Bureaucracy Eats Girl Scout Cookie Profits -- Some Volunteers Complain That Troops Get Only Crumbs

Kathleen Totz, 11, is a small but important cog in a sales effort unique in the annals of American enterprise. This year, the slim, bespectacled Girl Scout was the top cookie seller in Troop 265 in Wallingford, Conn., toting up $498 in receipts for 166 boxes.

After four years' experience, she can rattle off the difference between Thin Mints and Shortbreads in her sleep. Her only gripe is customers who renege on orders. "As I see it," she says, "people should pay before you deliver the cookies."

By dribs and drabs, the door-to-door earnings of volunteers like Kathleen add up: The annual cookie sale - the Girl Scouts' main funding source - generates an estimated $400 million in revenue. It is a venture that Scout officials like to portray as grass-roots volunteerism in action, a roll-up-the-sleeves effort that furthers scouting's programs and traditions, while fostering entrepreneurship and self-esteem among the nation's 2.6 million Girl Scouts.

"I don't know of any other organization that could pull together a cadre of volunteers to sell so many products so successfully in such a short time," says Pat Mackey, chief executive officer of Southeast Louisiana Girl Scout Council in New Orleans.

But many in this volunteer cadre - the Scouts, troop leaders and parents who provide the free labor - are beginning to question the annual cookie drive, saying the troops simply don't see enough of the profits. Tax-free cookie proceeds mainly support the Girl Scouts' sprawling bureaucracy, critics say, while the girls themselves are left with the crumbs.

This year, a West Haven, Conn., troop leader went so far as to lead a boycott of the cookie sale and to complain to the state attorney general, alleging, among other things, that her local council was taking too big a chunk of cookie profits. She was promptly drummed out of scouting.

Even the most dogged cookie salesgirls don't generate much money for their troops. Kathleen's pluck will earn her a stuffed toy, a T-shirt and a badge for her uniform. But only $67 of her sales will land in Troop 265's treasury, where there isn't enough money to buy all the badges the girls earned this year.

Most of Kathleen's profits will be kept by Connecticut Trails Council, the Girl Scouts' local administrative office in North Haven. The council, which trains volunteer troop leaders and plans events, relied on cookie sales to fund fully 66 percent of its $3.5 million 1992 budget, including $1.6 million in salaries and benefits for 42 employees.

There are 332 such regional Scout councils scattered around the U.S., each one with an office and a paid staff overseen by a volunteer board. Some larger councils - serving 12,000 girls or more - have dozens of employees. Together they spend about $357 million a year. Well over half a council's income typically is from cookies.

"There's incredible pressure on these little girls to sell," says James Grafton Randall, an attorney in Anaheim Hills, Calif., who took the Girl Scouts to court in a religious-discrimination suit brought by a Brownie. "The Scouts are used as unpaid salespeople for this multimillion-dollar organization, to pay for staff and administrative costs and buildings."

At Girl Scouts of the USA, the national headquarters in New York, a spokeswoman says the local councils need that big cut of profits. "Being a Girl Scout leader requires a good deal of expertise. A lot of a council's revenue goes for distributing basic information, so that we have all of our 800,000 adult volunteers in sync," she says. "We are dealing with children, so we have to be very, very precise in what we do."

She adds that the decentralized network of local councils is essential "to make scouting relevant to the needs of a particular place." Girl Scouts USA doesn't share in the local councils' cookie proceeds, though it does get a 2 percent royalty from the commercial bakers' net sales.

Council administrators' salaries, ranging up to almost $90,000, aren't excessive by nonprofit standards. But what critics find unseemly is the Girl Scouts' aggregate overhead, and the degree to which child labor supports it.

Traditional scouting occurs at the troop level, they maintain, where volunteer leaders give tirelessly of their time and money to see that the badge work, camping and good deeds go on as always.

By contrast, they say, paid council employees serve mainly as policy-enforcers and supervisors. The sales needed to sustain this administrative apparatus, critics suggest, has come to overshadow scouting's philanthropic mission.

Recently, a California court acknowledged that the young sales force is indeed financing a big business. A 6-year-old girl last year sued the San Diego area Girl Scout council after being denied membership because she wouldn't say the word "God" in the Girl Scout Promise. Randall, her attorney, argued that the Girl Scouts' San Diego-Imperial Council is a business that nets almost $3 million annually in cookie profits alone, and thus cannot by law discriminate. Last December, Judge Vincent Di Figlia of state Superior Court in San Diego agreed and issued a preliminary injunction prohibiting the Scouts from excluding the Brownie. The Girl Scouts have filed an appeal.

