Are Churches More Like Charities or Country Clubs?

Christian apologetics and atheismMost churches do good works—soup kitchens, food banks, and so on—so they’re like charities.  But they also provide a social connection like a country club.  Which is the better fit?

Let’s look at the financial statements of organizations that are clearly charities.  The American Red Cross has an annual budget of $3.3 billion.  Of this, 92% goes to program services, with the rest going to “management and general” and “fundraising.”  Or Save the Children—91% of its $450 million budget goes to program services.  Or World Vision—85% of $1 billion.  Or the Rotary Club of Eagle Grove Iowa—100% of $3.3 million.

Organizations that help the disadvantaged are just one kind of nonprofit.  The ACLU (86% of $70 million) defends individual rights and liberties.  Or, for an organization on the other side of the political aisle, take the Alliance Defense Fund (80% of $32 million).

Surely many country clubs host bake sales for good causes, organize projects that help charities, or even donate money, but let’s assume that the good works done to society by country clubs amounts to a few percent of income or less.  We have 80 to 100% of revenue going to good works for regular nonprofits vs. (say) 2% for country clubs—that’s why donations to nonprofits are tax exempt and dues to country clubs are not.

How do churches compare?  The short answer is, we don’t know.  With very few exceptions, the financial statements of churches and religious ministries are not available to the public.

But there are estimates.  For example:

Every year churches collect some $100 billion in donations. But most donors do not know that the average congregation in the U.S. gives only two percent of donated money to humanitarian projects. Some 98% goes to pay staff, upkeep of buildings, the priest’s car, robes, salary and housing.

This came from Roy Sablosky.  But he’s on the board of the American Humanist Association of Greater Sacramento.  Might he be biased?

Christianity Today is another source.  A survey gave this breakdown of the average church budget: 43% for salaries, 20% for facilities (mortgage, etc.), 16% missions, 9% programs, 6% administration and supplies, 3% denominational fees, 3% other.

So where is the money to good works?  Presumably “missions” includes this, but this is a nebulous category.  A dollar spent on the First Baptist Church soup kitchen certainly counts as a charitable expense, but the dollar spent supporting a missionary doesn’t.

That estimate of 2% to humanitarian projects may not be too far off.

These survey numbers are suspect in my mind because less than a quarter of the 1,184 surveys were returned.  Did churches who were embarrassed by their numbers—perhaps the fraction devoted to salaries or facilities was even higher—not bother to respond?  I’d like to have more reliable numbers, but when they’re kept secret, we simply don’t know.

What are churches embarrassed about that they need to make up excuses to avoid showing how they spend their tax-exempt donations?  Again, it’s hard to tell.  But there are estimates:

The January 2011 issue of the International Bulletin of Missionary Research reported that Christian religious leaders will commit an estimated $34 billion in financial fraud in 2011. 

(I presume that’s worldwide, not just in the U.S.)  And that’s just fraud.  The money going to inflated salaries, lavish living, and other embarrassing expenses may be a far larger amount.

There are groups within Christianity that are also working on financial transparency.  For example, MinistryWatch said,

We wish Senator Grassley success in his quest for the truth [in his investigation of six high-profile televangelists].  It is time for these televangelists to come clean; otherwise it could seem that they are running nothing more than money laundering schemes in the name of Christ.

But MinistryWatch has an uphill battle.  They’re told by fellow Christians that it’s not right for anyone to judge, that it’s not Christian to be critical, that examining a ministry shows distrust in God, and that they should focus on God and not the works of man.

But shouldn’t churches be on the forefront of modeling what’s right within society?  When pastors enumerate all that’s bad with American society today, the list should include the financial secrecy of their own organization.

The overseer must be above reproach as God’s steward
— Titus 1:7

See the first post in this series: What do Churches Have to Hide?

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Church Accountability

Does God exist?In November, 2007, Senator Chuck Grassley (R-Iowa) asked six high-profile televangelist organizations to provide more information about how they work.  Grassley said: “My goal is to help improve accountability and good governance so tax-exempt groups maintain public confidence in their operations.”

