Are Churches More Like Charities or Country Clubs?

Most churches do good works—soup kitchens, food banks, and so on—so they’re like charities. But they also provide a social benefits like a country club. Is a church more like a charity or a country club?

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.

Pulling back the curtain

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 can fairly be counted 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.

Why are the books closed?

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

(This is an update of a post that originally appeared 5/14/12.)

Photo credit: Wikimedia

About Bob Seidensticker
  • Greg G.

    Tithing is a seat license for a weekly performance of music and oratory.

    • wtfwjtd

      Another axiom that applies to tithing–“he who pays the piper, calls the tune.”

  • http://empiricalpierce.wordpress.com/ EmpiricalPierce

    The overseer must be above reproach as God’s steward

    — Titus 1:7

    Ah, but right now churches ARE above reproach – in the same sense that the inordinately wealthy are in many cases above the law.

  • Trent Horn

    Ironically, the reason Churches are tax-exempt is to promote the separation of Church and State. This was part of the decision in Walz vs. Tax Commission of the City of New York (1970). Way back in 1819 in McCulloch v. Maryland the Court said that, “the power to tax is the power to destroy” and in order to protect freedom of religion courts and legislators have opted not to tax churches.

    Churches have much more in common with charities (another 501c3) than country clubs (a 501c7). Church services are usually open to the general public and are free (tithing is usually optional). Most social clubs require members to pay dues and are usually not open to the public. Churches provide religious and moral instruction, a deep source of meaning in life, pastoral aid to the grieving as well as funeral services, support for weddings and marriages, visits to the sick, disabled, and imprisoned.

    If museums and amateur sports leagues can be 501c3’s despite not giving much money to charity, then I don’t see why churches should not be 501c3’s as well.

    • http://www.patheos.com/blogs/crossexamined Bob Seidensticker

      You make a good argument that a church isn’t like a country club. But the fact remains that a church still isn’t like a charity.

      This is helpful input; thanks.

      • smrnda

        I would add that unless the books are open and expenses are reported, we don’t know if any particular church is more like a charity than a country club. We don’t know without the facts, any more than without the books open we don’t know a charity isn’t a scam.

    • wtfwjtd

      You make some valid points here, but are missing the primary thrust of Bob’s post: that of accountability. I don’t think that Bob or anybody here was advocating the taxation of churches or other non-profits, just advocating that they all have to follow the same rules to maintain their tax-supported and tax-privileged status. Transparency and openness of the books in exchange for this tax status has always been a given for other organizations, why not churches? It has been shown to reduce fraud and waste, and allows donors to have more confidence in the honesty and integrity of their organization.

      If you are advocating that we look into revoking the privileged tax status of sports enterprises, like the MLB and NFL, you would certainly have my unequivocal support there for sure.

    • GeorgiaPeach23

      You make good points, but most of the services you list (weddings, funerals, counseling, visits) are restricted to members. I might be welcome to sit in the pew, but I would not be allowed to have my wedding there. It is disingenuous to count these things as open to the public.

      • wtfwjtd

        “I might be welcome to sit in the pew, but I would not be allowed to have my wedding there. ”

        From my experience here in the midwest, you probably would be allowed to have your wedding there–for a fee. Of course, the same could be said of most country clubs, so your final statement is still valid.

        • GeorgiaPeach23

          Even as an atheist? Would my gay friends also be allowed to get married there?

        • wtfwjtd

          Uh oh, you’re right, neither one of those would be allowable around here. Unless you would be willing to lie, but that’s unacceptable. Good point.

      • Trent Horn

        Yes, but unlike country clubs membership in a Church is usually free. All you have to do is fill out a form. Services like weddings usually only require a modest donation to cover time involved, which doesn’t nearly pay for the costs required to operate the Church as a whole. Grief counseling and home-bound visits are usually free (as are visits to prisons which one of my old priests used to do).

        As per your comment below, my sister-in law married an atheist in a Catholic Church so atheists can get married there. Of course, the Church doesn’t offer weddings like Big Macs, they only offer it to people who make certain religious promises (or at least one person in the union has to be willing to make those promises).

        I don’t see how the refusal to do weddings with people of the same sex is any worse than refusing to marry unions that consist of more than two people. Such unions simply violate what the Church believes marriage is.

        • GeorgiaPeach23

          Churches are welcome to uphold whatever religious beliefs and requirements they like — but as you nicely explain, their services are only public to the extent that the public agree with their dogmas. This would put them more on the country club side.

        • Trent Horn

          Eh, I don’t think country club is the right zone to put Churches. If anything a closer match would be tax exempt sports leagues. A group of people organized in pursuit of a common good beyond mere leisure itself. The public is welcome, but you still have to play by the rules.

