The practical problems with Church financial disclosure

In my post yesterday, I addressed why loyal latter-day Saints should not be part of any movement to push the Church toward greater financial disclosure. You can read that here.

Today I would like to address a different but related issue, which is the many, many practical problems with financial disclosure in a private institution like the Church.

Notice the word “private.” This is essential. Government, which is a public institution, has completely different rules than a private institution. This concept goes back centuries and is part of British common law, which formed the foundations for our own laws. Government belongs to “all of us” (presumably), and because you are part of the institution of “all of us” you should be allowed to have transparency of how government spends its money. So, you can go to your local town hall and ask to see the budget, and everything should be there. I have actually done this, and in every town where I have lived, disclosure is pretty complete. This is a good thing.

Private institutions are not expected to make “complete disclosure.” This is an easy concept but often misunderstood.

Let’s say you and your buddies get together and have a BBQ in your back yard once a week. You have made a private agreement. It is on private property, it involves voluntary, private associations. As long as you are not bothering your neighbors by loud music or yelling and screaming and setting off fireworks at 2 a.m., you are free to keep your private association. Nobody from outside your group can come along and insist you disclose who is paying for what, and how much, and is Joe buying the hamburgers or the hot dogs, and is Alice always making the potato salad. From a legal standpoint and from a standpoint of basic common sense, your private association should be respected.

So, we can agree that outsiders to a private association have no legal standing and no moral standing to demand that members of a private association disclose their financial actions. So, if you are not a member of the Church of Jesus Christ of Latter-day Saints, stop asking for financial disclosure because it is a private institution and has nothing to do with you. Go find something better to do with your time, thank you very much.

How about members of the association? Yes, they can ask for disclosure, but presumably they would only do so in the most extreme circumstances. If Joe at the BBQ is always insisting that everybody disclose exactly how much was paid for hamburgers and potato salad, wanting to see receipts, he is really a busybody, and personally I am not inviting him to my BBQ anymore. He may end up leaving the association.

You see, full “disclosure” for private institutions is always problematic. Many people who favor “full disclosure” or “transparency” within the Church are, frankly, no different than Joe asking to see the receipts at the weekly BBQ — they are just making busy work for other people and asking for things the majority of the people don’t care about. And of course the “transparency” only goes one way: they want disclosure for other people, but are unwilling to disclose things about their own private finances. So, they really don’t want transparency at all — what they want is to cause trouble.

The point is that, in any private association, there are appropriate ways and times to ask for disclosure. If you are a member of a private association like the Lion’s Club, and you suspect your president is pocketing group funds, then, yes, at the monthly board meeting you are probably justified in asking for an audit. But notice that all private groups have ways for this to be accomplished. At the Lion’s Club it may be at the board meeting, at the Church it is a discussion with your bishop and/or stake president or even the high council member responsible for auditing your ward.

Yes, your ward is audited twice a year. What happens is the bishop and the clerk have to prepare detailed, and I mean detailed, accounting for every dollar that was spent. I personally have audited several wards, and we spend hours and hours going over expenses, making sure the receipts are there, etc. If the receipts are not there (and this sometimes happens), we call in the clerk and if necessary the bishop, and the audit is not done until all expenses can be explained. I can attest that controls are in place on a ward and stake level to assure that all money is accounted for. And if it is not, and you suspect something fishy is going on, go to your bishop or stake president or even your high council representative, and the problem will be addressed.

OK, that’s the situation at a local level. How about at a regional or church-wide level? Well, very few people, if any, reading this have any idea how it takes place. And the Church is deliberately opaque about this. We receive a twice-a-year report at Conference that covers things with a broad brush stroke, but we probably would not be able to find out details if we wanted to.

I, for one, am completely OK with this, and I suspect the vast, vast majority of members who go to Church and perform their callings and go to the temple and pay their tithing are OK with this as well. In 15 year as a Church member, I have never heard anybody at church grumbling about the Church’s financial situation. It is always semi-anonymous people (who may or may not be active members) over the internet.

