An Elusive Goal : George Allen’s Game Plan for Fitness Academy in Laguna Hills Has Consumed $2.7 Million but Project Is Still on the Sidelines

When George Allen moved his National Fitness Foundation out of Indianapolis in 1985, he left behind the cornerstone for what he hoped would be the first national fitness academy, a unique center for the coaches who train America’s young athletes.

Three years and millions of dollars later, the cornerstone, still unused in Indianapolis, is all that has been built of Allen’s pet project.

Despite the support of some of America’s most prominent corporate and athletic personalities, including President Reagan, and despite a steady succession of high-profile fund-raising events that have helped bring in more than $2.7 million, nearly all of which has been spent, not a shovel of dirt has been turned at the south Orange County site chosen for the academy.

Review of Records

The foundation hopes to build the U.S. Fitness Academy on a 175-acre patch of rolling meadow in Laguna Hills. But trustees of Allen’s nonprofit foundation recently scaled back the academy’s size substantially and cut its cost from $50 million to $30 million, in part because money has been so difficult to raise.

Details of how the foundation has raised and spent money became clear in a Times review of records collected from nine government agencies in five states and Washington. The review showed that:

-- Whatever its problems in launching construction of the academy, the foundation claims on its tax forms to have spent an impressive 84.7% of its revenue--a far greater amount than the standard set by a national charity watchdog agency--on its professed goals of promoting fitness and the academy. This figure includes a substantial amount spent on its annual banquets. But, looked at another way, about 80 cents of each dollar raised went for salaries, fees and travel and conference expenses, according to the tax returns.

-- The banquets have helped the foundation raise more than two-thirds of its income. But the banquets themselves have been costly fund-raising devices, with expenses accounting for more than 46% of the proceeds.

-- The foundation’s decision to leave Indiana for California also proved costly, even though the foundation refused to return $250,000--its largest single contribution--to the Eli Lilly Endowment when the endowment asked for the money back. After the foundation moved west, the Indianapolis-based Lilly Endowment gave it no more money but instead contributed $6 million to build a different fitness academy that has since opened in Indianapolis.

Never Adopted Formal Budget

In attempting to review the foundation’s performance, The Times learned that the foundation’s volunteer board of trustees never adopted a formal budget. Nor has the corporation filed some required financial reports in Illinois, California and Orange County.

Despite several requests, foundation officials declined to provide The Times with copies of the corporation’s tax returns and financial statements.

Allen, the ever-optimistic former pro football coach who is both foundation chairman and chief executive officer, dismisses the corporate filing problems as “a few little things that anybody could overlook.” Those problems, he said, are being corrected.

And he insists: “There has been a hell of a lot accomplished.”

The academy, he says, will still be built, albeit on a smaller scale and in affordable phases, rather than all at once.

And while the foundation has not raised vast sums, Allen says, it has used some of its revenue to establish programs such as summer camps for teachers and students that can operate at the academy when it is completed.

“When we get the academy built, boom, here’s the program!” beams Allen, who has maintained his confidence through six lean years of fund raising.

“These things,” said foundation executive director Hal Trumble, “don’t come easy and they don’t come quick.”

“You know how long it took to build the ($73.3-million Orange County) Performing Arts Center? About 20 years,” Trumble said. “I’ve been here a year now and I’m trying to get this thing on the right track.”

Allen, the former coach of the National Football League Los Angeles Rams and Washington Redskins, was serving as the unpaid chairman of the President’s Council on Fitness and Sports when he came up with the idea of building a national academy as a training center for coaches and a clearinghouse for fitness research. He wanted to model the facility after similar academies in Europe that he saw during the course of his President’s Council work.

Allen incorporated the private, tax-exempt National Fitness Foundation in October, 1982, in Illinois, intending to raise money to build the fitness academy, something the President’s Council could not undertake because it is a government entity.

“I want to do something that’s bigger than football,” Allen said in a recent interview, explaining his motivation.

But Allen stresses that the purpose of his foundation is broader than simply building an academy. The foundation also exists to finance and promote fitness programs for the public, according to documents on file with the California Franchise Tax Board.

Distinction Blurred

In its early years, Allen concedes, the foundation operated as if it were an adjunct of the President’s Council. Foundation office employees worked on council business and the distinction between the two operations was blurred.

“At that time, if you made a phone call it was President’s Council (business) even if it was foundation” business, Allen said. “So we were together. In other words we were a . . . team.”

