Over the past dozen plus years, I’ve watched church after church lie to their members and commit financial fraud. Of course, they don’t call it that…
You see, churches have a habit of asking for money for one purpose and then using it for something else. Usually it’s building funds, but it can be anything. “Our Sunday School department needs money for X” – and then when someone donates towards that request, the church goes… “hmm, what we really need at this moment is to pay staff salaries” and wouldn’t you know – they do just that.
Now I know what you’re saying – Incredipete, if money is donated to the church, the church needs the discretion to use it as they think is best.
And that’s where I, and the IRS, disagree with you.
I’ve never agreed with the IRS on any other topic, but I adamantly agree on this one. As a person who has always donated to charity, if I designate funds to something I specifically care about and you use it some other way, you are lying to me and you’re stealing from me. It’s outright fraud. No matter how thin you slice it, as they say, it’s still bologna.
The IRS feels the same way. And can I just say, if the IRS thinks something is unethical or fraudulent – then it’s blatant. The last people on Earth that should ever argue it’s OK to do should be a church. They are supposed to have the highest standards of ethics, yet instead they feel above the law.
Either they use loopholes to avoid the spirit of the law (don’t take money under false pretenses), or they simply don’t care or they think the law doesn’t apply to them.
If a business did exactly the same thing, someone would assuredly go to prison.
Here’s what the law actually says on this topic:
Solicited designations – A solicitation means that your organization asked for donations for a particular cause. Maybe it was a request from the pulpit, a letter, email, website, radio spot… it doesn’t really matter. What matters is that donations given in response to a direct solicitation MUST be PERMANENTLY dedicated to that purpose. In a soup kitchen example, the board cannot move that money around, no matter how dire the circumstances, if those funds are the result of a solicitation. Many of you may have read the story of the director of a large, national charity resigning after it was found he did just this very thing. Was it for a good reason? Yes. Was it illegal? Unfortunately, yes.
The fact is, it shouldn’t take the IRS to make rules to prevent a church from lying to its members. Churches should hold themselves to the highest ethical standards, especially where donations are concerned. If churches were truly transparent with financial information, and the congregation knew funds were being redirected, the church would be empty in an instant. As it should be.
I have been personally aware of 4 different circumstances where this exact scenario played out. I’m not in a position to be a whistle-blower, nor do I need any extra drama in my life, but suffice to say, I will NEVER attend a church again that doesn’t have a strong board of elders and a board of trustees that is 100% transparent with the churches records. Not just the financial statements – but copies of every check, gift letter, and any other communication from the donating party.
Churches that do this should be completely embarrassed and ashamed, and even if they’re never caught (stripping them of tax-exempt status) they will have to answer to God on judgment day.