So, why doesn’t the Church disclose all of the details? Here are some reasons I can think of, and there probably are dozens more:

1)It would never be enough for the critics. If the information was disclosed on a regional level, they would ask why not on a stake level or a ward level. They would want every possible detail about every possible investment. They would be Joe at the BBQ on steroids.
2)It would take a lot of time and cost a lot of money. The auditing on a ward and stake level is carried out by volunteers, but the more disclosure the Church makes, the more time and money that must be spent auditing and justifying. Imagine if the entire process were public and every person could question every expenditure. It would be a complete nightmare, and precious tithing money would be spent hiring accountants, attorneys, etc.
3)Private information would be released. Personally, I am not interested in my tithing information being broadcast to the world. But in these days of identity theft, can you imagine the treasure trove of information for scam artists to be gained from private information gathered from the Church?
4)Private information could cause contention. What if spending per person in Switzerland is 10 times spending per person in Ghana? There could be very good reasons for this (like the cost of living), but the Church would spend countless hours justifying and dealing with hurt feelings. Not good.
5)People could base their personal financial decisions on the Church’s financial investments. They would just be following the Lord, right? Well, imagine if they did this and the investment lost money. Again, not good for anybody.

These are just some of the reasons I could come up with. To sum up: if you are not a member of the Church, it is a private institution, and its finances are none of your business. If you are a member of the Church, you do have a stake in it, but is it really all that important? Don’t be like Joe at the BBQ insisting on seeing receipts for the potato salad to see if he spent five cents more than another person. Go find something better to do.

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About Geoff B.

Geoff B has had three main careers. Some of them have overlapped. After attending Stanford University (class of 1985), he worked in journalism for several years until about 1992, when he took up his second career in telecommunications sales. In 1995, he took up his favorite and third career as father. Soon thereafter, Heavenly Father hit him over the head with a two-by-four (wielded by the Holy Ghost) and he woke up from a long sleep. Since then, he's been learning a lot about the Gospel. He still has a lot to learn. Geoff's held several Church callings: young men's president, high priest group leader, member of the bishopric, stake director of public affairs, media specialist for church public affairs, high councilman. He tries his best in his callings but usually falls short. Geoff has five children and lives in Colorado.

31 thoughts on “The practical problems with Church financial disclosure

  1. Note to commenters: due to the huge volume of comments from yesterday’s post, we will be moderating all comments.

    A reminder: this is a blog for faithful members of the LDS church. Comments are intended to build up the Church and honor modern-day prophets and apostles. Comments denigrating the Church or insulting other commenters or the OP won’t make it past moderation. Be polite, keep on topic and don’t try to dominate the conversation. Thanks.

  2. Well said Geoff! I noted some of these same things in my comments on the other thread. It would probably be a public relations nightmare for the Church to try and handle these things solely from a logistics point of view, and overall it would distract from the central mission of the Church, to preach the restored gospel of Jesus Christ.

    The Church’s annual audit report says, “The Church Auditing Department is independent of all other Church departments and operations, and the staff consists of certified public accountants, certified internal auditors, certified information systems auditors, and other credentialed professionals.”

    That should be enough to put most at ease that the funds are being used appropriately. Those that are asking for more are looking beyond the mark (Jacob 4:14, which is an excellent scripture on this subject). It also reminds me of Martin Harris and the lost 116 pages. It is unnecessary to dig deeper, and would likely cause more problems than it allegedly solves.

  3. Geoff, the church and other exempt organizations receive massive tax subsidies from federal and local governments, as do their members. So they are not completely private to that extent. Non-religious organizations have to file a federal Form 990 disclosing their finances, which must be made available for public inspection. This is so even though many such organizations would be deemed “private” under your definition above (i.e. private foundations).

    For policy reasons, Congress has decided not to impose the disclosure requirements on religions only. Maybe this is one thing government kind of gets right?

