Boys & Girls Club contemplates financials


While not in crisis, the club sees possible funding shortfalls in the near future

Feb. 14, 2018 — The Boys and Girls Club of Western Lane County (BGC) is now at a crossroads.

After controversy embroiled the organization in 2015, the task of rebuilding the club’s image was taken on by various community members and organizations, including former executive director Chuck Trent, current director Jack Davis, BGC staff and board members, and multiple donations from the community with both sweat equity and cash donations in the hundreds of thousands of dollars.

“The community needs this club, and this club needs the community,” Davis said about how the club fits into the Siuslaw region.

The club’s programming is growing at an unprecedented rate, but so are the associated costs.

While the public’s opinion of the club has grown, BGC worries that the community believes the club no longer needs funding, creating the possibility of decreased donations. And current national trends may hamper the club’s ability to receive additional funds by the year’s end.

As the club reorganizes its image, financial difficulties remain.

Currently, BGC is in need of at least $40,000 to make it through the summer, representatives said. The move planned for the Nan Osborne Memorial Teen Center (formerly the Quality Childcare of Florence building) is not fully funded by a “significant” amount, though construction has already begun.

The club is not in crisis, BGC representatives state, but the possibility exists.

“We don’t have a problem today, we don’t have a problem this month and we probably won’t have a problem next month,” Davis said. “We’re looking at the intersection of two issues. There’s higher overhead, and we’re looking at less income this spring than we did last year by a significant amount. When those two meet, that’s when we’re going to have a problem.”

Current board members Michael Pearson, Jordan Nivilinszky and Harold Kinney, joined Davis to describe the challenges facing the club today.

 

Teen Center

In 2014, BCG merged with Quality Child Care of Florence (QCCF), another organization that offered child care and a learning environment designed to meet the needs of infants, toddlers and preschool children, in hopes to reduce overhead and increase efficiency, according to an official 2016 audit of the club.

But in 2015, QCCF closed, leaving BGC the building that once housed the program. Afterwards, the board decided to use the building as a Teen Center.

The current headquarters of the club, located at 1501 Airport Road in Florence, serves a combination of high school and junior high students. As of now, Teen Center enrollment is down, but the board foresees a near future where the club will have to accommodate high school aged youth.

“If you look at all the kids in (Elementary Program Director Samantha Gauderman’s) elementary program, they’re moving up,” Kinney said. “It keeps growing. If we keep doing a good job there, then they’re going to move into the middle school and they’re going to come here, and pretty soon, they’re going to continue and be a part of the Teen Center.”

Part of that preparation is the QCCF building.

High school and junior high school youth have different needs and social aspects, Davis explained. While the club plans on having high schoolers mentor the younger members, it became obvious to the staff that the two cohorts needed the ability to spend time apart.

The solution was to put the older teens in QCCF and keep the junior high kids in the main building.

But QCCF has its issues. It’s located next to Siuslaw Middle School, a few miles away from the main building. And the interior is specifically designed for preschool.

BGC will have to spend money both on redesigning the building and physically moving the building next to the current BGC headquarters.

By doing that, the club ultimately hopes to save money. Instead of hiring additional staff to work in its current location, existing staff can easily walk back and forth between the two buildings when they are on the same property.

However, the move is not fully funded. While the majority of funds have been set aside, there is still a “significant” shortfall, according to Davis. The board declined to give exact figures.

BGC is currently applying for grants to cover the remainder of the cost, but the grants are not guaranteed.

While exact figures on how many grants end up getting funded are scarce, a 2004 report provided by the Foundation Growth and Giving Estimates found that of organizations that receive 50 proposals or less a year, only 38 percent awarded at least half of their proposals.

If the club is not awarded the grants it has applied for, the overall budgetary shortfall the club is experiencing could balloon even further.

Whether or not it can raise the funds, the club is locked into the move. The foundation has already been set, concrete poured. The move was supposed to occur in September, but an issue with the availability of the planned moving company forced the club to change companies, rescheduling the move to later this winter or early spring.

The Siuslaw News was unable to confirm why the move was unable to be funded before work began.

Planning for and funding the future isn’t the only cost inflation that the club is facing. With the elementary program taking off, staffing costs have risen sharply in the past year.

 

Beyond babysitting

A review of the club’s 2016 financial report showed that salaries, payroll taxes and workers’ compensation equaled $123,359. Since then, the club has hired additional paid staff, including Davis, Teen Center personnel including a cook and additional aides in the elementary program.

While the club was still tallying its 2017 financials (due for public disclosure in May), payroll more than doubled to approximately $270,000, Davis said. That amount does include planned additional staffing later in the year.

The board defends the extra staffing as a way to provide better childcare.

