a defect and then give her $5. We don't go into hospitals or research centers and stuff our money in their desk drawers. We rely on nonprofits to represent us to our concerns. We rely on nonprofits to find those who need help, to sort out any freeloaders, to provide efficient, useful help. Let us do our homework, certainly, but let us keep in mind the totality of the business of nonprofits.
Rather than asking if a nonprofit is spending more than an arbitrary 85 percent on its clients, ask, what is being done for those it serves? How does it reach that population? How effective is it? What opposition does it have? Do its values line up with my own? Who supports it? These questions will give a far better evaluation of a nonprofit than simply looking at the salary of its top executives.
I support WWP because they help a lot of veterans in meaningful ways. They are always looking for ways to be better, to help more, and to be more efficient. They do pay their executives well. I have no problem with that as long as they keep providing significant services to those they help. I hope the recent bad press causes all of us to look carefully, not only at the nonprofits we support, but also at what we expect of all our nonprofits. We should develop reasonable guidelines for running and evaluating a nonprofit. It costs a lot to help people. Nonprofits are businesses, businesses with tenuous incomes, difficult clients, and many responsibilities. It is hard work. It is not done for free.
That's just the truth.