How Offended Should I Be? Humanitarian Edition

impact_financial

The Church just released its UK financial statements.[fn1] And with the release has come a fair amount of internet hand-wringing about some of the details.[fn2] Two details, in particular, seem to be bothering people: salary information and the lack of spending from the British Church’s humanitarian fund.

So should these things bother you?

Honestly, I can’t say. But I can say that, before you decide to be bothered (or, for that matter, before you decide not to be bothered), there are a couple questions you should ask.[fn3] 

Humanitarian Aid Fund

At the end of 2014, the Church in the United Kingdom had £1,631,000 ($2,542,000) in its Humanitarian Aid Fund. During 2014, it didn’t spend any of that money. So what’s up with that?

I don’t know. But sitting on the fund is neither inherently good nor inherently bad; rather, it depends on all sorts of factors. Among them:

What is the purpose of the fund? I mean, presumably it has a purpose. If that purpose is to provide food to hungry people, then it could always, and completely, be spent down. If its purpose, on the other hand, is to provide relief to people in the United Kingdom who have been displaced because of an earthquake, and there was no earthquake in 2014, it makes sense that none of the money have been spent.

Who is donating to the fund, and why? In 2014, the Humanitarian Aid Fund received £367,000 ($572,000) in donations. Did these donations substitute for donations that otherwise would have been made to UNICEF or Oxfam or USA for UNHCR? In that case, not spending them down imposed a cost on those who needed aid (assuming UNICEF, Oxfam, or USA for UNHCR would have spent the money on humanitarian relief).

But maybe these donations were not substitutes, but rather additional donations, donations that wouldn’t have been made but for the existence of the LDS Humanitarian Aid Fund. If so, as long as the money is eventually spent on humanitarian aid, the fund’s existence—even without spending in 2014—is a net charitable benefit, because it has provided more money to humanitarian aid than otherwise would have been there.

What kind of returns is the fund receiving? Time value of money says a dollar today is worth more than that same dollar a year from now. That’s because if I invest a dollar today and can earn a risk-free 5% return, the dollar today will be worth $1.05 in a year.

For that reason, in an inflationary environment, current consumption is more valuable than future consumption (because prices may rise faster than the risk-free rate of return).

But if I can beat the market, my dollar today may be able to do more than a dollar’s worth of good in a year. Say we’re in a 5% risk-free return world, but I can guarantee that I can earn 10%. Most people’s dollar today can provide either $1 of aid today or $1.05 of aid in a year; mine can provide $1 of aid today, but $1.10 of aid in a year.

Add to that that my colleague who studies happiness says there isn’t a similar time-value-of-happiness. That is, happiness tomorrow has the same current value as happiness today.

In that case, barring a pressing immediate need, it may be better for me to save my aid money and use it in the future when it can buy more aid than it could today.

How much aid can you get for £1,631,000? Really, I don’t know.

What is the legal regime surrounding the fund? I mean, does it have to be used in the UK? Can it be used anywhere? Are there legal restrictions on what it can be spent on?

So is it bad (or good) that the Church has sat on its Humanitarian Aid Fund? I’ll repeat: I have no idea. Good or bad depends on the answers to these, and plenty of other, questions. Basically, I’m just trying to complicate things here: financial statements lay out how money flows, but they, alone, don’t give us any normative guidance. We have to bring both context and our values into the picture to determine good or bad.

Salaries

The salary objection is much less interesting to me, but I’ll lay it out anyway. One person employed by the Church made between £160,000 and £170,000 (roughly $250,000-$265,000), while 23 made in excess of £60,000 (about $94,000). Is that offensive and obscene?

I don’t know. But I do know some questions to ask. For example, what kinds of jobs were those highly-paid employees doing? What is the average pay for those kinds of jobs? What do other nonprofits in the UK pay similar employees? How about other churches?

Other Stuff

Confession: I’ve only skimmed through the financials.[fn4] There probably is other interesting stuff in there. But again, financial statements are a stylized representation of reality, not reality itself. And they’re normatively neutral: the flows of assets and money don’t tell us the should story; we have to construct that around them. And for those of us not well-acquainted with nonprofit financials or church financials more broadly, they story they tell we hear in fits and starts.

So yes, it’s both interesting and valuable that we have access to some financial information about the Church. But this British financial disclosure isn’t a silver bullet that proves either that the Church is true or that it is a corrupt scam. It just tells us how money flows.

[fn1] Q: But I thought the Church didn’t release financial information?!?

A: It doesn’t in the US. Under US tax law, most tax-exempt organizatons have to file an information return with the IRS, and that information return is made public. Churches, however, are exempted from the information return requirement. (If you want a lot more detail about this, you could read my Dialogue article about the Church’s 20th-century experiment with financial disclosure.) UK law, on the other hand, apparently requires financial disclosure, even from churches.