In 2014, the club was severely understaffed. The elementary program only had a few paid positions. While a single day in the program could see up to 90 children attending the program, there could be as little as three paid staff to look over them, leaving a 30:1 ratio of children to instructors. This made it difficult for staff to properly look after the children, let alone provide opportunities like tutoring or additional education that would supplement public school programs.

Now, the program looks to ensure a 15:1 ratio of children to staff, a goal set by the Boys and Girls Club of America.

“One of the reasons for that is we’re trying to make sure we actually know what the kids are doing,” Nivilinszky said. “We had some parents in the past who were upset because there was some bullying going on. That’s not to say that if you have a large ratio of kids to aides, you can’t keep an eye on every one of them, but it’s about ensuring safety among the kids and making sure we’re able to help them.”

By upping the ratio, BGC believes it will increase youth safety and allow the program to focus on learning.

“I would say the club has made a major shift in focus over the last few years,” Davis said, “by literally transitioning from a glorified babysitter program to a professional program that has a purpose — and that has a goal in mind to see these kids and help them be all that they can be.”

But to become that, the club feels, they need a dedicated staff.

For example, while the elementary program’s hours are primarily after school lets out, Gauderman works full time, working on programming during the day, teaching her aides programming before the children arrive and then working with the children.

This is during the school year. In the summer months, Gauderman and her aides work all day with the children. This creates a larger staffing increase (and greater costs) during the summer months, meaning longer hours for Gauderman and her aides.

While volunteers help offset the staff’s workload, and the board believes it needs more volunteers to help, the board does not think that volunteers can fully staff the program.

“It’s just as feasible as having volunteers run the school district or running the hospital. You need paid professionals,” Davis said.

The past executive director, Trent, was essentially a volunteer, earning just $1 a year. But he was working fulltime hours in a time in his life when he had already reached retirement. Last year, Trent stepped down from the position and rejoined the board.

Davis has stepped into the executive director position, accompanied with a full salary.

Pearson said, “That’s what people are generally against, saying, ‘I don’t want to pay for operations and all your salaries.’ Without the salaries, there wouldn’t be any programs to give to these kids. We have to have professionals that are dealing with the children to make sure they know their stuff. That’s really a big misunderstanding that a lot of people have about our organization. The majority of our costs are base salaries.”

Another problem facing BGC is board burnout.

“We have very passionate individuals on the board,” Nivilinszky said. “Our board is working full hours. And those who aren’t working full time have families and jobs to support. A large part of this is we want to do more fundraisers, but I just don’t think it’s possible.”

Pearson, who has been helping to run the annual summer Fore Kids Golf Tournament for eight years, wouldn’t call his current state “burnout,” but he is seeing a toll.

 “I actually have a job,” he said. “And I’ve been kind of ignoring that. I’m doing two things not very well. I’m not doing that job very well and I’m not doing this job very well. And I’m frustrated. That’s my biggest thing. I wish I could spend all my time working on Boys and Girls stuff. There’s enough work to justify doing that, but I just can’t. I’ve got too much other work to do.”

Extra staff and more volunteers leads to additional costs. Every volunteer and employee has to go through a screening process and background check that adds to the bottom line.

“And we have to run those for every volunteer, every employee, every board member, every year,” Davis said.

This is to ensure the safety of the children.

“I would want all volunteers to be screened,” Nivilinszky said. “I wouldn’t let my kids come here if it was 100 percent volunteer based.”

Despite all of the extra costs, Davis states the result of not funding salaries would lead to a reduction in children served.

“The only way we can trim our costs is by letting staff go,” Davis said. “And if we let staff go, we have to cut back on the number of kids we serve. So which child would you like to say, ‘I’m sorry, we can’t let you into the Boys and Girls Club because we don’t have the money?’”

 

Restricted funds

Paying for the staff has presented challenges to the club.

The staff, as well as other operational costs like utilities, are paid through unrestricted funds. That is, the money is not set aside for specific projects.

Specialized projects, like renovations to a building, are often funded through restricted funds. These funds can only be used for their specific purpose.

Generally, restricted funds come from a variety of sources: grants, endowments, donations, etc. Charitable organizations who award grants like to see their funds going to a specific, finished goal that they can closely keep track of. And the duration of the grant can be limited so the funders can move on to different nonprofits to spread their wealth.

 Operational costs are funded primarily through donations and interest off investments that come from sources like endowments. However, it can be difficult to rely on these types of funding sources. And national trends point to a particularly difficult year for BGC, as well as nonprofits across the nation.

Currently, on paper, the club is not insolvent. As of right now, it projects a $13,000 surplus at the end of the year. But that amount is not guaranteed.