    Most organizations – public charitable, mutual benefit, private trusts and foundations, corporations, LLCs, homeowner’s associations, etc. are bound by state law to make full financial disclosures to their various members, beneficiaries, stakeholders or shareholders. Disclosure doesn’t turn on the private or voluntary nature of the organization, but on the real economic interests of those who contribute. I don’t think that portraying stakeholders who exercise their rights to review finances as annoying busybodies is consistent with the freedom respecting society you advocate elsewhere on this blog.

  4. 5)People could base their personal financial decisions on the Church’s financial investments. They would just be following the Lord, right? Well, imagine if they did this and the investment lost money. Again, not good for anybody.

    Whoa, Geoff! You pretty much pulled that directly from my comment on the other thread yesterday! Glad to see you’re paying attention! ;-)

  5. Great post! Just one thing stood out. If I remember correctly we only hear the audit report once a year, not at both conferences. Minor detail and I might be wrong.

    I think the thing that is striking to me about the transparency-mongers is the dim view they must have of the integrity of our leaders. I can understand that coming from those who dislike the Church, but it’s surprising to hear that from the members.

    I recall Elder Holland’s talk from several years ago when he put the Restoration in stark terms: either Joseph was a prophet of God who saw what he claimed to see or he was an insidious liar. There’s no middle ground. Similarly, either the Church is led by men chosen of God who continue to be led by Him or it’s not. It seems that clear cut to me.

    I suppose many would call me naive and simple and that’s just fine. I know I’m going to have a stewardship interview at some point that is going to encompass all of my callings, actions, thoughts, words, etc and so is President Monson. Frankly, I think mine is going to be a little more important to me, so I’m going to focus on the beam in my own eye and let President Monson worry about any motes he might have.

  6. DCL, a “subsidy” is not when government allows people or organizations to keep more of the money they freely generate. It is a subsidy when government takes money from taxes and gives it to another person or organization. Thus, “farm subsidies” when farmers receive payments for doing nothing or a subsidy to a green business to make useless products that nobody will ever buy. So, the Church and its members do not receive subsidies — they simply have less money taken away.

    The reason they file financial disclosure with the IRS is that the IRS recognizes 28 different types of organizations as eligible for tax exemption. This includes private educational organizations, mutual aid societies, charities and other organizations that perform charitable functions. Many of these organizations do not have to make complete disclosure either. It is nice that we have a First Amendment that recognizes religious liberty, but it is worth pointing out that these organizations perform charitable functions more efficiently than government, and therefore government is allowing them to keep their money for a very practical reason, ie, it would cost taxpayers a lot more money to perform these functions than the taxes they might theoretically receive by taxing these groups.

    State laws vary, and most private groups in Colorado do not have to make the kinds of disclosures you claim, except to file state taxes. State law in Colorado does not touch HOAs, and it certainly wouldn’t touch a private BBQ group. The same rules apply in Florida. So your point about private organizations is not true countrywide. Such a claim for “full financial disclosures” violates free association, imho, but I am not a lawyer and cannot address every possible contingency.

    Could you please tell me where I got a “right to review finances” when I joined the Church? I don’t remember that from the baptismal interview. I remember a lot about Jesus and Joseph Smith and promising to give up coffee (that was a difficult one), but not anything about a right to review finances. I maintain that such a right is not part of the covenant you make when you join the Church. People have free agency and can do whatever they want with that agency, but I consider people who claim they have such rights annoying busybodies, yes I do. If you have “real economic interests” and concerned about how your money is spent, there are channels for bringing up your concerns. Please discuss with your bishop or stake president.

  7. Nick, sorry, I was going to give you credit, and it just got lost in the shuffle. Yes, I got that idea from your comment in yesterday’s post. Credit where credit is due.

    I am impressed that you are reading all of my thousands and thousands of words. Maybe someday I can help convince you to come back to church?

  8. “It would never be enough for the critics.”

    Responding to critics of the Church, in any way, continues to feed their criticisms, of which are never satisfied.

    And you’re right, this is a private matter between members of the Church who freely give of their means in response to a commandment, and covenant, to do so, with the Lord.

