Activist Groups Urge Obama to Reject Boy Scout Honor
From Fox News:
Activist groups, including Scouting for All, urge President Obama not to accept the honorary Presidency of the Boy Scouts of America until they stop discriminating.
Scouting for All is a 100% Volunteer 501-(c)(3) Nonprofit Organization. Every dollar donated goes toward our education and advocacy programs, and is tax deductible.
Legal Concerns Regarding the Boy Scouts of America, Learning for Life and The National Boy Scouts of America
March 6, 2006
The Boy Scouts of America (BSA) created the Learning for Life program in 1991. The BSA claims that Learning for
Life is a separate corporation that operates completely apart from the Traditional Scouting Program. Close inspection
of IRS documents and other public records shows this is not the case. In fact, the majority of revenue generated
by Learning for Life flows directly into accounts of the National Council of the BSA. These revenues accounted
for more than 60% of the revenue supporting the Traditional Scouting Program in 2003.
Learning for Life was chartered as a nonprofit organization. Its stated purpose is to benefit the Boy Scouts of
America. It does this by offering the highly successful Learning for Life program for use in improving the lives
of inner city youth. The program is sponsored by a variety of federal and state agencies, school boards, charitable
foundations and United Way agencies. While Learning for Life lists a portion of the revenue from this program
in its IRS reports, the majority is channeled directly into the coffers of the Boy Scouts of America where it is
labeled as 'membership fees and assessments' on IRS reports filed by the National Council BSA. A close inspection
of the Articles of Incorporation for Learning for Life shows that the organization may not even qualify as a charitable
nonprofit organization according to IRS requirements.
The Boy Scouts of America also incorporated the National Boy Scouts of America Foundation. The purpose of the
foundation is to financially support the Boy Scouts of America and Scouting organizations around the world. The
stated purpose of the foundation does not qualify the Foundation as a nonprofit charity according to IRS requirements.
In addition, the IRS does not allow an organization to incorporate a foundation for its own benefit. (Material
obtained from www.bsafoundation.org.)
In 1991 the National Council of the Boy Scouts of America (BSA) created the Learning for Life program. The program
is a curriculum supplement to be used in a classroom setting and is to be taught by teachers and teachers' aides.
Professional and volunteer members of the BSA are not involved in delivering the program. The program is aimed
at improving the scholastic performance and life skills of inner city and underprivileged youth in kindergarten,
grade school and high school. The objective of the program is 'â€¦to enable young people to become
responsible individuals by teaching positive character traits, career development, leadership, and life skills
so that they can make moral choices and achieve their full potential.' (Material obtained from www.learning-for-life.org)
Learning for Life (L4L) was incorporated in Washington, DC on February 15, 1991. The BSA retained control of L4L.
As noted in the Articles of Incorporation (Attachment A), the Board of Directors is comprised of five BSA officials.
Article Four further specifies that 'the corporation is organized and operated exclusively for the benefit of and
to further the purposes of the BSA.' In other words, the BSA regards L4L as an organization that will benefit the
BSA and not serve as a specific vehicle for charity to the community. Learning for Life is registered as a 501(c)(3)
non-profit organization as specified in the Articles of Incorporation. At the time of incorporation the registered
office was located at 1025 Vermont Avenue, NW, Washington, DC. In 1992, L4L registered its headquarters address
as 1325 West Walnut Hill Lane, Irving, Texas (same address as the National Council, Boy Scouts of America). Learning
for Life is offered through 300 local Council offices throughout the country. These Councils are agents of the
National Council of the Boy Scouts of America to which they are chartered. They are not agents of Learning for
Life, however, and the use of these facilities to solicit business for Learning for Life is an expediency that
further illustrates the commingling of BSA and L4L business dealings.
The BSA modified the original L4L in 1998 when it added the Exploring program to the Learning for Life program.
Exploring is a program targeting high school age men and women. This program provides an introduction to twelve
potential career areas. Professionals in these career areas deliver the program, serving as adult advisors. The
BSA saw this as a natural complement to the Learning for Life program since it deals with career development. Learning
for Life, Inc. thus consists of the Learning for Life program and the Exploring program. (Material obtained from
L4L is the largest curriculum supplement program for inner city and underprivileged youth in the United States.
It represents a single integrated program with grade-specific material available for kindergarten through high
school youth. It has grown from a program serving 600,000 in 1991 when it was founded to a program serving 1.7
million in 2004. (Statistics taken from www.bsa-discrimination.org)
L4L has a broad base of support. A variety of federal government agencies have supplied grant funding for L4L
programs. Attachment B is an example wherein the Fund for the Improvement of Education (a federal agency) supplied
a grant of $198,820 to support a L4L project serving 18,000 youth in 24 counties in central Oklahoma. State Departments
of Education are frequent sponsors of L4L. In Attachment C, we note one such grant for $400,000 from the Florida
Department of Education to support a L4L program for the time frame of July 1, 2005 through June 30, 2006. The
Hawk Mountain Council, BSA provided a L4L program for 1200 youth in the City of Reading, Pennsylvania during the
2003-2004 school year, as outlined in Attachment D. Jamie Reed of the Pennsylvania Neighborhood Assistance Program
told us that the program cost their agency $50,000, inclusive of all program materials. Since the program covered
1200 students, the cost is $50/student. In 2003 there were 1.6M youth involved in L4L, according to the membership
statistics cited below. If the charge per student were $50, the program would generate $80M in revenue per year.
