The United States Olympic Committee is on pace to compile a projected combined deficit exceeding $107 million during the next four fiscal years, severely diminishing USOC's ability to fund and support American athletes training for the Olympic Games and placing USOC on the brink of insolvency.

According to financial documents, memos and letters recently provided to some USOC executive committee members and obtained by the Orange County Register, USOC, barring dramatic and sweeping budget cuts, will post substantial deficits in each of the next three fiscal years.

A four-year financial analysis by USOC, based on projected expenses and projected and guaranteed revenues, shows the organization, which has an annual projected budget of $138 million, posting deficits of more than $57.9 million in 2001, $7.4 million in 2002 and $72.3 million in 2003, leaving USOC swimming in more than $137 million worth of red ink as it heads into the 2004 Olympic Games.

Even projected record-setting revenues of more than $168 million in 2004, including a record $104.4 million in broadcasting revenue, will still leave USOC with a projected deficit of $107,013,623 for the 2001-2004 quadrennium.

Overall, between 2001 and 2004, USOC will bring in a projected $444,986,377 in revenue while compiling $552,000,000 in expenses.

The budget crisis, USOC vice chairman Sandra Baldwin recently wrote to another USOC official, "is like a railroad train coming dead at us." While top USOC officials debate what the final deficit figure will be, many conclude the organization is faced with substantial cuts in expenditures if it wants to avoid financial disaster.

In documents and interviews, USOC officials reveal a budget that has been outstripped by skyrocketing administrative costs and a drop in fund-raising revenues in the wake of the Salt Lake 2002 bribery scandal and a series of drug controversies.

They also portray an organization that has too often lost sight of its primary purpose – preparing American athletes for international competition and ultimately the Olympic Games.

Instead, USOC officials charge that rising salaries and benefits for top officials, administrative costs and in some cases waste not only have the organization in financial straits, but have also jeopardized USOC's tax-exempt status.

USOC is sanctioned by the In ternational Olympic Committee as the sole U.S. agency for the training and underwriting of the U.S. teams for the Olympics and Pan American Games and selecting American cities to bid to host Olympic Games.

The Colorado Springs-based organization has approximately 500 employees and also funds 46 national governing bodies (NGBs) for Olympics sports.

It's grown in size to where its major cost is that they have all these (employees)," said USOC executive committee member James Easton. These non-profit (organizations) tend to get out of control and they think they can just switch money that is supposed to be going for athletes and give to salaries and everything is fine.

But that's not right. That's not the way it should work. I've always thought the goal should be get as much money as we can to the athletes and not the administrators."

USOC will take a look at the budget at meetings later this week in Washington, D.C.

While Baldwin described USOC's financial situation as urgent" in an Oct. 10 letter to USOC chairman William J. Hybl, several USOC executive committee members don't expect a budget for the next quadrennium to be done until at least April.

Echoing other top USOC officials, Baldwin said that in taking a hard look at the budget and weighing potential cuts the (national governing bodies for Olympic sports) and the athletes have to be our first priority."

But other USOC officials acknowledge the financial crisis and cuts made to address it could impact athletes training for the 2004 Olympics.

The athlete support should be OK through Salt Lake City, everything is pretty much already in place there," said USOC executive committee member Sarah Josephson, referring to the 2002 Winter Olympic Games in Utah, said in an interview.

But we're probably going tohave to look at that (for 2004). We may have to do some adjusting to that."

Bonuses out of line

The budget concerns and talks of budget cuts come at time when a USOC committee has proposed bonuses for senior USOC staff of more than $2.8 million.

For the most part I believe (the bonuses) are out of line," Baldwin said in an interview. They are out of line with what we can afford and with what we can spend if we're going to better support our athletes."

Other USOC administrative expenses have also raised concerns among some top USOC officials. For instance, Norm Blake was hired as USOC's chief executive officer on Feb. 5 and received a $500,000 annual salary and a $200,000 bonus.

He committed to streamlining the organization to make it more fiscally responsible. But shortly after he was hired, and within weeks of laying off 40 employees, Blake spent $27,000 on leather furniture for his new office.

Certainly not the kind of expenditure I think you would make if you're streamlining an organization," Baldwin said of the furniture.

Blake resigned this fall, less than nine months after taking the job, citing resistance from heads of the NGBs for the various Olympic Sports and some USOC officials to his plans.