The investigated organizations (I’ll use the names of the public faces) were:

  • Joyce Meyer.  She responded fully to Grassley’s questions, joined the Evangelical Council for Financial Accountability (ECFA), and discloses her annual revenue to MinistryWatch (about $110 million per year).
  • Benny Hinn also gave complete answers to Grassley’s questions.  However, MinistryWatch gave him a transparency grade of F.  His ministry’s income is about the same as Meyer’s.
  • Kenneth Copeland: incomplete information.  He claimed (go here and search “Torpedoed!”) that his 40-year-old ministry has taken in a total of about $1.5 billion.  MinistryWatch grade: F.
  • Creflo Dollar: incomplete information.  MinistryWatch grade: F.
  • Eddie Long: incomplete information and not listed in MinistryWatch.
  • Paula White: incomplete information and not listed in MinistryWatch.

Let’s dwell on this a moment.  A U.S. senator asks for information, as the Senate Finance Committee is empowered to do, and he is (more or less) given the finger.  And there is no fallout?  These ministries can tap dance away from this request for information with no meaningful loss of face?  The faithful still shower them with $100 million per year?  What kind of disconnect from reality is this?

This is a contract between U.S. taxpayers and these nonprofit organizations, mediated by the IRS.  We provide the nonprofit status and, in return, they prove that they deserve that status.  If religious organizations policed themselves and they made their finances public (by voluntarily submitting their information to the IRS like all other nonprofits), this wouldn’t be a problem.  But they don’t.  With $100 billion in tax-exempt contributions to the religion industry every year, shielded from inspection, it’s obvious that this exemption is a bad idea.

A memo prepared by Sen. Grassley’s staff highlights some of the foundational principles that are relevant to this discussion.

The Constitution does not require the government to exempt churches from federal income taxation or from filing tax and information returns.

And:

Requiring churches to file an annual information return does not offend either the Free Exercise Clause or the Establishment Clause [of the First Amendment].

Some ministries have complained that an obligatory filing would entangle the government in church business, but the opposite may be more accurate.  Today, the IRS must define what a church is, since the legal code doesn’t.  For example, after a long legal battle, Scientology was granted tax-exempt status as a church.  Putting churches in the same bin as other nonprofits would eliminate this unwelcome role for the IRS.

The Grassley memo admits that there should be no constitutional problem with a level playing field, but it argues that some problems will remain:

  • Eliminating the exemption “would unnecessarily burden the overwhelming majority of churches.”  Why?  The 1.5 million nonprofits with less than $100,000 in annual income can follow the rules.  Surely a church that can keep its books can fill out a four-page 990-EZ form.  The only tough part is taking that deep breath and disclosing to the world how you spend your income.
  • This would burden the IRS’s Exempt Organizations Office, which is stretched as it is.  When a ministry is simply a piggy bank for a few people at the top, no laws are being broken.  Things change if we can force the churches to commit publicly.  Let’s let a little sunshine in and let public scrutiny (and possible condemnation) do its work.  Could a sleazy ministry lie?  Of course, but when it does, it’s now breaking the law.  At that point, there’s a crime that the IRS can go after and assets that can help fund the process.
  • This would be contrary to the intent of Congress.  True, but the desires of Congress can change.  If ordinary Christians, embarrassed by the secrecy of churches, demanded a level playing field for all nonprofits, Congress just might turn around.  Without public demand, there will be no energy for this initiative.

The ECFA is a good step.  Though it’s expensive to join, it provides what amounts to a Good Housekeeping seal of approval to ministries that abide by its code.  But even they don’t demand that salaries be revealed, and members need only provide financial information on written request.  It’s a baby step, when a level playing field is the obvious solution.

The IRS has a form 990 and 1.5 million nonprofit organizations already using it.  It works.  It should be our window into the operation of all nonprofits, including churches.

What are the next steps?  An atheist organization like the Freedom From Religion Foundation could file lawsuits, but a push for this from within the Christian community would be far more effective.  Christians, you have the power.  Aren’t you embarrassed by being lumped in with the worst of the televangelists?  Wouldn’t you like to see some public scrutiny on Scientology and other organizations hiding behind this loophole?

You won’t like me when I’m angry,
because I always back up my rage
with facts and documented sources.
— the Credible Hulk

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