Senators Seek More Financial Explanations from BGCA

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Updated July 21, 2010

6 p.m.

Three leading Republican senators are continuing to press the Boys & Girls Clubs of America about its finances, asking it to explain why it has $54 million in tax-favored offshore investments and $53 million in private equity funds, at a time when the nonprofit group is seeking federal money to keep local clubs open.

In the latest of a series of inquires dating to January, Senate Finance Committee Ranking Member Charles Grassley (R-Iowa) and Sens. Tom Coburn (R-Okla.) and John Kyl (R-Ariz.), wrote to the Boys & Girls Clubs on June 9, stressing that there seems to be a “disconnect” between Congress’ intent to help the national organization open more local clubs and the way the national group is operating today, with large investment funds and what the senators say are outsized salaries and compensation for top officials.

Specifically, the senators are trying to figure out why the federal government should continue to put money into the organization when it appears to have plenty of investment money available. The senators also are asking about closures of local clubs when government officials were trying to provide the seed money to open more.

“There seems to be a disconnect between what Congress intended by directly funding the national organization and wanting to provide seed money to open clubs throughout the country, to the way the organization is operating today, where clubs in some of the neediest areas are having to close their doors for lack of resources, while the national organization is sitting on hundreds of millions of dollars, some of it offshore,” Grassley said.

In a 45-page response letter delivered to the senators on Tuesday and released today by BGCA, officials addressed the senators'r questions and pledged that the organization “will continue to be a responsible steward of its funding from all sources, including, importantly the citizens of the United States.”

The organization said club closures are due to more than just financing, citing inability of some facilities or neighborhoods to sustain the clubs, and "the inherent challenges and risks in many of the places where new club sites were established," among other reasons.

Addressing the investments in offshore funds, the organization maintained that such investments are common among nonprofits. However, in its letter, the group said it recognizes that “the overall practice is under scrutiny” and said the group’s board of governors is “reviewing the overall asset allocation plan to determine if changes in any aspects of the plan are warrented.”

In an earlier response to the senators, the Boys & Girls Clubs said it had opened 4,243 clubs since 1996. But the senators found that it had closed 1,023 during that period, not what the Congress intended.

The issue first arose during Judiciary Committee discussions of legislation that would alter the Boys & Girls Clubs funding statute from its original purpose of providing seed money to start new clubs in poor neighborhoods to providing a steady stream of funding for the national organization. The legislation also would remove the congressional requirement that the national organization extend services and open clubs for young people in public housing projects, according to Grassley’s Finance Committee spokeswoman Jill Gerber.

“For Senator Grassley,  it’s a matter of understanding what’s going on with the way the program is set up right now, and how it is wise, or not, to make the changes in the statute,” she said. “ It’s about accountability.”

In its most recent letter, the senators said that the president of the Boys & Girls Clubs receives $536,800 in compensation with an operating budget of $1.4 billion, compared to other charity presidents with larger operating budgets whose compensation ranges from $361,800 to about $400,000. The senators asked for justification and for discussion documents about how the total compensation packages were determined for the highest ranking officials.