[fn2] As a totally unrelated side note: for those who want to see the Church start to be more financially transparent, I can think of worse ways than instinctively and reflexively criticizing those disclosures the Church makes, without trying to understand them in context. But frankly, I can’t think of a whole lot.

[fn3] Note that these are representative questions; they are, by no means, all of the relevant questions one can ask.

[fn4] Day job, family, and all that.

Comments

  1. That amount in the humanitarian aid fund is tiny; I suspect it needs to be built up before it can be put to any real meaningful use. Either that, or it hasn’t been spent because there hasn’t been a humanitarian disaster in the UK in the last year. When I was serving in Public Affairs we got involved with a food bank in our local town to see how we could help them, and it turned out there are quite a lot of restrictions on what that humanitarian aid money can be spent on. So, for example, we were able to buy them a fridge, but weren’t allowed to buy them a van to transport the food.

  2. Sam,

    Apologies for my laziness in not searching this out on my own, but were the salaries for total compensation or do they just reflect a base salary? In other words, do the numbers reflect the home and other benefits a mission president would be provided? Also, are the salaries listed only for church employees that live in the UK?

  3. lastlemming says:

    [I]n an inflationary environment, current consumption is more valuable than future consumption (because prices may rise faster than the risk-free rate of return).

    To provide another little piece of context, the UK is definitely NOT an inflationary environment. That weighs in favor of future consumption.
    http://www.bbc.com/news/business-34255161

  4. Anna, thanks. I kind of figured there were restrictions on how humanitarian aid money could be spent; it’s good (and interesting) to hear that there are, in fact, specific rules governing its spending.

    Marc, the bands (on p. 26) list the number of employees whose “emoluments” fall within certain ranges. But that’s as much as I can tell. And the salaries are for employees of The Church of Jesus Christ of Latter-day Saints (Great Britain). I kind of assume they all live in the UK, but I suppose there’s no necessary reason why they must.

    And lastlemming, I should have said as much (as I realize that not everybody’s as obsessed with the news of the financial world as I am). Thanks for the added context.

  5. Thanks Sam, I am filing this one under “not offended”

  6. My limited reading of this shows that the 180k members in the UK aren’t supporting the structure of the church in their country to the tune of about a $12 million shortfall that is made up with a grant from Utah.. . . and that real estate is expensive in the UK and so is its upkeep.

  7. I’m with you on the salaries. When I tell people that I work for a non-profit the usual response is, “How do you get paid?” My employer, like any business, must pay a comparable wage in terms of salary and benefits to fulfill its mission. The church in the UK is a multi-million dollar “business”, and you need a certain degree of experience and talent to manage it, deal with legal issues, etc.

  8. So you’re telling me our quasi socialist brothers on the other side of the Atlantic aren’t paying their “fair share” and expect someone else to pick up the tab of their faux-topian society that wouldn’t be able to exist without the umbrella of American technology, military, etc?

    Who would have thought international economic mooching would extend to church activities as well.

    Regarding the high paid salary, I’d guess lawyer/financing type position. 200-400 bucks an hour on the private market adds up fast so they may be saving money by bringing them on staff.

  9. Gerry, that’s fundamentally offensive and, likely, wrong. There’s no indication that the church in the UK isn’t paying its fair share (whatever that means). That the parent church makes deposits into its foreign branch makes all sorts of sense; the UK church has fewer revenue sources than the Utah church (for example, it doesn’t appear to have any for-profit subsidiaries), and has a different, constrained organization.

    I suspect that a full accounting would show money flowing all around the church (like, I suspect that my Southern California home sends surpluses to Salt Lake, while I suspect that certain inner city wards can’t support themselves). Overall, though, that’s part of why we’re brothers and sisters in the gospel.

  10. My guess on the high salary – temple recorder. Full time IT position, with some serious database administration skills, lots of backups, triple-redundant server admin, and similar duties in the job description. It’s more of a full-time job than a calling, and therefore unlike that of a temple presidency.

    UK church expenses would also be far, far lower without the need to support the Boy Scouts.

  11. Bayprince says:

    That one high salary is very well a church attorney based in England. If I am correct, in that context the salary is almost certainly below average of his fellow English attorney peers.

  12. I’m most interested in the Real Estate expenditures (new projects and facilities maintenance) – if I am interpreting things correctly, it looks like just over 10% of meetinghouses have more than one unit (ward or branch) meeting in it. Now, I’m not overly familiar with the UK, but my gut tells me 272 meetinghouses plus 31 rented spaces is an awful lot in a relatively small country. I’m surprised the utilization is so low? Is the number of units decreasing? Was there building for growth that never happened? Or is my perception totally off, and the 300ish meeting spaces are actually all generally quite distant from each other?

