Veterans Charity in Senate Inquiry Defends Spending

A veterans charity that the Senate Finance Committee is investigating in the wake of charges that it spends little of its money on programs to help veterans, has defended its operations in a formal response, saying that as a new organization it had to invest in efforts to recruit donors.

“At the present time, our donor file has approximately 2 million names,” the Disabled Veterans National Foundation said, calling that a “major achievement” given that the Washington group was created in late 2007, just before the recession hit.

Senators Max Baucus, the finance committee’s Democratic chairman, and Richard Burr, the senior Republican on the Veterans Affairs Committee, opened the investigation last month following a CNN report that said the charity spent nearly $61-million on outside direct-mail and fundraising companies from 2008 to 2010, while providing unnecessary items like candy and hand-sanitizer bottles to veterans.

Precilla Wilkewitz, the charity’s president, said in the response that her group has given $16.1-million to veterans in cash, clothing, food, hygiene products, and other items. “It is indisputable that tens of thousands of veterans have received much-needed assistance from DVNF,” she said.

She said that from 2009 to 2011, the charity received almost $75-million in donations and spent almost $33-million on fundraising costs.

However, the group’s tax records show that it spends millions in additional dollars each year on direct-mail efforts that it counts as “program expenses”—including $13-million in 2010 and $9.5-million in 2011, according to its Form 990 tax returns. Charities are allowed to allocate a portion of their direct-mail expenses to programs if an appeal educates the public about issues related to its mission.

CharityWatch, a private ratings group that CNN cited in its report, gives the Disabled Veterans National Foundation an F grade because of its low spending on direct aid to veterans.

In its response to the senators, the group cited an economic analysis that it commissioned from Richard Steinberg, a professor of economics and philanthropic studies at Indiana University-Purdue University Indianapolis. Mr. Steinberg concluded in 2010 that the charity’s early spending to find donors was not excessive given the potential long-term payoff.

The group spent roughly $31-million in 2011 but was left with a deficit of almost $1.9-million, according to its tax form. It also faces total liabilities of more than $17-million. Raegan Rivers, the charity’s chief administrative officer, said in an e-mail that “our supporter file is growing, and we expect the deficit to start being reduced.”

Send an e-mail to Suzanne Perry.