A wide variety of other funding sources is also used. These include United Way agencies, school boards, individual
contributors and charitable foundations.
As large non-profit corporations, both the BSA and L4L must file financial reports with the Internal Revenue Service
using Form 990. Once filed, these forms are matters of public record. They can be obtained free-of-charge from
corporate research organizations such as Guide Star (www.guidestar.org/index.jsp). These forms contain membership
statistics. Membership data for youth and adults in the BSA can also be found in BSA Annual Reports (www.scouting.org).
Overall tabulations showing historical statistics for both the BSA and L4L are also available (www.bsa-discrimination.org).
The most recent year for which Form 990's were available from Guide Star is 2003. Consequently, we focused our
analysis on 2002 and 2003. The above resources show that there were 3.3M boys in the BSA in 2002, 1.7M youth in
L4L in 2002 and 1.2M adult leaders in the BSA in 2002. For 2003, there were 3.2M boys in the BSA, 1.6M youth in
L4L and 1.2M adult leaders in the BSA.
Membership Fees and Assessments
A convenient listing of membership fees levied by the BSA in 2002 and 2003 was found in Smoke Signals, vol. 65,
no. 5, June-July, 2002. The Otetiana Council publishes this newsletter, and it is available online at www.Otetiana.org
. According to this reference, the BSA charged $7/year for youth and adult leaders as membership fees in 2002.
Membership fees for L4L were $5/year. In 2003, membership fees increased to $10/year for youth and adult leaders
in the BSA. Those in the Exploring program were charged $7/year while those in the Learning for Life program saw
their fees unchanged at $5/year. In addition to the direct membership fees, the Learning for Life program charged
a $250/year licensing fee for each class that used the program according to a report filed on www.secweb.org.
Discrepancies Found on 2003 Form 990's
Membership fees and assessments are to be recorded on line 3 of Form 990. The number quoted on the BSA National
Council Form 990 for youth and adult leaders in the BSA was $114.4M in 2003. The number quoted on line 3 of L4L
Form 990 was '0.0'. According to the above two paragraphs, the membership fees for youth and adult leaders in
the BSA were $44M; membership fees for L4L should be more than $8M. We assert that revenue from L4L has been commingled
with revenue reported by the BSA National Council and reported as 'membership fees.' Subtracting the calculated
membership fees for youth and adult leaders in the BSA ($44M) from the reported figure ($114.4M) gave imputed revenue
of $70.4M for L4L. Adding this revenue to the 'total revenue' quoted on line 12 of the L4L Form 990 ($9M) gave
a true 'total revenue' of $79.4M for L4L. (This is surprisingly close to the revenue estimate calculated from
an L4L quote for a program in Reading, Pennsylvania noted earlier.) The total expenses quoted for L4L on line
17 of Form 990 were $8.4M. Subtracting the total expenses from the true total revenue gave a 'profit' of $71M.
Expressed on a 'per participant' basis, revenue was $49.63/person and profit was $44.38/person. The return on
revenue was ($71M/$79.4M) x100 = 89.4%.
Discrepancies Found on 2002 Form 990's
We investigated the Form 990's for 2002 and carried out the same analysis using membership fees and membership
numbers for 2002. We found similar discrepancies. The corrected 'true total revenue' for L4L in 2002 was $88.1M.
Using the total expenses quoted on line17 of Form 990 for L4L, the 'profit' in 2002 was $78.8M. Expressed on a
'per participant' basis, revenue was $51.82/person and profit was $46.35/person. The return on revenue was again
Curriculum Supplement Programs Available from Commercial Vendors
In order to determine whether or not what the L4L charges for its program is 'reasonable,' we found curriculum
supplement programs offered by commercial vendors and compared prices that were charged by these vendors to the
per-participant revenues generated by L4L. Perhaps the most comparable product was 'Social Responsibility Training'
(SRT) offered by Character Development, L.L.C. (detailed description available at www.characterdevelopmentsystems.com)
SRT is a classroom program led by a trained instructor. It consists of a number of exercises outlined in a handbook.
There is a separate handbook for each grade. The course costs $47 per year for each student. This cost covers
the handbook and makes allowance for instructor training. An alternative course, 'Life Skills Online School,'
is offered by Phillip Roy (www.philliproy.com) . This course is also a classroom program led by an instructor.
It consists of a series of lessons on CD. There is an online component as well. The course costs about $21 per
year for each student. This fee covers a license to use the course, an original set of CD's and access to the
online exercises. It includes no allowance for materials, although the instructor is permitted to reproduce the
CD's for use by additional students at no cost.