 “That’s assuming that some big fundraising events happen and are successful,” Davis said. “But the problem with most organizations is cash flow. I heard one time that 80 percent of private businesses that go bankrupt are showing a profit on paper. But cash flow kills them. We’re in that situation because the summer is the most expensive time of the year, and it’s the time we bring in the least amount of money.”

 The $13,000 is essentially an estimate — it can only be achieved through reaching the donated income sources for the year.

This type of accounting is not unique to BGC. Most nonprofits create budgets on projects, basing their financials on last year’s donation receipts.

 For example, $50,000 of that total is expected to be raised through a November/December push for donations, according to Davis. The period is traditionally a boon for nonprofit giving.

Those amounts are not guaranteed, particularly when newly developing national economic factors come into play. One of these is the Tax Cuts and Jobs Act, passed by Congress in 2017, is expected to discourage charitable donations. A Dec. 29 report by Market Watch explained the change:

“The new law nearly doubles the standard deduction — the amount everyone is allowed to subtract from their taxable income — to $12,000 for singles (up from $6,350 for 2017) and $24,000 for married couples who file jointly (up from $12,700). That’s seen as bad news for charities because taxpayers will have less of an incentive to itemize their deductions to reduce their taxable income. And that means people who have donated to charity — whether in part or entirely — as a way to get a tax deduction may be less likely to do so.”

Complicating the matter is the stock market volatility seen in the past few weeks, where the Dow Jones dropped 1,600 points, the biggest point decline in history during a trading day, according to a Feb. 5 report by CNN.

Volatility in the stock market is normal. In fact, the upward gains of the market in recent years was decidedly abnormal, and the economy is healthy, according to the CNN report.

 However, CNN also reported that the “mysteriously low inflation may be ending.” It’s possible that interest rates will increase, along with inflation, which could eat into the record-high corporate profits seen over the last few years.

This uncertainty could make those who donate skittish, particularly those whose primary income relies on the stock market, namely retirees, a large demographic of the Siuslaw region.

 And while BGC has seen unprecedented giving in the past few years, statistically, it’s not the norm. The Great Recession of the 2000s has made individuals reticent to donate.

As reported by The Atlantic in 2016, Texas A&M University released a study showing that people are donating a smaller portion of their income than they did before the recession. Between 2000 and 2008, charitable giving increased annually by one or two percentage points until 2008, when the market crashed, and donations understandably dried up. But by 2012, when the economy was beginning to see a partial recovery, donations were still falling, declining by six percentage points compared to 2000.

“It could be that the uncertainty from the recession has had a lingering effect,” the article stated. “Giving tends to be habit forming.”

The article pointed out that the Great Depression of the 1930s made people more frugal long after the economy had recovered.

Because of these reasons, BGC, along with other nonprofits in the region, could see a considerable drop in donations this year. This is particularly difficult with such a small donor base.

“There’s so much competition in this town for the dollars from sponsors,” Kinney said. “And we have some fantastic sponsors, but we just want to be careful we don’t go after them over and over again. That’s a big concern.”

The club is already seeing this come into play.

 

Rolling in cash

During last year’s annual Fraudville fundraising event, an evening where members of the community engage in a lip sync battle, the bottom line was boosted by a generous matching grant from John Hardison.

“Last year we were challenged to bring Fraudville from $26,000 the previous year up to $35,000,” Pearson said. “If we could bring it up to $35,000, they would match it. And that’s what we did. So Fraudville last year was $70,000.”

But this year, nobody has offered a matching grant.

 “Nobody’s putting up an extra $35,000,” Pearson said. “So, we expect $25,000 from Fraudville, compared to $70,000, which we won’t be having from last year from that one event.”

According to Davis, the matching grant was unexpected, and it helped save the club financially that year. It had been planning a shortfall in funds by the end of the year.

As of right now, the club is in the same position — it’s down $40,000, an amount the board hopes to raise throughout the year.

This is not to say that the board feels that Fraudville, which is held every February, is a failure. Year over year, the club’s fundraisers have seen an increase in donations.

“Without the continued support of our many sponsors who continue to help us with smaller donations, we could not exist,” Kinney said.

Traditionally, nonprofit revenue primarily relies on earned income, i.e. selling services or, in the case of BGC, program fees.

Last week, financial website The Balance reported that 70-75 percent of nonprofit revenue comes from earned income, with the remaining coming from charitable giving or grants.

But the BGC’s income model is the complete opposite of the norm.

The club’s 2016 statement showed a total of $683,806 in support, revenues and program receipts were received. Of that, only $72,510 was received through program fees. The rest of the money came though grants, contributions, special events and miscellaneous.