  9. The tax exemption and tax deductibility of contributions are economic subsidies, although its possible to call it different things to fit an ideological framing.

    Geoff, check out Colorado Revised Statutes 38-33.3-317.

    I am not arguing that the church should disclose its finances as I think the exemption is based on sound policy. But this exemption is based on religious principles, not on some notion of the privacy or voluntary nature of the organization.

  10. DCL, I believe in calling things what they are, not what we want them to be ideologically. Keeping more of your own money instead of giving it to the government was never and never will be a subsidy.

    http://en.wikipedia.org/wiki/Subsidy

    As for the statute, I read the first few pages and then ZZZZZZZZZZZZZZZ… oh, sorry, fell asleep there for a second. It seems to be something about HOAs. I don’t know what to tell you, dude, nobody I know has ever reported anything to anybody from their HOAs in Colorado (including ours).

    I stand by what I wrote about the differences between private associations and public ones.

  11. You said that Colorado law doesn’t touch HOAs. I pointed out that it does touch HOAs, including in a detailed way requiring full disclosure of finances to their members. So, dude, the proper response is “I stand corrected.”

    The reason I’m harping on this point is because advocating non-disclosure to the stakeholders in various organizations opens the doors to a wide variety of private abuses in the form of investor fraud, charity fraud, etc. This has been in the common law for 1000 years before government decided to enforce it proactively, so you’re arguing against some pretty ancient principles here.

    Also, the authoritarian mindset in this post does not wear well with the libertarian aspirations of this blog. See, e.g., Jesse Walker’s July 17, 2012 article on reason.com, repudiating Hayek’s belief that a dictatorship is an OK way to impose liberty.

  12. Dude, life is too short to read that statute. But let’s say you are correct about its contents. I can tell you that no HOAs that I know of pay any attention to such things, and the vast majority of people go about their business getting along with their neighbors. I will grant you the point that there is always a danger of private enterprises falling victim to fraud from unscrupulous members (I referred to this in the OP), and the solution there is pretty clear: audit the offenders and sue them. I can see no reason why any government should have anything to do with it.

    When it comes to the Church, I have said repeatedly that there is a process for people to complain if they suspect abuse. Again, no need for any government involvement.

    As for the “authoritarian mindset,” I have to laugh. It is authoritarian for a small group of people (the authoritarians) to force their will on the vast majority of members who trust Church leaders to spend money wisely by causing their tithing to be wasted on additional disclosure and audits that the vast majority of members do not want. So, if anybody is being authoritarian it is the small group trying to spend the money of the large group for a cause the large group does not agree to. I am not a fan of Pinochet or any “temporary” dictatorship of any kind, especially when it is launched by authoritarian non-members and disaffected murmurers.

  13. The libertarian mindset is concerned about coercive force exercised by a government. Their is nothing contradictory to that in the post. Geoff is discussing a private, voluntary organization. Voluntary organizations can come up with their own practices and libertarians aren’t going to fret about it.

  14. Many private organizations–in particular, charitable organizations that accept donations–are indeed required by law to make full financial disclosures. Churches are generally excepted from disclosure rules applicable to charitable organizations. Nevertheless, in the interests of accountability, transparency, and good stewardship, many churches do disclose their financial information. It is widely considered a “best practice.”

  15. Kullervo, some churches do, others don’t. It is widely considered a “best practice” by critics of the Church, many of whom are not members and have no reason to care. It is not considered a “best practice” by more than 1 billion Catholics and most Mormons.

