Charities whose games earn millions for promoters see fraction of profits
By RON AIKEN
In Columbia, bingo games played to benefit the South Carolina Department of the American Legion Auxiliary on Pickens Street earned $1 million in proceeds from Oct. 1, 2014, to Nov. 30, 2015.
Of that amount, the promoter returned $12,000 to the charity.
In Charleston, bingo played to benefit the Charleston Animal Society earned gross receipts of $1.4 million from April 1, 2014, to March 31, 2015.
The Animal Society’s cut from the promoter? Eighteen thousand.
In Graniteville, bingo games played to benefit the Sertoma Club of North Augusta made $2.3 million from April 1, 2014 to March 31, 2015, while its return from the promoter was $12,000.
Across South Carolina bingo is big business, generating $105 million in revenue in 2016 according to the Department of Revenue (DOR), which regulates the games. Bingo was legalized by the S.C. legislature in 1996 with the stipulation that games must be conducted by a nonprofit to generate income to support its mission. To run the games, nonprofits are allowed to hire licensed promoters.
An extensive review by Quorum of more than 100 pages of records from DOR and the S.C. Secretary of State, however, show that a system designed to raise funds for charities has become a money-making machine for a relatively small cadre of bingo promoters. Some of those promoters return less than 1 percent of revenues earned to the charities themselves, while others return none at all.
According to Secretary of State records, 53 charities operate games in South Carolina run by promoters, more than half of which are run by three top promoters.
Ramon Ashy Sr. is the president of POPs Charity Bingo, which runs games for 10 different charities under the names POPs Charity Bingo-Upstate, POPs Charity Bingo-Greenville and POPs Charity Bingo-Carolina. (Ashy also owns POPs Charity Bingo-Clemson, but no records for games under that name appear in records from the past three years.) POPs has taken in gross receipts of $22 million since 2013, records show, and does not report to the Secretary of State what, if anything, it returns to its charities.
Using his own name and the business name of Truck, Trailer and Equipment Sales, Harold Dukes runs games for five charities. For one of those — Achieving Wheelchair Equality — Dukes claimed a loss of $39,573 in 2014, despite receipts of $388,980. In 2015, he returned just $991 to the charity, despite gross revenue of more than $490,000.
The Irwin family of Chapin — father Hal and sons Thomas and Gregory — conduct bingo operations for 12 different charities whose games have earned gross receipts of $11 million since 2013.
With so much revenue generated and so little returned to the charities, what is happening to the rest?
By law, prize winnings returned to players must be at least 50 percent of the revenue generated through the sale of bingo cards. Additionally, a fraction of each bingo card is taxed by DOR (10 cents per dollar for most games).
The rest is claimed as expenses, and the joint financial reports submitted to the S.C. Secretary of State reviewed by Quorum show:
- there is no set format used by promoters to list expenses, which leads to difficulties in determining net profits and understanding what is included in nebulous categories such as ‘miscellaneous,’ ‘other,’ and ‘fees’; and
- with no set percentage across the board stipulating what charities should receive from a promoter’s revenue,some charities are making more off less-profitable games, others much less off incredibly profitable games.
With no legal standard to adhere to whatsoever, the exact amount each charity does derive from its promoter is solely determined by the specific agreement between the individual promoter and the charity. That is how a single promoter can charge a charity more than $317,000 in salary, yet return just $12,000.
‘A GREAT DEAL OF VARIATION’
The amount and nature of expenses claimed by promoters on the joint financial reports that are available to the public vary wildly and are difficult to verify.
While some promoters listed payouts to players, which aids in determining net profits to the promoter, others did not, such as all of the Irwin family’s filings.
Hal Irwin runs games representing five charities, the maximum number an individual promoter can be licensed for by law: American Legion Winthrop Hall Post 212 in Aiken, the Charleston Animal Society, the Hilton Head Humane Association, Mental Health America of Beaufort-Jasper Counties and the Sertoma Club of North Augusta. Those games earned a total of $6.2 million in 2014-15 alone, while the five charities collected $89,000, or 1.43 percent.
That same year Irwin claimed $386,835 in “Promoter Salary” for those games, and another $816,044 for “Payroll Expense.” Of the $89,000 received by the charities, the smallest amount, $12,000, went to the the Sertoma Club, whose games earned the most revenue of the charities, at $2.3 million.
