How ignorance drained reserves and butchered a $500M cash cow
Exposing reckless spending by a non-profit is challenging when the Board of Directors doesn’t do proper oversight
When the Active Network in San Diego tapped me in 2006 to join the so-called USTA Tennislink Team, I felt quite special. The company had just won the award for becoming the technology partner of the United States Tennis Association (USTA). As a community tennis organizer in Southern California, I felt I had some expertise to add to this job and chose areas I knew a lot about already: adult leagues and NTRP tennis ratings. As the team lead for both areas I was fortunate to deal with some great people at USTA national and fabulously dedicated staff and volunteers at the USTA’s 17 section offices.
Unfortunately, a new CEO was hired for Community Tennis and the league department we were reporting to was part of it. Within a few years, everything had changed. When he got rid of the very supportive and capable National Director of Competitive Play, I’d begun to look at the organization with a more critical eye. That action was the beginning of a long list of very questionable decisions by this person and the overall CEO who I began to see as people out for themselves, looting the very organization that I loved and putting a once-solid governing body of tennis into quite a precarious financial situation.
How could they do it? That’s quite easy to explain. Because the Board of Directors let them and the Chief Financial Officer signed off on all of this.
Whatever hold those two executives had on the Board, it worked for them. Their salaries went up astronomically (for a non-profit), all executive salaries went up with it, and they went on an unprecedented spending spree. While the organization began to lose money and needed to show investment gains or sell investments to cover the losses, the pair got the USTA into $710M debt, mostly long-term notes by institutional investors. At the same time, the 17 USTA section offices started to ask for more money to sustain their own operations.
I have described this process in detail and step-by-step in my latest Feature Article in the January issue of Tennis Club Business.
The result of that reckless handling of USTA funds is evident today. A big note payment of $83M is due in 2022, another $200M a few years later. Everyone is concerned now. The President who is also Chairman of the Board and was present when all this reckless spending happened, looks like a deer caught in a headlight. How can they ever get out under that amount of debt when the operation is losing money and the viewership for their moneymaker, the US Open Grand Slam tournament, is going down at the same time?
The new CEO who was hired two years ago and did his best to cut expenses and guide the ship back to calmer waters resigned in disgust (so I was told) last month. He gave up realizing under the current circumstances there was no way to succeed for him. The good ol’ boy culture of the USTA defended the status quo and there was nothing he could do about it. Even today it looks like they really think there’s nothing wrong with the organization and its finances.
The USTA needs a change in culture and the entire Board of Directors needs to step back in my opinion. A CEO has to come in who is used to rescue broke businesses and stop the spending immediately. Half the staff of that bloated organization needs to be let go and all the money-intensive but useless programs need to stop. That and discontinuing Player Development, Net Generation, Coaches Certification, USTA-University, trimming down the US Open expenses, and firing a bunch of highly paid executives will save the organization $75M annually. That’s a start. Get back to the basics and start fresh.
The alternative? Non-profit bankruptcy. What’s it going to be, USTA?