  16. A couple of off-the-cuff thoughts, from someone who isn’t all that bothered by the Church’s lack of disclosure:

    1) I don’t find the “it’ll take too much time and money to make disclosure” terribly persuasive, since it seems likely that “executive summaries” of the Church’s finances are already prepared and circulated throughout the highest levels of Church leadership.
    2) Kiwimormon had a recent blog post about Church finances in New Zealand, where disclosure occurs as a matter of legal necessity. The numbers appear to show that the US Church basically gives the NZ church a $20 million subsidy each year. Not only was the disclosure immediately deemed “insufficient” by the critics (confirming your #1), but I must confess myself a little miffed that some ingrates couldn’t stop carping about Church finances and demanding a voice in the way the Church spends its funds globally even after getting a $20 million-per-annum bailout (confirming your #5). All this bickering about money can’t be productive, from a building-Zion standpoint.
    3) I hear a lot of critics gripe about how the Church’s commercial investments are supposedly out of harmony with the Law of Consecration, which seems odd since the Law of Consecration would basically give the same group of “materialistic” Church leaders control over 100% of a critic’s assets rather than just 10% as per the status quo.

  17. Jim Do, it’s not just the preparation of finances that cost time and money, it would be dealing with the legal and social fallout, as you describe in New Zealand.

  18. I don’t think we should underestimate the additional cost of “full disclosure.” The Church has a massive audit department as it is, but the reports they are doing are not for public consumption. That is a completely different type of project and would involve huge new teams of auditers, new reports, and then a massive increase in the public relations team to deal with all of the inevitable complaints coming from “full disclosure.” I certainly don’t want my tithing money spent that way.

  19. a “subsidy” is not when government allows people or organizations to keep more of the money they freely generate.

    If the same tax is applied on an unequal basis to grant an advantage to some activities over others, it is economically indistinguishable from the situation where the government collects the regular amount from everyone and then issues checks to the favored recipients.

    The mortgage interest deduction is a subsidy of home ownership, for example, the bigger the better. It creates a strong economic incentive for people to buy instead of rent, and to build bigger homes than they would have otherwise. Renters (up to a point) and those who live in more reasonable homes bear the burden in the form of higher tax rates than would otherwise be necessary.

  20. Mark D, if you want to argue that the mortgage interest deduction incentivizes certain behaviors, that is fine. But technically it is not a subsidy. From an accounting perspective, subsidies are additional assets. So, if a farmer would make $20k and gets a $10k subsidy from the government his total revenue has increased. This is a subsidy. But if somebody with a mortgage interest deduction has $50k in revenue and gets a $3k tax break, his total revenue has not increased. Yes, his after-tax income has increased, but it could also increase in other ways, such as having more children, pay alimony, etc.

    This is an important distinction because some people (such as DCL above) make the claim that the Church “receives massive tax subsidies.” This implies that the government sends checks to the Church and its members, which is patently false.

    The ideology behind this is that everything belongs to the government so if the government lets you keep more of your own money it is a “subsidy.” (I am not claiming DCL has this ideology, btw, but he unwittingly buys into it by calling a tax break a subsidy). This is simply an incorrect ideology historically and legally, and the Founders would have a fit to see how many people buy into this ideology. Instead, the money belongs to you (technically the Lord, but you are the steward, not the government), and you pay it to the government to run necessary services. If the government wants to incentivize certain behavior (buying homes, funding charities), it can give you tax breaks, ie, take less money from you. But this is not a subsidy — this is a tax incentive for specific purposes.

  21. The risks of full disclosure are being vastly overplayed.

    As noted, the Church used to disclose financial matters without any harm. It wasn’t an overwhelming task and with today’s financial controls, the task would be even easier.

    The media? The argument for non-disclosure is very similar to the argument that politicians used to make about disclosing political contributions. The “bad” impact was almost non-existence since disclosure has been required at the state and federal level.

    Every year there would be a few stories, but they would only last a couple days. The impact would be minimal.

    Burden on local wards and stakes — The real issue is not the auditing issues. It is disclosure of where funds go. There is a simple solution. Once a year, hold an adult meeting and put the ward/stake budget up on a screen. Hand copies out. Explain and then ask for questions. Would probably take 15-20 minutes. My ward growing up used to do this every year with no ill effects.

    But the advantages are significant.

    Sunlight is cleansing. It minimizes suspicion. It demonstrates trust. It bolsters those who are supportive of the institution.

    I have hope that future leaders will take this bold step.