Despite owning Shamrock Bingo, a bingo hall at 551 Atomic Road in North Augusta where the Sertoma Club’s games are held, Irwin also claimed building lease expenses of $196,511 and equipment rental costs of $277,636 for the games he promotes.
“With the charities and promoters, they all file the same financial report with us, but they itemize them differently,” said Shannon Wiley, attorney for the S.C. Secretary of State. “Some get a small percentage back, others have additional expenses that they may even take out of the charity’s cut.
“There’s a great deal of variation on how expenses are itemized.”
DOR, rather than the Secretary of State’s office, monitors compliance with the minimum 50-percent payout rule. Promoters file quarterly reports with DOR that are required to include the amount of payouts, and a spokeswoman for DOR said investigators carefully monitor all reports for compliance. Routine audits assure promoters are accurate with their financial reports to DOR, but the question that remains is simple: Why don’t the charities complain?
‘WE HAVE A GENEROUS PROMOTER’
“The deal we have is as good as anyone else’s,” said David Hewett, treasurer of the Sertoma Club of North Augusta. “I’m not unhappy because we don’t have the size and membership to be able to run a bingo operation.”
Like most charities that participate in bingo, he’s also happy with the portion of money the state itself returns to charities from its tax on bingo cards.
Of the 10 cents on the dollar tax on most games’ cards that DOR collects — for a total of $7.3 million in 2016, according to DOR — 72 percent of it is distributed by statute to various organizations and 28 percent is returned to the charities, in accordance with the amount of money their games generated.
For Hewett, whose Sertoma Club’s games grossed more than $2 million in 2014-15 — one of just nine charities statewide to do so — that amount is somewhere around $75,000, and represents a huge portion of the club’s yearly budget. For the 14 charities whose games make much less — between $32,000 and $491,000 — the state check is considerably smaller, meaning the percentage a promoter offers is that much more important.
Rather than fret about it, Hewett said his organization and most like it see any money received from the promoter as a bonus.
“(Hal Irwin) gives us a thousand dollars a month as a stipend,” Hewett said. “Many don’t give the charities anything. (The charities) are counting on their revenue from the state rebate, not the promoter.”
When told Irwin charged his charity $317,313 in personal salary for the Sertoma Club’s games alone (in addition to another $12,000 in “Professional Fees” and $160,000 for “Payroll”), Hewett shrugged it off.
“We have a generous promoter,” he said. “We don’t get much from him financially, but he runs the games and pays the rent and utilities for the location that runs them. All of these things are costs borne by the promoter, not the charity, so it’s peace of mind for us.
“He may seem like he’s making money, but with all the expenses involved, he’s squeaking by.”
Correcting the imbalance between profits made by promoters and the money they return to the charities isn’t likely to change. Since each charity signs an individual deal with each promoter setting the financial terms of the arrangement, as long as charities believe they are getting a fair shake, there’s no reason it should change, Wiley said.
“I can’t speak to what the charities are thinking (about not wanting more from promoters),” Wiley said. “We can’t legislate what percentage has to go back to the charities.
“There have been some Supreme Court cases ruling that localities and states can’t dictate a specific percentage back to the charity because it would be a violation of free speech.
“Ultimately, we rely on disclosure requirements and publicizing those percentage amounts so the public will take a look at it. If you’re going to a bingo game to support a charity, you might raise an eyebrow before doing it. But in truth, I don’t know how many people who go to bingo halls to play are really thinking about that.”
For professional nonprofit administrators, the rate of return to charities from bingo promoters in South Carolina is distressing.
“This is a racket running under the auspices of charity,” said one statewide administrator who did not wish to be identified. “It’s obscene for promoters to be making so much money off these games and only returning one (or) two percent to the nonprofits. They don’t even bother hiding it.
“For many of these very small charities that operate on shoestring budgets, they don’t want to jeopardize the little bit of money they do get. For a rural animal hospital or veterans organization, $12,000 is a lot of money.
“The Legislature didn’t create the law so a few bingo promoters could make whatever they wanted in the name of charities that receive very little in return,” the administrator continued. “(The law) was set up as a way to allow bingo to be played legally, but only as long as it benefited charities. We’re way past that now. This is a very, very flawed system.”
Reach Aiken at (803) 200-8809. Email him at email@example.com, and follow him on Twitter @RonAiken and @QuorumColumbia.
FOR FURTHER READING:
Spreadsheet containing all professional bingo solicitors’ financial information from 2013-15: BingoProSolSC