Senators Question Executive Salary and Other Perks at Youth Charity

In another sign that executive compensation at nonprofit groups remains a hot-button political issue, four Republican senators this month asked Boys & Girls Clubs of America to provide details about what it spends on salary packages, lobbying, perks, travel, and other items, saying they were worried that it had become a “top-heavy organization.”

The senators said they were acting partly because they needed to ensure that government money is spent responsibly as they face an “unprecedented” federal budget deficit—a stance that could presage more scrutiny of how nonprofit organizations spend their money.

“As the budget deficit grows, we’re going to see increased pressure on these issues,” says Michael Peregrine, a lawyer who specializes in nonprofit issues. “The public and regulators are going to be asking what you all do as a tax-exempt organization to justify the subsidy you receive.”

Spending Questioned

Questions about Boys & Girls Clubs arose when the Senate began considering whether to renew an annual federal grant to the giant youth organization.

The four senators—Tom Coburn of Oklahoma, John Cornyn of Texas, Charles Grassley of Iowa, and Jon Kyl of Arizona—complained in a press release that Boys & Girls Clubs president, Roxanne Spillett, earned more than $900,000 in compensation in 2008, “even while local boys and girls clubs nationwide close their doors due to budget shortfalls.”

In a letter to Robert J. Bach, the Boys & Girls Clubs board chairman, they said they were troubled by some of the group’s expenses at a time that it reported a $13-million loss on its 2008 Form 990 informational tax return.

They also asked about reported spending that year of more than $4-million on travel, $1.6-million on conferences and meetings, and more than $540,000 on lobbying, and they requested details on how the group awards grants to local clubs.

The inquiry is the latest jab at the nonprofit world by Senator Grassley, the senior Republican on the Senate Finance Committee, who regularly questions charity compensation practices and wants to tighten rules enforced by the Internal Revenue Service on executive pay. The IRS has also been investigating executive compensation at nonprofit hospitals and universities.

Some nonprofit leaders agree that high pay and perks are a problem at some charities and cringe when news about them emerges, especially since they create a public-relations nightmare for a field dominated by small and medium-size charities that offer modest salaries.

Congressional scrutiny of such a “big brand-name charity” suggests that “it’s open season and boards need to pay attention to these compensation issues,” said Paul Light, a professor of public service at New York University who conducts surveys of public confidence in charities.

He worries, however, that it could end up depressing salaries for the many “underpaid” executive directors at midsize charities.

Other nonprofit experts and charity leaders argue that executives running large, complicated organizations like Boys & Girls Clubs deserve to be well compensated.

The Internal Revenue Service requires executive compensation at charities to be “reasonable” but does not require their leaders to “take a vow of poverty,” Mr. Peregrine said. “It may make people feel better to say that, but it’s not the law.”

Change in Focus

The Senate legislation in question, S 2924, which was approved by the Senate Judiciary Committee, would extend through 2015 an annual grant that Boys & Girls Clubs of America receives from the Justice Department, at a cost of $425-million.

The original program was set up in 1996 to help the group establish new clubs in “public housing and other distressed areas.” But the new legislation says the money should go to improve the quality of educational, health, youth-development, and other services at both new and existing clubs “with special emphasis on reducing high-school dropout rates.”

The senators, all members of the Judiciary Committee, criticized that change of focus, saying that Congress originally intended to provide money to start clubs in neighborhoods that especially needed them but now would be providing “a perpetual source of funds to sustain the Boys & Girls Clubs.” They said they were also troubled that the legislation does not prohibit local clubs from seeking their own federal grants.

According to the group’s 2008 Form 990, Ms. Spillett earned $988,591 in pay, bonuses, benefits, and deferred compensation. She earned $510,744 in base pay and bonuses—compared with a median of $361,538 in The Chronicle’s survey of executive compensation at more than 300 of the country’s biggest charities and foundations that was published last October.

Boys & Girls Clubs of America, based in Atlanta, said in a statement that Ms. Spillett, who became president in 1996, had overseen the organization’s effort to double its revenue and the number of young people served. (The group’s total revenue in 2008, including money generated by more than 1,100 affiliates, was more than $1.3-billion, with the national office bringing in slightly more than $107-million.)

The statement said Ms. Spillett’s base salary of $360,774 in 2008 had not increased since 2006 and that the board had authorized $150,000 in incentive pay based on performance. (Of the rest, $385,500 was in deferred compensation, according to the Form 990.)

The group said its board’s human-resources committee worked with an independent consulting firm, Mercer, to assess the marketplace in setting Ms. Spillett’s total compensation. Mercer “found that it was consistent with prevailing and current market practices of similarly situated national nonprofit organizations,” it said.

The travel expenses cited by the senators covered the activities of more than 350 national staff members “who make thousands of visits to local clubs, providing consulting and technical support year-round,” it added.

The group said it had fully complied with all government rules since it began receiving federal money, including annual audits. It said almost 92 percent of the grant it received in 2008 was passed through to local clubs.

‘A Positive Force’

Other senators have a more positive view of Boys & Girls Clubs. The bill approved by the Judiciary Committee on a 17-2 bipartisan vote says the group has been “a positive force in the communities it serves” for more than 100 years and praises its work in schools and on public-housing sites and Native American land.

Further federal spending would help the organization continue its efforts to cut crime, drug use, and obesity and improve educational and job opportunities for young people, it says.

It notes that the organization has grown from 1,810 clubs that serve 2.4 million young people in 1990 to 4,387 clubs that aid 4.5 million young people today.