  22. And of course the “transparency” only goes one way: they want disclosure for other people, but are unwilling to disclose things about their own private finances. So, they really don’t want transparency at all — what they want is to cause trouble

    I’d never looked at this that way. Interesting.

    why doesn’t the Church disclose all of the details? — it would increase pressure for bribes. Right now, only one in ten approved humanitarian projects in Africa gets final approval from the local governments. The other 90% founder on a refusal to pay bribes. That would only go up.

    massive tax subsidies from federal and local governments — that depends a great deal on how you define your terms. Exemptions from certain taxes are generally not subsidies in the not for profit world. Geoff B. has it right.

    JimD — now where do you get off interjecting reality and real life examples into a discussion? Should truth have a place or is this just all theory. I’m calling you out for pointing out the truth.

    But it is interesting, and probably worthwhile, to compare the experience of the Church in countries where it has various disclosure laws with those where it does not.

  23. If they choose to, fine.
    But consistently insisting to see the records indicates a lack of trust.
    Think about it.
    Do you ask your spouse every year if they’re faithful to you?

    I hope not, at least if you trust your spouse.

  24. Stephen, your first point, I truly do feel that the same types of problems that occur with complete transparency for the Church could be problematic with complete transparency for individual finances. So, let’s say you are required to disclose your tax returns and school records on the internet. What types of problems could that cause — you are being transparent, aren’t you? Well, we have already seen with Mitt Romney’s tax returns that small things are twisted and distorted. He has been subject to endless mocking on the fact that he really does tithe, the fact that his tax rate is legal but “low,” etc, etc. You will note that Pres. Obama has refused to provide any of the transcripts and records from school.

    So, the calls for transparency are, in my opinion, hypocritical. I was going to ask that anybody calling for transparency in the Church should post his tax returns and school transcripts on the internet and provide a link, but that might be going just a wee bit far. :)

  25. “…is Alice always making the potato salad.”

    Well, actually Alice’s actions could have an impact on interstate commerce in that it would affect the mayonnaise and potato industry so the state might indeed have a compelling interest to know if Alice is engaging in rampant market-upsetting actions with her free potato salad making habits!

  26. While they can no longer invoke the commerce clause they can impose a tax…no, a penalty…no, a tax… if they don’t buy government potato salad.

    (Government potato salad. You know that’s been sitting in the sun for hours before you get it.)

  27. Geoff …

    ” You will note that Pres. Obama has refused to provide any of the transcripts and records from school.” or his passport he used to travel to Palestine with, or the Kenyan embassy records when he and his mother arrived in country …

    Yep. I’m aware. If the Church was not already the focus of so many attempt to shake it down for bribes and similar financial transfers … I might feel differently. The entire area makes for an interesting discussion.

    Which leads me to ask just how detailed of disclosures do people want? Down to individuals and how much each person in each congregation pays in tithes and offerings? With a donation by donation breakdown, including days, amounts, banks the checks were drawn on?

    When people start talking about disclosure, I think it would not hurt to define just what level of disclosure people are asking for and then to ask why that level instead of a different one. That is a fair discussion, since the reports in conference are disclosures. How much more? Why only that much and not even more?

    Would it be a good start to take every person who signed the petition and ask them if they would be comfortable with full disclosure of all the tithing and offerings they have paid, broken down by each payment (date, amount and bank the funds were drawn on), address the payment was linked to?

    I think everyone agrees that is too much disclosure.

    But, on payments going out, should we get to know who got what type of welfare, when and the exact form and source on a per person and a per church unit basis? That seems pretty intrusive too.

    So, what level of disclosure and what level of non-disclosure? Seems like we need people to define their terms. Or is that being unfair?

  28. I am loving the potato salad humor. Remember you can get everything you want at Alice’s (potato salad) restaurant.

  29. Stephen, as I say above, no matter what you disclose it will not be enough. At the end of the day, personal information will be disclosed that will cause tremendous contention, loss of privacy, hurt feelings, resentment, etc. This appears to be the goal of the people asking for disclosure (although some people may have not really thought through the issue very well).

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