As outlined above, L4L revenue was $49.63 per student per year in 2003. This can be broken down to $5/year for
registration, $10/year for license fees (assuming 25 students in a class paying a $250 license fee) and the balance,
$34.63, for materials. As noted in their Web site, www.learning-for-life.org, L4L offers a wide variety of materials,
including lesson plans workbooks, textbooks, CD's, promotional materials and recognition materials. It seems reasonable
that a school system would spend $34.63 a year on materials for each student. The cost of the L4L program is clearly
in line with the cost of the SRT program. It would also be comparable to the cost of the Phillip Roy program if
you assumed that a school system spent about $30 per year per student for materials needed in that program. The
overall conclusion, then, is that the L4L program is competitive with commercial offerings. It is clearly not
a 'charitable offering,' however.
Concern Raised Regarding the Status of Learning for Life as a Nonprofit Organization
Learning for Life (L4L) claims to be a "charitable nonprofit corporation." in its Articles of Incorporation.
(Attachment A). This is not sufficient proof of purpose according to the IRS. In order to qualify for exemption
under IRC 501(c)(3), the organization must pass the "organizational test." In order to do this the organization
must state the precise purpose of its existence. This purpose must match one of the "acceptable purposes"
listed for a charitable nonprofit organization in the code. L4L claims in Article Four that it operates "for
the benefit of and to further the purposes of the Boy Scouts of America..." In other words, L4L exists to
benefit the BSA, another charitable nonprofit organization. This purpose is not on the list of acceptable purposes.
Consequently, L4L fails the organizational test and may not qualify as a 501(c)(3) nonprofit organization. IRC
501(c)(3) further states that 'The organization must not be organized or operated for the benefit of private interests,
such as the creatorâ€¦'
Concern Raised Regarding 'Excessive Compensation' of L4L Directors
According to Article Six of the Articles of Incorporation, L4L is required to show that the benefit of any officer
of the corporation is limited to "reasonable compensation." L4L pays the salary of both the Secretary
and Assistant Secretary in full. Those two individuals made in excess of $700,000 in 2003. That seems "excessive"
especially when they are also listed on the payroll of the BSA. IRC 501(c)(3) specifically states, 'If an organization
engages in an excess benefit transaction with a person having substantial influence over the organization, an excise
tax may be imposed on the person and any managers agreeing to the transaction.'
The National Boy Scouts of America Foundation
The BSA incorporated the National Boy Scouts of America Foundation (the Foundation) as a charitable foundation
as defined by the IRS. The stated purpose of the Foundation is "to financially support the mission, values
and programs of local councils of the Boy Scouts of America and Scouting organizations throughout the world by
promoting and soliciting gifts, grants, and matching funds from individuals, corporations and foundations interested
in supporting Scouting both nationally and internationally." (Material obtained from www.bsafoundation.org.)
In simple language, the purpose of the Foundation is to collect money from individuals and organizations and then
distribute it to Scouting organizations across the country (local councils and the National Council) as well as
around the world. In even simpler language, the BSA organized the Foundation to raise money for itself and for
international Scouting organizations. A Board of Directors manages the Foundation. Members of the Board also
sit on the Board of Directors of the BSA National Council. The Foundation provides the BSA with a personal endowment
that it can use as it sees fit without outside oversight. It also provides the National Council with a vehicle
whereby it can 'reward' certain local Councils for 'superior performance' (e.g. for meeting recruiting goals, for
successfully promoting Learning for Life). The potential for abuse of such an unsupervised fund is very apparent.
In order to qualify as a 501(c)(3) nonprofit organization, the Foundation must pass the IRS "organization
test." In order to do this, it must have a purpose for existence that appears on the IRS list of "qualifying
purposes." The stated purpose of the Foundation does not appear on the list. In addition, IRC 501(c)(3) specifically
states that, "The organization must not be organized or operated for the benefit of private interests, such
as the creator..."
All IRS references can be found at www.irs.gov/charities/charitable/article/0,,id=96099,00.html .
Legal Issues Raised by These Findings
Is it permissible for two nonprofit corporations to commingle their revenues, thereby concealing the true nature
of the finances of both organizations?
Is it permissible for one nonprofit corporation to incorporate a second corporation (or foundation) as a 'nonprofit
corporation' (or 'nonprofit foundation') if the main purpose of the second organization is to provide tax-free
revenue that supports the founding organization?
Does Learning for Life, Inc. qualify as a 501(c)(3) nonprofit corporation? Does the National Boy Scouts of America
Foundation qualify as a 501(c)(3) nonprofit foundation?
Is it permissible for Learning for Life to pay the Secretary and Assistant Secretary of the Board of Directors
a sum in excess of $734,000 for 'program services?' This would seem to violate Article Six of the Articles of
Incorporation in that it exceeds the limit of 'reasonable compensation.' It also appears to violate IRS regulations
for a 501(c)(3) nonprofit corporation.
Scouting for All
Scouting for All is a 501(c)(3) nonprofit corporation incorporated in the state of California. The purpose of
the organization is to eliminate the discriminatory practices of the Boy Scouts of America.