Donuts and coffee? I think you are confusing the USO with the Red Cross. The USO provided clubs where the troops could go for clean entertainment (emphasis on "clean").
I guess we never questioned the USO because when I was in college back in the Dark Ages, a small special group of singers from our choir was selected to sing for the troops overseas. I'm not sure where they went, but it may have been to Asia. It was around the time or just before the war started in Vietnam. I was so envious about not getting to go because I had chosen that year to drop out of school, and I'm not sure I would have been chosen to go. Anyway, the girls came home raving and glowing about the experience of being able to entertain the troops.
Apparently many celebrities like Bob Hope felt it worthwhile to entertain the troops through the USO. In the beginning when young women were solicited as USO hostesses, they were picked for their good morals, and they had to stay squeaky clean to be kept on. They were not entertainers of "that" kind. I don't know anything about their money or their funding. I just thank them for the good job they did entertaining veterans like my father and other relatives in the military during WWII and Korea, and my husband during the Vietnam Era.