Boys Town Bonanza

"There are no bad boys," said Father Edward Flanagan as he set about building Boys Town on a swatch of Nebraska prairie back in 1917. His goal was to establish a refuge for homeless boys, many sent to him by state welfare agencies. Over the years a stream of tattered urchins found their way along U.S. Highway 6, which cuts through nearby Omaha, to Boys Town. In 1938, a wind-battered waif in the movie Boys Town made the place part of American folklore. Arriving at the doorstep with an injured lad slung on his back, he announced to Father Flanagan (Spencer Tracy, of course): "He ain't heavy, Father. He's m' brother."

Boys Town has been a legendary human success story; what few knew until last week, however, is that it has been financially successful beyond Father Flanagan's wildest dreams. Today the institution has more money than it knows what to do with. One measure of its wealth is its endowment fund, which includes a portfolio of stocks and bonds managed by Morgan Guaranty Trust, and is estimated to be worth at least $200 million. Compared with the endowments of universities, Father Flanagan's Boys Home Foundation Fund would rank No. 8, behind Harvard, Yale, Stanford, the University of Chicago, Princeton, Columbia and Cornell. Boys Town has about $286,000 in endowment for each boy; the university with the highest endowment/student ratio is Cal Tech, at a mere $96,000.

Boys Town is land rich too. Its campus is on 1,300 acres, now estimated to be worth $8,000,000. Near by it owns another 120 acres, plus an office building in downtown Omaha; in Iowa it owns a summer camp; in Wyoming some ranch land. Boys Town ended 1970 with total assets of roughly $192 million. If it were an industrial corporation, these assets would rank it 372 on FORTUNE'S list of the top 500.

Where did Boys Town get all its money? Mostly from $1 and $2 donations solicited twice a year, at Christmas and Easter, by the town's highly organized mailing campaign. Roughly 34 million letters go out each year explaining that Boys Town is a "City of Little Men" and that a small contribution "can help bring happiness to other homeless and unwanted boys." It is a simple poverty-pitch appeal, hardly consonant with Boys Town's present wealth. It was originally devised by Ted Miller, a membership solicitor for the Loyal Order of Moose, who joined Father Flanagan's staff in 1939 after seeing the Boys Town movie. Admits Henry Lucas, Miller's successor and a 24-year veteran of Boys Town fund raising: "We're the envy of organizations around the country."

Well they might be. In 1970, donations to Boys Town totaled $ 17.7 million. It cost considerably less to operate the institution: many staff members are low-paid priests or nuns, building maintenance is minimal, and expansion is currently limited to one new $3,000,000 grade school. As a result, 1970 expenses for Boys Town totaled only $9,000,000--more than one-third of it spent on raising more funds. That means that it cost less than $6,000,000 to operate the institution. On its present basis, Boys Town no longer needs the fund-raising campaigns, since interest from the endowment is now running in the neighborhood of $6,000,000.

Human Error. Until recently, it was impossible to get the figures that tell the rags-to-riches story. But the Tax Reform Act of 1969 required tax-exempt Boys Town to file a public statement of financial position for the first time. Warren Buffett, 41, owner of seven Omaha weekly newspapers that have already won two national awards, last week seized the opportunity to publish the first expose of Boys Town's finances; a six-man team headed by Editor Paul Williams had worked on the project since November. Buffett, a Protestant and self-made millionaire who until two years ago ran a successful investment firm, concluded that Boys Town was mesmerized by its fund-raising machine. Says Buffett: "I'm not blaming anyone. What happened here is human." He did criticize the town's administrators for failing to expand their operation to handle more troubled boys, such as the retarded or drug addicted.

Father Flanagan originally set up Boys Town to provide a home only for mentally and physically sound boys. Under the directorship of Father Nicholas Wegner, now 73, the institution has refused to alter that policy, even though foster homes now accommodate more of the kind of boys that Flanagan meant to help. The town's population has fallen from around 900 in the early '50s to under 700 last year.

Father Wegner responded to Buffett's story by explaining: "This is a business. No business ever stops trying to save for unknown contingencies. If we go into the retarded business, we'll need the money." That is true enough; caring for retarded children costs considerably more than the $6,000 per boy the town now spends each year. In fact, providing such care is one of the new directions that Boys Town may take in a belated effort to catch up with the times. Recently its 17-member board voted to seek outside professional counsel in charting Boys Town's future. It is perhaps only a small step, but Buffett claims it is the boldest policy move the Boys Town directorship has made in the 24 years since Flanagan's death.

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