Each council runs its own cookie sale, setting the price per box (which this year ranged between $2 and $3) and dividing the proceeds as it sees fit. Typically, troops get 10 percent to 15 percent, the council takes more than half, and the manufacturer gets the rest. Last year, the Scouts sold 175 million boxes.

Yet critics complain that, after taking a majority share off the top, the councils act like the proverbial company store: They tap the troops' much punier share by charging Scouts fees for everything from camping to the badges they earn.

Esther Mannah's Brownie troop in Harriman, N.Y., earned a profit of $170 selling cookies this year. But $60 of this went back to the council, she says, to buy flags the troop needed to march in a St. Patrick's Day parade. She adds: "People buy cookies thinking it's for Scouts, not knowing the girls only get 40 cents a box."

Girl Scouts' reliance on cookie profits - or "girl-generated income," as it is called - is a touchy subject in Scout circles. Councils insist they are working to diversify fund-raising. But without a network of corporate donors, and with United Way support declining in recent years, they have few alternatives.

Cookie merchandising has come a long way since the 1920s, when Scouts ventured out with wicker baskets of home-baked cookies. Today they watch training videos and play trivia games to sharpen selling skills.

Incentives - like embroidered "marketing" patches showing an upward trend line - inspire girls to rack up spectacular numbers. Rachel Schleifstein, a New Orleans 11-year-old, sold 662 boxes this year, and individual totals of 1,000 boxes aren't unheard of.

Cherry Mana, a Thousand Oaks, Calif., Scout leader, says older girls tire of supermarket "booth sales" and door-to-door peddling. "The cuteness is not quite there as much as it used to be," she says. So she has them place newspaper ads or throw Tupperware-style cookie parties. Other troops telemarket or staff cookie fax lines.

Parents - who today do a lot of the selling - are encouraged to take orders at work, where turf disputes and price wars sometimes erupt among co-workers (as when neighboring councils set different prices for the same product).

Each council strikes its own deal with one of two bakeries that produce the product: ABC Interbake Foods in Richmond, Va., and Little Brownie Bakery in Louisville, Ky., both of which decline to comment. "The councils cut a hard bargain, working one company against another," says a former Interbake executive.

The councils also play hardball with their sales force. In some areas, unless troops participate in the cookie drive (and, sometimes, calendar and magazine drives), they can't raise money on their own.

And national Girl Scout rules bar them from raising money for outside causes, no matter how worthy. Lucy Smegielski says that last year she was reprimanded by Connecticut Trails after her troop in Prospect, Conn., donated $1,000 they had raised in a bottle drive to a homeless shelter. Now, when the troop raises money for the needy, it does so as the "Prospect Youth Group."

Nor is there room for error in a troop's cookie-sales projections: When troops hold booth sales, unsold cookies can't be returned, and the troops must pay their local councils for leftovers.

The stress astonishes a Fortune 500 marketing executive in Cincinnati, whose wife was a cookie monitor this year. "I've been watching my wife sweat," he says. "She has $700 collected and needs $2,300. People aren't returning phone calls - they haven't paid yet. My wife wrote a check to satisfy the Girl Scout deadline. Now it's up to her to collect."

This year's cookie sale, just concluded, was especially acrimonious in parts of Connecticut. A West Haven troop leader, Beth Denton, led a cookie boycott to protest the way the Connecticut Trails council apportions revenue. Denton claims troops aren't getting a promised 14 percent of proceeds, or 42 cents a box; she figures the girls are being shortchanged two cents a box. She also objects to the $1.6 million in salaries and benefits paid to 42 council employees in fiscal 1992.

In February, after Denton complained to the state attorney general, the council dismissed her as a leader, though her "rogue troop" continues to meet. Attorney General Richard Blumenthal won't comment on his inquiry while it is still under way.

Officials at Connecticut Trails, representing 23,000 girls in half the state, decline to be interviewed about the boycott. But in a statement, the council says sales incentives - like the T-shirt Kathleen Totz got for being her troop's top seller - can add up to as much as four cents a box.

The council also says girls benefit from 120 different activities it sponsors annually, its five campgrounds and from the training it offers troop leaders. It cites its outreach to poor neighborhoods, including after-school programs in inner-city schools and troops in homeless shelters.