Apparently not everyone agreed with the team concept, however, and objections arose about mingling the affairs of the two organizations.

“About ’85 somebody complained,” Allen recalled. “We just figured that since there was a complaint that we better keep everything separate.”

Allen declined to name the complainers, other than to say “it was a couple of guys. . . . One was on the (foundation) board” of trustees.

Government records show that while conducting private foundation business, Allen charged expenses to the tax-supported President’s Council. Expense vouchers from Dec. 8, 1982, through Dec. 12, 1984, show Allen charged the President’s Council $5,520 for travel, lodging and meals involving foundation business.

Some of Allen’s expense vouchers were authorized by Carson Conrad, at the time executive director of the President’s Council. In an interview, Conrad conceded that those expenses should not have been authorized.

“If a slip-up was made on it, that was my fault,” said Conrad, who did not recall the specific vouchers. “You can’t use secretarial, travel funds or any type of government-appropriated funds for the promotion of the U.S. Fitness Academy or the National Fitness Foundation. You cannot use . . . funds appropriated by Congress . . . no matter how valuable or worthwhile” the cause.

In 1985 Allen stopped charging foundation business to the President’s Council, the expense records show.

Also in 1985, the foundation’s income tax returns first showed a salary for Allen and its new full-time executive director, two-time Olympic decathlon champion Bob Mathias.

And it was during this period that the foundation began spending more money than it brought in, with a deficit for 1985 and 1986 of $358,589.

Internal Revenue Service income tax returns show that Allen’s salary was $78,126 in 1985 and $125,000 in 1986.

But Allen and foundation treasurer Willard Harris, who signed the tax returns, said in interviews that Allen actually was paid only about $30,000 to $40,000 in salary over a two- or three-month period. The balance was donated back to the foundation, they said.

“I could see that if I continued to take a salary we weren’t going to make it so I said forget about the salary,” Allen recalled.

Harris, a Newport Beach developer, said the foundation’s annual cash balance actually was greater than it appeared on income tax returns because most of Allen’s salary was never paid.

Indeed, Allen said that heading up the foundation has cost him money.

“I just took a trip for the foundation and didn’t charge 15 cents,” said Allen, who recently traveled to Czechoslovakia representing the foundation at an international symposium. “This has been the most costly financial thing I’ve ever gone through. Every trip I took I took money out of my own pocket.”

Much of the foundation’s money has been spent trying to raise money.

The foundation’s largest source of income--its annual banquets--have honored dignitaries such as First Lady Nancy Reagan and comedian Bob Hope.

“As you all know,” foundation treasurer Harris told an Oct. 16, 1986, black-tie dinner at the Irvine Hilton Hotel, “all of the proceeds from tonight’s event are earmarked for construction of the Fitness Academy . . . right here in Orange County.”

Harris said in an interview that the Irvine dinner proceeds were used to pay consultants working on the academy.

But first there were other bills to pay.

Tax returns show the foundation received a total of $1,585,344 from the Irvine dinner and four other annual awards banquets held in New York from 1982 to 1986.

However, the net proceeds were only a little more than half the take--$845,947.

Returns Not Yet Filed

The foundation’s tax returns for 1987 have not yet been filed, but Madelon Marfield of Projects Plus Inc., the New York fund-raising firm that organizes the New York banquets, said the 1987 dinner raised $408,350. Marfield refused to say how much was left after paying expenses.

Allen estimated the foundation had about $250,000 in the bank before this year’s awards dinner, which was held Tuesday at New York’s Waldorf Astoria Hotel.

This year’s dinner “financially . . . won’t be one of the biggest ones,” he said, adding that gross and net revenue figures will not be available until this week.

Lagging fund-raising has made it impossible for Allen to make good on his promise to President Reagan that the U.S. Fitness Academy would be built before the end of his Administration in January, 1989.

In 1984 the foundation announced it had obtained “seed money” for the academy from the Eli Lilly Endowment of Indianapolis, the nation’s fifth-largest private foundation. In its promotional literature, the National Fitness Foundation said the Lilly grant had “influenced the site selection” of the proposed academy.

But in 1985, lured by the promise of free public land in Orange County, the foundation moved its offices west and decided to build the academy in Laguna Niguel.

The Lilly Endowment had donated $250,000 of a promised $400,000 to the foundation, but the foundation’s move prompted the endowment officials to ask for their money back.

