The headlines are everywhere: "Televangelists Face Intense Federal Probe", "Grassley Probes Televangelists' Finances", "Ministries under Federal Microscope".
On Monday, November 5th, this nation's press and then the general public were made aware of the latest in a number of nonprofit organizations that some large Christian Ministries were the focus of Senator Chuck Grassley's (R-Iowa) inquiries through his position of influence on the Senate Finance Committee.
In the past few years, Senator Grassley has been taking nonprofit organizations to task on what he has characterized the "gold-plated" lifestyles and a lack of accountability and financial transparency. In 2005 and 2006, he held a series of hearings that included testimony from some of the largest and most well known charitable organizations in the country including the Red Cross and the Smithsonian Institute.
Through a number of sessions, public inquiries and testimonies, some very prominent nonprofit organizations were asked some pretty embarrassing questions about the board oversight of the organization (or lack thereof), executive compensation, often in the millions of dollars and unusual perks that were normally considered the type of benefits provided royalty, heads of Fortune 100 companies and professional athletes.
With the attention now on some large Christian groups (the media calls them all televangelists but they are actually organized as churches), this has been a furious news cycle for me personally. The organization that I'm associated with, the ECFA, is an organization that typically has a lot to say about the integrity of Christian ministries and churches and provides accreditation for over 2,000 nonprofit organizations including some of the largest and most well-known evangelical ministries. While I'm not sure if I qualify as a true "expert" under everyone's definition, I'm the closest thing available often for the media.
I try my best to answer the questions about this development and give the seemingly starved media some food for thought but as most can tell you, I don't get much time to adequately answer some questions.
So, I thought I'd try to answer some often asked questions here on my blog where I get to use a backspace key, can delete and rewrite my answers and even use a spellchecker.
Question: Am I surprised at the inquiry?
Yes and no. Yes, it's certainly unusual that six large media ministries would get lengthy letters from one of the ranking members of the Senate Finance committee. No, it's not unusual for Senator Grassley to continue to focus on an area that he believes needs to have more financial transparency and accountability.
Question: What is Grassley after?
I'm glad you asked that (it's typically not one of the questions I get). Senator Grassley is primarily asking the question, "Is the nonprofit acting like a nonprofit?" By their nature, nonprofit organizations are supposed to be operating for the public good. The government prohibits the nonprofit from allowing any of its income to be paid to or property sold (below fair market price) to insiders such as officers, directors, or employees. Setting up a related for-profit organization to funnel income to insiders is also not allowed and may have serious consequences including the loss of tax-exempt status.
Question: What is likely to happen?
This is more difficult to say but if the inquiry follows the path that others have blazed, some or all of the ministries are likely to be called in to provide testimony about specific transactions and occurrences under oath. There will be inquires to determine if any of these three specific types of transactions occurred: 1) Excess Benefit Transaction. Were perks and benefits provided to the heads of the ministries and their families that should have been taxable events? Most likely to be looked at will be trips, travel, personal vehicles, etc. 2) Private Inurement. Private Inurement (private personal benefit) happens when when an insider — an individual who has significant influence over the organization — enters into an arrangement with the nonprofit and receives benefits greater than she or he provides in return. 3) Excessive Compensation. The IRS has a three-point test to determine if the board is not doing its job of approving the compensation of the chief executive in a manner that is reasonable and documented. The key part is surveying or looking at a survey of other organizations and their compensation plans.
Documentation will be key in the proceedings. Typically, if an organization cannot provide the proper documentation of the "tax-exempt" purpose of some financial transactions, they will be determined to be "taxable" and fines and penalties will likely result.
We'll be watching closely. By the way...none of these organizations are members of the ECFA but in many ways, I wish we would have been asked to get involved years ago.
