June 19, 2018

Senators Want Accounting Details From Boys & Girls Club of America

Presented by Serenic Software. Download our free whitepaper – “5 Key Reasons Why Great Financial Management is So Important for Your Nonprofit Now”

A group of Republican senators (including Chuck Grassley) want Boys & Girls Clubs of America executives to answer for such egregious non-profit sins as high executive salaries, fat retirement plans, and lobbying expenses. You see, Chuck Grassley is a sharp guy (wild statements about executive suicide notwithstanding) and as ranking member of the Senate Finance Committee, he’s the one keeping an eye on the sort of action non-profits get from Congress. So when an $85 million a year initiative to provide blanket funding to the non-profit group slipped by the committee, the red flags went up.


Iowa’s Grassley is joined by Tom Coburn, R-OK; Jon Kyl , R.-AZ.; and John Cornyn, R-TX in questioning a multitude of sins including CEO Roxanne Spillett’s $1 million a year compensation package, half a million dollars a year in lobbying and $4.3 million in “travel expenses.” Not really a problem if the funds are unrestricted and coming from donors who know their donations may go to, say, trips and renting a Senator here and there. Nah. After reviewing the org’s 2008 tax return, the senators concluded that 40% of Boys and Girls Club funding comes from the federal government.

The new Senate bill, S.2924, changes the original intent of a 1998 bill that granted $20 million a year to provide “seed money” for 1,000 new Boys & Girls Clubs from 1997 – 2001. Grassley argues that this new legislation essentially turns money that should go to keeping low income at-risk youth off the streets, into a vague piggy bank for the organization. Naturally, Chuck & Co. have a problem with that.

The Boys & Girls Clubs of America posted a $13 million loss in 2008. In 2009, it cut 10% of its full-time workers, instituted 26 furlough days a year, and closed chapters in DC, Florida, Georgia, Virginia, and others.

Though the organization hasn’t had time to personally respond to Grassley’s nice letter last Thursday, they told the Journal they’d be complying with the investigation and not at all afraid of what the committee may find, insisting they are no more poorly-managed than any other non-profit nor do they spend more on lobbying than anyone else either.

Sounds like an excellent defense; I don’t see how it could go wrong.

Senators Demand Accounting from Boys & Girls Clubs [WebCPA]
Sens Try To Block Funding To Boys & Girls Clubs of America [WSJ]

Presented by Serenic Software. Download our free whitepaper – “5 Key Reasons Why Great Financial Management is So Important for Your Nonprofit Now”

A group of Republican senators (including Chuck Grassley) want Boys & Girls Clubs of America executives to answer for such egregious non-profit sins as high executive salaries, fat retirement plans, and lobbying expenses. You see, Chuck Grassley is a sharp guy (wild statements about executive suicide notwithstanding) and as ranking member of the Senate Finance Committee, he’s the one keeping an eye on the sort of action non-profits get from Congress. So when an $85 million a year initiative to provide blanket funding to the non-profit group slipped by the committee, the red flags went up.


Iowa’s Grassley is joined by Tom Coburn, R-OK; Jon Kyl , R.-AZ.; and John Cornyn, R-TX in questioning a multitude of sins including CEO Roxanne Spillett’s $1 million a year compensation package, half a million dollars a year in lobbying and $4.3 million in “travel expenses.” Not really a problem if the funds are unrestricted and coming from donors who know their donations may go to, say, trips and renting a Senator here and there. Nah. After reviewing the org’s 2008 tax return, the senators concluded that 40% of Boys and Girls Club funding comes from the federal government.

The new Senate bill, S.2924, changes the original intent of a 1998 bill that granted $20 million a year to provide “seed money” for 1,000 new Boys & Girls Clubs from 1997 – 2001. Grassley argues that this new legislation essentially turns money that should go to keeping low income at-risk youth off the streets, into a vague piggy bank for the organization. Naturally, Chuck & Co. have a problem with that.

The Boys & Girls Clubs of America posted a $13 million loss in 2008. In 2009, it cut 10% of its full-time workers, instituted 26 furlough days a year, and closed chapters in DC, Florida, Georgia, Virginia, and others.

Though the organization hasn’t had time to personally respond to Grassley’s nice letter last Thursday, they told the Journal they’d be complying with the investigation and not at all afraid of what the committee may find, insisting they are no more poorly-managed than any other non-profit nor do they spend more on lobbying than anyone else either.