According to the minutes of a Nov. 13, 1985, trustees meeting, National Fitness Foundation attorney Jonathan Howe advised “there was no legal obligation to return the money.” He conceded, however, “the major problem has always been the ‘moral commitment’ that was made. . . .”

Kept Money

Foundation trustees decided not to return the money.

Since then, the Lilly Endowment has contributed nothing more to the National Fitness Foundation. Instead, it donated $6 million toward the construction of an alternative project: the recently completed $12-million, 125,000-square-foot National Institute for Fitness and Sport in Indianapolis. The facility provides many of the services planned for the U.S. Fitness Academy.

“Maybe we shouldn’t have moved the academy from Indianapolis,” Allen allowed recently.

The National Fitness Foundation now operates out of offices in El Segundo and El Toro, which are staffed by Allen, executive director Trumble and three assistants.

Allen acknowledges that he has been surprised at costs and delays in getting approval to build on public land provided under a $1-a-year lease option by the Orange County Board of Supervisors.

In 1984, Los Angeles architect Charles Luckman, designer of Los Angeles International Airport and New York’s Madison Square Garden and a $40,000 donor to the foundation, was chosen to prepare the academy’s architectural plans.

Over the next two years Luckman’s firm was paid about $204,000 for its work, according to tax returns and foundation treasurer Harris.

Luckman, who did not return repeated telephone calls from The Times, designed an ornate, 250,000-square-foot academy to be housed under one roof. In an April 15, 1986, memo to foundation trustees, Luckman wrote that final architectural fees would be more than $2 million.

Stumbling Block

But the size of the building was a stumbling block in getting construction approval from the Orange County Board of Supervisors and the California Coastal Commission.

“I didn’t think there would be a big objection to building an academy when it was so good and so needed,” Allen said.

When county supervisors finally approved the academy in 1986, it was on the condition that the building’s size be reduced 20%. The Coastal Commission also preferred a smaller complex.

Now that the foundation trustees have decided to construct several buildings instead of one large structure, they will need new architectural plans, Allen and Trumble said. They said a new firm for the job has not yet been chosen.

The new campus-like configuration was supported by UC Irvine Chancellor Emeritus Daniel G. Aldrich Jr., a foundation trustee.

“The magnitude of the funds ($50 million) necessary to produce a single facility constituted a problem,” Aldrich said.

Aldrich said it should be easier to fund construction of smaller, less expensive buildings by raising money from “donors who would be interested in supporting a specific aspect of the program.”

“I built an institution on this basis and it is still being built on this basis,” Aldrich said, referring to UC Irvine, where he was the founding chancellor.

Sharing Aldrich’s optimism is Orange County Supervisor Thomas F. Riley.

“I think the new plan is really do-able,” Riley said.

Architectural fees amounted to less than 10% of the $2.3 million spent by the foundation from 1983 through 1986, the period for which tax returns are available.

The foundation paid $959,381, or 41% of its revenue, in salaries and fees to officers, consultants, attorneys, accountants, public relations representatives and other employees, according to tax records.

Another $848,965, or about 36%, was spent on travel and conferences, for the most part the expenses of the annual banquets, records show.

However, 84.7% of the foundation’s revenue was spent on what the foundation defines as “program services,” the intended charitable use of the funds, as opposed to “management and general expenses.”

This figure puts the foundation well above the 60% level that Margery K. Heitbrink, assistant director of the National Charities Information Bureau Inc. in New York, said charitable corporations should spend on program services.

But a review of foundation tax forms shows that of the $1.9 million the foundation says was spent on program services, more than $700,000, or about 38%, was spent on conferences, conventions or banquets.

In 1985, the National Fitness Foundation voluntarily filed a copy of its 1983 U.S. income tax return and other documents with the NCIB, which analyzes charitable organizations by applying eight “basic standards in philanthropy.”

But the NCIB was unable issue a complete evaluation because the foundation did not include an audited financial report itemizing its fund-raising expenses, according to an NCIB March 26, 1985, analysis.

The National Fitness Foundation has submitted nothing to the NCIB in subsequent years.

The NCIB analysis found that the foundation had not reported holding any board meetings in 1983, while NCIB standards call for a minimum of three a year. And the NCIB analysis said the foundation lacked a detailed budget approved by its board of trustees, another of the watchdog agency’s basic standards.

“I would think you would want the board to approve the budget, which I would think would be critical,” Heitbrink said in an interview.