        • GeorgiaPeach23

          That’s a very good analogy. Yes, they are like sports leagues. TIL major sports leagues and competitions don’t pay taxes — which strikes me as crap, to be honest. In any case, the NFL etc. are 501(c)(6) non-profits that file documentation. If churches had to abide by the 501(c) regulations (they are currently exempt), I would consider that a fair outcome.

        • Trent Horn

          No no no. Amateur 501c3 leagues whose profits are not remunerated to certain people. For example the head of the NFL makes about 12 million dollars a year but the Pope doesn’t receive a salary. At least in the Catholic Church I’m not aware of any clergy “getting rich.” There was a German bishop who was abusing funds to build a mansion but Pope Francis put the smackdown on that. He rocks.

        • wtfwjtd

          Unions that consist of more than two people happen to be illegal. That’s a big difference.

        • Trent Horn

          same-sex unions also used to be illegal and still are in some places. If marriage can be redefined to make the sex of the people involved irrelevant, then why can’t it be redefined to make the number of people irrelevant? The polygamous television show “Sister Wives” has a sickly sweet line about this, “Love should be multiplied, never divided.”

        • wtfwjtd

          “If marriage can be redefined to make the sex of the people involved irrelevant, then why can’t it be redefined to make the number of people irrelevant?”

          It certainly could be, but I see no evidence of movement in that direction in our society. There are valid societal reasons for disallowing polygamy, whereas the only objection to same-sex unions was and is rooted strictly in religious belief, which more and more people say isn’t a valid enough reason to continue to prevent them.

        • GeorgiaPeach23

          The poly community is certainly interested in greater acceptance but so far there isn’t much of a movement for marriage rights. It’ll be a trickier legal construct than 2-person marriage, certainly, probably more like a LLC. Custody and child support issues would be thorny. Government benefits? Taxes? I don’t know what those should look like. N>2 relationships are more complicated than N = 2 which is why there isn’t a straight line from gay marriage to poly marriage. That said, I could certainly be convinced to support legislation if the details could be worked out.

  • Kodie

    I have a situation personally about this non-profit business of churches. The place where I work has another similar business camping at our space looking for their own space and the space they want is a church basement. The problem they are having leaving our space is that they want to run a for-profit business on church property, that has nothing to do with the church, they are just looking for a space to run their business, and it’s a business that needs a lot of wide-open space with high ceilings, which the church basement apparently has. They are facing zoning problems with this prospect, and I’d also wonder if they would be paying church rent for the space and whether that would be taxable, being as this business has nothing to do with the church. In fact the owner of the business and 95-99% of his younger students are Jews, a lot of whom are orthodox enough to need Friday night and all day Saturday off, and several wear tzitzis and yarmulkes and curls at the side of their face, and in the case of one girl, a long skirt over her pants. They and the church seem to be willing to this venture, except the city doesn’t seem to be having it.

    • http://www.patheos.com/blogs/crossexamined Bob Seidensticker

      The rules are clear, I’m sure. I’ve browsed the IRS rules but don’t remember this issue.

      My guess is that this rent would be accounted as taxable income, and they’d file a separate return for this kind of income.

  • Nptphoto

    I would say more like a country club and in fact I have used the local yacht club as very similar institution. The mainline Presbyterian church I belonged to posts their annual report and projected 2014 budget online, so it gives a good indication on mainline church expenses. Background is: typical beautiful white church from the 1800s, membership around 240, compared the other churches it has a larger and younger membership. They just finished up a capital improvement of 1.3million which ballooned to 1.8mil so the future mortgage is BIG and in this years budget they will have to come up with $140,000 for loan payments beyond the operating budget. I have distilled and condensed the budget expenses for 2014 from their website;

    Total Payroll & Insurance 54%
    Total Property & Maintenance 18%
    Total Renovation Related 11% (costs incurred due to construction damage)
    Basic Mission Support 10%
    Total Admin Expenses 3%
    Per Capita Expense 3% (per person amount paid to the Presbytery, like dues)
    Total Ministries 1% (minor amount to the various committees)

    You could make the case that Mission Support is not charitable because a vast amount of it goes in adding members to the club. But if you take the 10%, that’s still awful. 90% goes to support the club, just like the yacht club.

    • http://www.patheos.com/blogs/crossexamined Bob Seidensticker

      Yeah, there’s not much here besides keeping the machine running.

      I am sympathetic to the argument that having this institution brings good things to its members, but then the identical argument argues for country club dues to be tax exempt. Where does it end?