Sounds like an excellent defense; I don’t see how it could go wrong.

Senators Demand Accounting from Boys & Girls Clubs [WebCPA]
Sens Try To Block Funding To Boys & Girls Clubs of America [WSJ]

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Non-Profit Organizations Feeling the Pain of Sarbanes-Oxley Compliance

You’ve already seen me rail on SOX and I’m not the only one.

Skeptical CPA, Accounting Onion, Business Insider’s John Carney, Re: The Auditors (and Francine here on Going Concern). Need I point you to more?

I am not classically trained in recognizing Service threats but this certainly feels like one.

Accounting and Tax Tips:

The Internal Revenue Service today reminded tax-exempt organizations to make sure they file their annual information form on time. In 2010 the tax-exempt status of any non-profit that has not filed the required form in the last three years will be revoked.

The Pension Protection Act of 2006 requires that non-profit organizations that do not file a required information form for three consecutive years automatically lose their Federal tax-exempt status. This requirement has been in effect since the beginning of 2007.


The costs of compliance begin to add up and suddenly it starts to reek of 404(b); compliance for the sake of compliance does not equal nor even assist transparency.

I spoke to Chris Leach, a former not-for-profit auditor who has served on several NFP boards, who gave some insight into the problem with the 990. Let me tick off just a few “concerns”:

• Some of the smaller non-profits don’t have anyone on their board qualified to do the 990. It’s not a 1040 and problems are numerous.

• NFP board members are exposed to liability, being forced to “sign off” on 990s. That should sound familiar to any auditor who has been at the job for longer than ten years or so.

Increased regulatory pressure has been proven to distort true financial condition, not necessarily make it any more transparent.

Any of this sound eerily familiar?

Many boards do not have members equipped to adequately review and sign Form 990, so they are still exposing themselves to liability as a result of improperly filed forms. “Bad publicity is the largest implication in my view, especially for organizations facing financial stress, and even more so in this economic environment,” Chris told me. “Beyond that, from a board member’s perspective, the biggest problem would be misstatements on the Form 990, which could potentially lead to personal liability for the board.”

Chris is slightly more reasonable than yours truly, saying “Just the simple day-to-day administration of tax issues puts pressure on smaller not-for-profit organizations. [However], when a not-for-profit organization isn’t a worthy steward of its donors’ trust, donors feel betrayed, so they want more transparency.”

Fair enough. Bring on the transparency (and the headaches?)!

Non-Profits Are Feeling the Pain

WSJ has a Monday piece “Once-Robust Charity Sector Hit With Mergers, Closings” (the Recession Forces Nonprofits to Consolidate) that may be found here. It tells the story of a “homeless” woman with terminal lung cancer and a charity no longer able to afford to help her out. Sad.

When one charity’s COO says “we’ve had funding cut after funding cut, and we never know when the next shoe is going to drop,” that is a bad sign.

Hit by a drop in donations and government funding in the wake of a deep recession, nonprofits—from arts councils to food banks—are undergoing a painful restructuring, including mergers, acquisitions, collaborations, cutbacks and closings.

“Like in the animal kingdom, at some point, the weaker organizations will not be able to survive,” says Diana Aviv, chief executive of Independent Sector, a coalition of 600 nonprofits.

I saw that on the Discovery Channel and it wasn’t pretty.

Note: the Service says the value of your blood is not deductible as a charitable donation but cars are. As of 2005, cars are only deductible at FMV, not Blue Book. Damn you, fair value, foiled by the free market again!

Blame the Service for tightening its charitable donation rules at the worst possible time? Not sure on that one. While you’re reluctant to donate your $200 Toyota (ha) to charity because you could have claimed $2,000 under old rules, find some comfort in the fact that (alleged) terrorist “non profits” can not file for 2 years and somehow get away with it. You wonder why I advocate fixing the system from the ground up?

You can text $10 to Haiti but what about the “Economic Homeless” here in America? asks Young Money.

If this were a survey and you asked me “What do you think the IRS could do to encourage charitable donations?” I would answer “Tax breaks. It isn’t the Treasury’s job to distribute bailouts.” Yet they continue to behave as though it is their duty.

See the problem yet?