‘Haven’t Had Budget’

Foundation executive director Trumble said trustees “really haven’t had a budget. What they’ve been doing is (deciding on) the particular programs they wanted to conduct, then they found funding for the program. So they really couldn’t approve it by setting a budget for every year.”

But this approach was not followed in 1986, when the foundation spent about $120,000 of its general fund to put on a summer camp for schoolteachers and students at the UC Irvine campus. At the time, foundation executive director Mathias disagreed with Allen over using general funds to pay for the camp. After their disagreement, Mathias resigned on Aug. 31, 1986.

The next year, the foundation operated a similar summer camp, but this time funded it with grants specifically earmarked for that purpose, including $125,000 from the Educational Foundation of America. Retired publisher Richard Prentice Ettinger of Newport Beach, a trustee of both the Educational Foundation of America and the National Fitness Foundation, helped arrange the grant.

Ettinger said the money was used “very effectively, I think. It has a broad effect in the schools in promoting the ideas of more regular physical education for the children.”

The summer camp, he said, was “very much worthwhile.”

Although only about 200 teachers and children actually attended the one-week session, Allen and Trumble estimate that 24,000 teachers and 6,000 children benefited from the two summer camps. Trumble reasoned that the 200 active participants returned to their schools and passed on what they learned about fitness to the thousands of others. He described it as a “trickle-down” concept.

It is unlikely, however, that there will be a summer camp this year, he said.

“We’ve made some mistakes . . . on some of the projects we’ve taken on,” Trumble said.

Decision for Trustees

Trustees must decide whether to continue such educational and promotional programs or concentrate on fund-raising for the academy, Trumble said.

“I’m real supportive of the foundation (but) I wish it was moving along faster,” said foundation trustee Cameron L. Anderson, president and chief executive officer of Kinney Shoes. “It’s a mammoth undertaking.”

On the plus side, Anderson said, some large corporate donors are being lined up to finance construction of the academy.

“General Foods is thinking about a big number and Atlantic Richfield” is interested, he said.

But one long-term obstacle is “how is the thing to be endowed later on” to pay for its operating expenses, Anderson said.

Over the years, the foundation has discontinued some activities that, while providing public exposure and promoting fitness, produced little, if any, income.

Among these was the National Fitness Classic in Houston in which celebrities, former sports stars and others teamed up in a variety physical tests and competitions.

According to documents on file with the California Franchise Tax Board, foundation officials decided the Fitness Classic was too expensive and “there was not substantial income to warrant its continuation.”

Because of its move to California, the foundation also canceled plans in 1985 for fitness workshops for senior citizens after investing “substantial time, effort and money” preparing for the workshops, according to the records.

Workshops Set

However, Allen said the workshops for senior citizens will be held this summer at Cal State Fullerton.

The foundation will also continue an annual fund-raising golf tournament in Laguna Niguel, despite only breaking even on the inaugural tournament last year.

Ralphs Grocery Co. has pledged to sponsor the event, which is expected to raise $1.6 million over the next six years.

“A lot’s been done that no one knows about,” said Allen, who made 30 speaking engagements and 73 public appearances on behalf of the foundation in 1987 alone.

He allowed, however, that “there were a lot of costs that we didn’t think of.”

WHERE FOUNDATION SPENT ITS MONEY--1983-86

Category Amount Conferences, conventions, meetings, banquets $764,923 Officer, director and employee salaries and benefits; payroll taxes 546,994 Grants and allocations to summer camps and U.S. Fitness Academy 235,761 Administrative fees 160,020 Office expenses, including rental 127,360 Public relations 94,058 Travel 84,042 Consultants (1983 and 1984) 58,557 Printing and publications 49,522 Accounting and legal fees 48,153 Relocation employee (1985) 31,028 Auto expenses (1985 and 1986) 20,095 Advertising 19,365 Project manager (1986) 14,410 Briefing expenses (1983) 11,361 Moving expenses (1984) 8,360 Outside services/temporary help 6,161 Depreciation, depletion 4,546 Insurance (1984 and 1985) 4,493 Stamp purchases (1983) 4,073 Land survey (1985) 3,000 Interest 2,806 Workshop expenses (1983) 2,109 Miscellaneous 1,322 Employment agency (1986) 1,030 Entertainment (1984) 595 Press conferences (1983) 454 Taxes-licenses (1985) 454 National fitness training (1984) 108 Professional fund-raising fees 0

Source: National Fitness Foundation federal tax returns from years 1983, 1984, 1985, 1986.