USOC officials cite other examples of what they describe as waste and questionable expenditures:

USOC officials have accounted for approximately $20,000 in unnecessary airline travel bills. The officials booked flights with airlines that they have frequent flier accounts with instead of using vouchers for discounted or free flights on United, a corporate partner.

In 1999, USOC paid the Chicago-based consulting firm of McKinsey & Company $ 550,000 to conduct a study that looked at, among other things, how USOC could be more efficient. I don't think you can justify that," Josephson said of the fee. That's an extremely large sum of money."

USOC also paid Marriott Corporation $868,357 for janitorial services at USOC facilities in 1999.

In the midst of the Salt Lake scandal, USOC paid a Utah company $121,123 for image consulting and marketing.

USOC chief financial officer John L. Samuelson was fired earlier this year but received his salary ($229,457 annually), benefits ($30,000 annually) and the use of a luxury car until June 2001. Richard D. Schultz, Blake's predecessor as USOC CEO, will receive a $587,000 bonus as part of his retirement package.

In 2001 USOC employees are projected to receive more than $28.5 million in salary and wages, a 58.7 percent increase over the same figure for 1999. USOC officials also expect to pay an additional $7.74 million in employee benefits in 2001.

The salaries and compensation for senior USOC staff have raised concerns with some top USOC officials about the organization's 501 [c] [3] status as a non-profit organization with the Internal Revenue Service.

I believe we must take immediate steps to assure ourselves that USOC can not only meet the test for a 501 [c] [3] status which has recently been questioned, but that we continue to be regarded as exemplary with respect to the amount of our total budget ...," Baldwin said in her Oct. 10 letter to Hybl.

Specifically," Baldwin continued, I am gravely concerned that recent hirings, salary levels and proposed bonuses may cause a huge increase in the total administrative costs, thereby reducing both the amount and percentage of funds which will go to athletes and programs."

Suffering financially

The USOC budget crunch also comes at a time when the NGBs are also suffering financially. All NGBs receive annual funding from USOC, with USOC support accounting for up to 76.5 percent of some NGBs' annual revenues.

Last year USOC paid out $54.4 million in grants to athletes and NGBs. Cuts in USOC funding could be devastating. Even with USOC support, at least 14 of the NGBs posted deficits last year totaling a combined $6.56 million deficit, according to documents obtained by the Register.

In recent years USA Track & Field has received more than $2.8 million annually from USOC, about a third of the USATF budget. The USTAF has posted combined deficits of more than $5 million during the past four fiscal years.

A reduction in USOC funding, USATF chief financial officer James Elias said, would force the USATF to cut in numerous areas."

For smaller NGBs – such as U.S. Shooting, which had $2.7 million in expenses in 1999 and U.S. Badminton, with $551,000 in expenses in 1999 – where USOC funding can account for as much as 76.5 percent of annual revenues, USOC budget cuts to make up the deficit could be catastrophic.

USOC's leading source of income is broadcasting revenue, primarily from NBC, which has exclusive rights to broadcast the Olympics in the U.S. through 2004.

For the four-year period between 1997 and 2000, USOC received $114.89 million. The USOC will receive $167 million between 2001 and 2004. The bulk of that comes in a balloon payment during the fiscal year for the Summer Olympic Games, with another smaller payment coming in the Winter Games' fiscal year.

Other USOC revenue comes from primarily five sources: corporate sponsorship, joint venture income, licensing, fund raising and grants from the U.S. Olympic Foundation.

While income levels from sponsorship, licensing and the USOF grants are projected to remain constant, USOC officials are concerned about a drop in fund raising and projected drops in joint venture income.

The fallout from the Salt Lake and drug scandals have hampered USOC fund raising, officials said. The USOC brought in $1.89 million in fund-raising revenue in 1998 but that figure slipped to $1.5 million last year and to $ 356,230 this year as of Aug. 31.

I think it obviously hurt," Josephson said.

USOC officials do not project fund raising to reach the 1998 levels in any of the next four fiscal years.

Baldwin said fund raising this year was also hurt by the elimination of state-by-state fund-raising chairman positions, which eliminated as part of Blake's streamlining efforts. The move, Baldwin estimates, cost USOC about $4.5 million.

The deficits, USOC officials complain, force USOC into bank loans for which interest payments further cut into future revenues.

But the biggest drain on the USOC budget, said Easton, echoing several officials, is the sheer size of the USOC.

For what is basically a $100 million a year business to have 500 (employees)," he said, is too much."