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Boy Scouts of America Struggles With Accountability Despite Estimated $2.6 Billion Settlement

   Mar 24, 2022

While Boy Scouts of America (BSA) may have made progress in settling its Chapter 11 bankruptcy reorganization plan amid multi-billion dollar sexual abuse claims, CharityWatch has found that its audited financial statements continue to be unavailable for its 2018, 2019, and 2020 fiscal years.

Audits are conducted by third-party certified public accountants (CPAs) according to generally accepted auditing standards (GAAS) and are presented according to generally accepted accounting principles (GAAP) in the United States. Because of this, they are generally much more reliable than a charity's tax filings or unaudited financial statements, which may omit important information necessary to judge how efficiently or effectively it is operating and whether or not it has the ability to continue as a going concern. 

Why Charity Audited Financial Statements Are So Important

An audit process includes inspecting a charity's assets and examining its accounting records, including source documents (e.g., invoices, purchase orders, expense reports, credit memos, cancelled checks), journal entries, and ledgers (the aggregate set of records containing all of a charity's accounts). Before expressing an opinion on a charity's financial health and conformity (or nonconformity) with GAAP, an independent CPA conducts analytical procedures to identify possible problems with its financial records and investigates them. Analytical procedures may include comparing different sets of operational and financial information, reviewing the consistency of historical relationships, and examining trends in financial ratios to identify any unexplained variances. 

As required by GAAP, audits also include a charity's related organizations. This is important because audited consolidated financial statements "wash" related organization transactions, whereas the tax Forms 990 of each of a charity's related legal entities do not. For example, if one legal entity receives contributions from the general public which it later grants to a related legal entity, these contributions are counted twice in the charity's tax filings; one time per organization. Consolidated audits "wash" related organization transactions so that transactions that occur among a charity's related legal entities are counted only once. 

One of the other biggest advantages of analyzing a charity's audit in conjunction with its tax filings is the ability to review the GAAP-required audit notes. Audits are required to include disclosures for things like liquidity; concentrations of revenue; significant subsequent events that occurred after the end of a charity's reporting year; significant liabilities; and the existence of lawsuits, tax penalties, or reporting delinquencies, among other relevant information.  

Boy Scouts of America Struggles With Accountability Amid Bankruptcy Filing

As of March 23, 2022, CharityWatch has been unable to obtain a copy of the Boy Scouts of America fiscal 2018, 2019, or 2020 audited consolidated financial statements. CharityWatch obtained a memo dated October 29, 2021 and signed by the Controller of the Boy Scouts of America National Council that was included with BSA's State of New York filing for fiscal 2020.  Posted to the New York Attorney General Charities Bureau website on 03/16/2022, it stated:

"As you are aware, Boy Scouts of America ('BSA') is delinquent in filing its 2018 and 2019 audited financial statements. We regret this delay; however, due to several factors that are beyond our control, our auditor, PricewaterhouseCooper[s] ('PWC') has not yet completed the 2018 audit which is necessary for us to file our audited consolidated financial statements for 2018, 2019 and 2020. 

"The audit has been further delayed by the Boy Scouts of America Chapter 11 Bankruptcy filing on February 17, 2020, as well as the on-going disruption caused by the Covid-19 pandemic. At this time, BSA anticipates an expected completion date of December 31, 2021 for the 2018 audit which will allow us to move forward with the completion of the 2019 and 2020 audits..."

CharityWatch reached out to Boy Scouts of America on March 23, 2022 to ask when the charity's audits would become available, but our inquiry was not immediately responded to as of March 24, 2022.

Charity Rating

CharityWatch has assigned a "?" rating to Boy Scouts of America (National Office) at this time due to our concerns related to its February 17, 2020 Chapter 11 bankruptcy filing and lack of independent audited consolidated financial statements for its fiscal years 2018, 2019, and 2020. If BSA is able to complete and publish its fiscal 2020 or 2021 audit in the future, CharityWatch will reassess our rating of the organization at that time. 

Large Compensation Packages Despite Legal Woes

Boy Scouts of America's 2020 IRS Form 990 tax filing, signed on November 15, 2021, reports its top three compensation packages for the year as $521,820 (paid to the President/CEO); $544,978 (paid to the CFO); and $715,374 (paid to the Assistant Chief Scout Executive). While paying multiple six-figure salaries to a charity's top executives in the midst of a bankruptcy reorganization may seem counterintuitive, it can be difficult for a nonprofit to cut pay at a time when it is relying on retaining the institutional knowledge and expertise of its leaders to help it navigate difficult and complex legal and financial issues. Charities compete with the private sector for qualified staff and may have trouble recruiting adequately qualified people to work for less, particularly during times of organizational crisis such as a multi-billion dollar legal battle. Still, compensation packages of this size are a tough pill for donors to swallow. Some may question if their donations will go towards paying settlements for alleged past misdeeds and high compensation to executives rather than for the direct programmatic activities they are intending to support. 

Boy Scouts of America Reaches Settlement

According to a March 18, 2022 article in the Associated Press:

"A committee representing several Catholic entities in the Boy Scouts of America bankruptcy has reached a settlement with the BSA and is withdrawing its objections to its proposed reorganization plan, attorneys told a judge on Friday.

The announcement came on the fifth day of a trial to determine whether the Delaware judge will approve the BSA's reorganization plan.

Under the settlement, virtually every Roman Catholic entity nationwide, including parishes, schools, dioceses and archdioceses, that was involved with Scouting would be considered a 'participating chartered organization' in the bankruptcy.

That would release them from liability for all Scouting-related child sex abuse claims against them from 1976 to the present, and for all pre-1976 claims subject to coverage by insurance companies that have reached their own settlements in the BSA bankruptcy. They also would be granted 12 months to negotiate financial contributions to a settlement fund for abuse victims in exchange for a full release from liability for all Scouting-related claims." 

Boy Scouts of America (National Office) (BSA) filed for Chapter 11 bankruptcy on February 17, 2020 and continued operating while it reorganized its finances. As part of the bankruptcy process, a Victims Compensation Trust was created to "provide equitable compensation to victims," per BSA. The Wall Street Journal reported on January 11, 2022 that the charity "had projected total abuse liabilities between $2.4 billion and $7.1 billion but now pegs them roughly at $3 billion." According to the March 18, 2022 Associated Press article, "the compensation fund would total more than $2.6 billion, which would be the largest aggregate sexual abuse settlement in U.S. history. The average recovery per claimant, however, would be significantly less than in other settlements of sex abuse scandals involving large numbers of victims."

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