  13. Especially if said attorney lives in London.

    And I’d like to apologize to the rest of the church for Gerry and his ilk.

  14. reaneypark says:

    I’m familiar with the UK and it isn’t practical to have multiple units meeting in the same building. Most units cover a specific geographical area and many of the members rely on public transportation to get to meetings. Traveling just 30 miles is a long distance for them. I could say something snarky about how that may be difficult to understand if you live in Utah and there’s a meets house on every block. But I won’t.

  15. it's a series of tubes says:

    Megan, this is a time when you’d do well not to trust your gut. UK units typically cover very large geographical areas; sharing a building simply is not feasible.

  16. Geoff - Aus says:

    My father was a building supervisor in UK in the 1960s and 70s. There was a policy to build buildings which would attract members. We built a chapel in Kirkcaldy in Scotland (by volunteer labour) with one pair of missionaries and half a dozen teenage girls. There were about 80 members attending when I went back a few years ago.

    As far as money being paid back from Utah, in Australia most members pay tithing etc by direct transfer to HQ which I assume is Utah, so the money would then be re distributed, So no US is not subsidising, the socialist world.

  17. Anecdotally, England: in my stake 2 buildings are shared between 2 units each. Bear in mind one of these buildings is a small stake centre, and the other a smaller building still. The second has room for only one ward at a time. And until wards combined this year, my own ward also shared a building, again this is a small building. My brother is a Bishop of a ward in a different stake, which also shares a building with a neighbouring ward. Again this is a small building, so it’s a squeeze, and there aren’t really enough parking spaces for both wards. So, where wards can do so, they do in fact share buildings. And I’m guessing the majority of our buildings are considerably smaller than those in Utah.

  18. $250,000-$265,000 is the highest paid church employee in Britain? I would have assumed it would be higher. I can’t understand how people would be offended by that.

  19. From p. 26: “The highest band of emoluments encompasses remuneration of a termination payment to a former employee of the Charity.”

  20. ktbnyc, you’re absolutely right. But that doesn’t actually tell us much. It could be that someone who earned £160,000 got a £10,000 severance payment. Or someone who earns £10,000 who got a £160,000 severance payment. Those two options tell significantly different stories, not to mention that it could be something somewhere in the middle.

    So if you want another question, it’s this: how much severance was the former employee paid, and why?

  21. EBK,

    I can understand how people would be offended by that, but I also tend to think that they haven’t thought things all the way through and their offense is more a gut reaction.

    Having written that out and in light of Steve’s new post I suspect I might need to give others a bit more benefit of the doubt.

  22. EBK, it’s common for people to get upset when they hear that people who work for charities and non-profits make near-market wages. The underlying distress is probably caused by the employee in question making more money than the one making the criticism (potentially a donor to the organization). Like if they give to an org no one who works for it should be making more than they do. They also assume that people who work for charities should be doing it out of the goodness of their hearts, which is the reason why the *volunteers* for the charities donate their time. Of course operating that way would mean all nonprofits would have to be staffed almost entirely by young people without families or financial commitments. Or people with poor skill sets and little ambition. It’s just a fundamental misunderstanding of what a non-profit organization is and a conflation of different parts of said organizations. It gets even worse when the organization is seen as being ineffective, like the BSA local councils.

  23. I can’t say BSA councils are ineffective. Why, the local council when I grew up turned up in a case study in one of my Accounting classes in college. Fascinating little case of financial fraud and the need for some basic auditing controls. I’ve remembered that story for years now, and have had occasions to dust if off and implement some sanity in more than one corporate Finance division.

    But, yeah, if you’re looking for good examples from the BSA, I’m stumped too.

  24. Xander Harris says:

    Sam, you’re right about the difficulty of interpreting that one figure, but from 2010-2014, the top end of the top comp band was 80,000. We still don’t know exactly how much of the 160,000 was salary and how much was severance, but it’s fairly clear that salary was sub-80,000.

  25. evilhrlady says:

    Yeah, I can’t get worked up over the salary either. I worked in pharma HR for 10 years and those salaries–whew! There’s a reason your prescriptions drugs are so expensive. But, a lot of those skills are transferable to other industries and so, if you want top notch talent, you have to pay for it.

    People always complain about non-profit CEO salaries. The reality is, if you’re good enough to run the Red Cross, you’re good enough to run a for-profit company and so you need to be compensated so you’ll stay.

  26. Considering that the saints of old used to literally burn their donations up in smoke, I don’t think we get to be offended at all.