Davis described how the program fees break down:

The cost to provide services averages almost $1,500 per student, per year, he reported. The membership fee for the entire year is $25 per month. The charge for the school year program is $25 per month ($1.25 per day) for elementary students. For the Teen Center, it’s $25 a month and an additional $50 per year.

But only a small percentage of these costs go to traditional operational costs like payroll. Instead, the money goes to amenities that are given to the students, like art supplies or the daily meals that each student receives.

In addition, many of the youth can’t afford the tuition. Instead, they’re funded by scholarships, which in turn are funded by donations. When donations go to scholarships, they don’t go to unrestricted funds like payroll and utilities.

Another major problem the club is going through is the perception that the club is “rolling in cash.”

The board stated the club works hard to recognize those who give, but by doing so, the board fears it may have given the impression that the organization is not in need of funds.

“It’s a double-edged sword,” Pearson said. “You talk about how much money that has been given, and people say ‘Ah, they don’t need my money.’ But yet, it’s an ongoing thing. You’ve got these expenses continually. In order to be sustainable, you’ve got to have continual income.”

For example, much has been said about the generous donations of John and Patricia Hardison, Nan Osborne and others when the club was revisioning its place in the community. Close to $800,000 was given to the program during that period.

But the club was $120,000 in debt and owed $30,000 in back taxes. Another large portion of the donations went to moving QCCF. $70,000 was put aside for operational costs, but that was used up last year.

The majority of those funds, around $444,000, went to permanently restricted funds that help bankroll operational funds and scholarships.

$357,000 was placed into an account that would fund operational costs, like payroll, for the rest of the club’s existence. But the money cannot be touched, only the interest it accrues. At 4.5 percent interest, the account pulls in $16,000 annually.

“On paper, we look great,” Davis said. “We have $357,000 sitting there, but we can’t touch it, except once a year we get a dividend check from it. Those funds are not ours. We couldn’t access those funds if the club fell apart tomorrow.”

The rest of the money is set aside for a scholarship fund that generates $4,000 a year through interest.

The 2016 financial statement shows high income because the club received a number of contributions to help the program get on its feet. In fact, $544,934 was given to the club through charitable donations, much of which was placed in restricted funds.

For unrestricted funds, the 2016 report stated a total of $205,757 was generated. The majority of that was received through contributions, fundraisers, grants and miscellaneous: $133,247.

The board also points out that the club receives little financial help from the national Boys and Girls Club foundation. Local club organizations are akin to fast food franchises. While Boys and Girls Club helps with name recognition, training, regulations and program guidelines, the organization does not provide funding. Local clubs are tasked with finding funding on their own.

 

Planned giving

The club is working to wean itself off contributions.

While the community quickly rallied around the club, organizations like the Ford Family Foundation and United Way, which could help fund operational costs like payroll, are only recently getting on board since the club found its financial footing.

“They’re not in the business of bailing out programs,” Davis said. “They want to build things.”

But since the club has built up its programs and reputation, BGC has been able to begin cultivating relationships with donors, most recently with United Way, which provided several volunteers to help with landscaping.

But these relationships take time to build and, as of now, the club has yet to find permanent funding through these organizations.

Another way the club is looking to raise funds is through planned giving.

 “Planned giving is an opportunity to bequest or leave in their will a part of their estate to the club, whether it’s an insurance policy, whether it’s part of their assets, whether it’s stocks or bonds,” Davis said. “They are planning ahead to give this to the club once their gone.”

“We have 10 percent of what we need in restricted funds to be self-sufficient right now,” Nivilinszky said. “The more people we get continually contributing, ten years from now we could potentially say this club doesn’t need that help anymore.”

But planned giving takes time to reap the benefits. For example, if an individual decides to will their estate to the program, the funds won’t be released to the club until the individual passes away.

If the individual requests the estate be placed into a permanently restricted endowment, like the Hardisons, it could take a year for the funds to appreciate interest to be released to the club.

However, BGC has only recently been making a push for planned giving, the benefits of which won’t be seen for some time.

While the club is currently developing long-term solutions like planned giving, reliable short-term funding is still an ongoing challenge to the club, according to Davis.

The financial uncertainty that the BGC faces is not unique to the club. Recent stories of social service nonprofits show that these programs constantly walk a tightrope between staying open and insolvency.

But as economic and political winds begin to change, these programs may find themselves in a more precarious situation, which is particularly difficult for programs like the Boys and Girls Club, which the board feels is only now hitting its stride.

The club’s next big fundraiser, Fraudville, will be held on Saturday, Feb. 24, at 6 p.m. at Three Rivers Casino Resort. For more information, visit threeriverscasino.com/events.


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