It says its salaries are lower than average for nonprofits, and go mainly to employees providing direct services to girls. Executive director Diane Del Pizzo earned $76,925 in salary and benefits last year, according to documents filed with the state attorney general.

Denton remains unmoved. Scouts pay anywhere from a few dollars to $50 each to participate in any council activity, she says, while leaders pay to attend training classes - even though the courses are taught mostly by volunteers. Troops are also pressed to donate to annual Scout giving campaigns.

And when the council held its testimonial dinner for volunteers last year, she and other leaders say they were urged to use troop cookie money to pay for their restaurant meal.

"The council says to girls, raise the money and then give it back," Denton complains.

She ticks off the troop camping fees quoted in this year's leader's manual for rustic, 51-acre Camp Murray, a bare-bones campground in East Haven: $38 a night plus $1 a head for use of a dormitory-style "chalet," and an additional $5 per troop to walk the nature trail, $5 to use the playing field and $5 to use the picnic area. "And we bring our own food and clean the latrines," she fumes.

Connecticut Trails says it took in $414,000 in camping fees in fiscal 1992; the council says it spent more than $691,000 to operate and maintain the camps.

With troops operating on a shoestring, leaders say they often must reach into their own pockets. Last year, Ruth Costa's West Haven troop kept $370 of the $2,750 it raised selling cookies. Half those profits evaporated when it had to repay the council for unsold Girl Scout calendars. "Once you order, you're stuck with them," she says. "We ate the difference."

Costa kept the troop going with $400 of her own money. The financial drain was one reason she has left scouting.

Though Denton's boycott failed to spread much beyond West Haven, where several troops refused to sell, many leaders around the state privately applaud her. Explaining why she doesn't speak out, one says: "I'm afraid I'd be dismissed. I've been with my girls since they were 5 years old - it would kill me."

Such concerns are well-founded, for the Girl Scouts do not take kindly to renegades. "You either march to their tune, or they will kick you out of the band," says Randall, the California attorney. Connecticut Trails' statement notes that its 12 paid field executives exist to "ensure proper enforcement of its policies."

Pat McCarthy of Lebanon, Conn., a Brownie leader who circulated a petition to have Denton reinstated, finds the stifling of dissent ironic for an organization that awards badges to girls who lobby for a cause.

"Horrified" by Beth Denton's firing, McCarthy says she contacted the state human-rights commission before starting her petition drive, "so I don't fall prey to the same retaliation."

At a February meeting, she says she confronted Del Pizzo, the council's executive director, with this question: "Would I be fired if I exercised my First Amendment right to free speech and peaceful protest? The answer was yes, I probably would."

Del Pizzo's recollection of her reply is "that it would depend on circumstances. If a volunteer doesn't wish to follow the expectations outlined in their manuals, yes, that could be grounds for dismissal."

Troop leaders in Connecticut gripe that although they are required to account for every penny raised, they have never seen a Connecticut Trails balance sheet. While Del Pizzo concedes volunteers aren't sent an annual report, she says a financial statement is distributed to leader delegates for its annual meeting.

She adds that volunteers don't realize the myriad "hidden costs" the council absorbs, from printing manuals to insurance to maintaining properties.

Says Sue McKernan of Prospect: "I really don't know as a leader where all the money goes. It seems that from headquarters on down, Girl Scouts are caught up in the same bureaucratic red tape and over-government we see in our national government. It's gotten too big."

With $400 million in cookie revenue - most of it cash - passing through the hands of 3 million-plus volunteers each year, it isn't surprising that some of it goes astray. "It's a nationwide problem," says Jerry Hathaway, an investigator for the Pima County Attorney's office in Tucson, Ariz., which has handled several cookie-embezzlement cases in recent years.

The Sahuaro Girl Scout Council in Tucson says procedures have been tightened and that of $1.4 million in cookie receipts last year, it failed to collect only about $1,400.

In one Alaska case, $664,000 - most of it cookie money - was embezzled from the Girl Scouts Susitna Council in Anchorage. The culprit, who in 1990 pleaded no contest to first-degree theft, was a troop leader employed as a council bookkeeper. Before she was caught and imprisoned, says prosecutor Mary Anne Henry, Anchorage's assistant district attorney, she splurged on trips to England, limousines and jewelry.

-- Reprinted with permission of The Wall Street Journal. Copyright 1993 Dow Jones & Co. Inc. All rights reserved.