The bingo racket | Arkansas Blog

Wednesday, March 11, 2009

The bingo racket

Posted By on Wed, Mar 11, 2009 at 2:25 PM

It's too late to stop this train, but anybody who's been following the effort by bingo operators to end taxation and regulation of the game would do well to look at a report the state Finance and Administration Department prepared last fall. It covers audits of 99 of the biggest bingo operators among some 250 licensed for "charity" gambling in Arkansas. It illustrates, to me, that the mewling on this issue is about pocket-lining of many of these organizations, not charity.

Bottom line: During the period covered, the bingo games took in $11.1 million in revenue from players. About $7 million went back to players in the form of winnings. "Expenses" for this "charity" endeavor -- by law to be conducted by volunteer labor -- was $1.4 million, not counting $622,000 in taxes.

Charities received a whopping $677,000 of the total take, or about 6. 1 percent -- pretty low for a nonprofit enterprise run with volunteer labor, wouldn't you say? But wait. There's more. Of that "charity" expenditure, well more than half, or $393,000 was in the form of "internal" charitable contributions. That is, the bingo games merely raised money to support themselves -- veteran and fraternal groups are often sponsors. Does this subsidy create a backdoor way to enrich the clubs or employees by freeing up other cash flow? The less they are regulated, the less we will ever know.

Here's a cover sheet on the state audit.

Here's the spread sheet with all the numbers.

The $622,000 that these bingo parlors paid in taxes during the audit period would be reduced to about $180,000 under legislation approved by a Senate committee yesterday. It will be interesting to see how much reaches outside charities and how much goes to "internal charity."

A good rule of thumb in the nonprofit world is that a well-operated charity spends about 80 percent of operating income on direct charitable services. After payouts, then, the bingo halls (which don't pay labor, remember) should have raised more than $3 million for charity. For pure outside charity, they managed about $284,000. Something smells fishy here.

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