By Joel Warner
By Michael Roberts
By Alan Prendergast
By Michael Roberts
By Michael Roberts
By Amber Taufen
By Patricia Calhoun
By William Breathes
part 2 of 2
Where does the money go? More than two years' worth of board minutes obtained by Westword, covering a period starting in January 1992, paint a picture of a nonprofit Christian ministry flooded by funds yet facing big bills. Daily cash flow pulsated into six figures. On the other hand, the ministry faced multimillion-dollar long-term debt to complete its purchase of the Beau Monde mall and more immediately pressing bills for millions of dollars a year to buy TV time.
The key for the ministry is what its officials call "undesignated" money. As a nonprofit organization, it raises money for specific purposes and has to spend it on them. That's "designated" money. "Undesignated" money, however, can be spent on just about anything that can be linked to the organization's purpose--such as buying TV time to spread the gospel.
Outpouring, the ministry magazine, puts this disclaimer in tiny type on its inside front cover: "Your donation to Marilyn Hickey Ministries is deductible to the extent provided by law and is received with the understanding that in the event Marilyn Hickey Ministries receives more funds for a particular project than are required to complete the project, any excess will be expended for tax-exempt ministry purposes at the discretion of the Board of Directors."
And there is excess. The "Statement of Receipts and Expenses" for Marilyn Hickey Ministries (doing business as Happy Church Inc.) paints the overall picture of the Hickeys' operation. For the first nine months of 1994, the company's total revenue was $12.7 million. Operating expenses for the first nine months totaled $11.4 million. Net receipts (after other additions and subtractions) totaled $1.042 million.
(Not bad for a nonprofit organization. Extrapolated to a full year, that puts annual revenue at $17 million, expenses at $15.2 million and net receipts at $1.39 million.)
The corporation's internal documents separate operations into two main categories: the church and the ministry. The "church" includes the Breadstore (an aptly named retail outlet for books, tapes and videos), the cafeteria, the K-through-12 Riverview Christian Academy and various pastoral and education groups. The "ministry" includes Marilyn Hickey's telemarketing, TV, magazine and direct-mail operations, overseas tours, special events and product sales departments, and the Marilyn Hickey Bible College. That segment produces about three quarters of the revenue.
During the first nine months of 1994, one quarter of the company's total operating expenses went to television advertising. That amount, $2.8 million, far outstripped TV revenue of $1.6 million. But the Hickeys more than covered the gap with direct-mail revenue.
In fact, direct-mail revenue was higher than the entire revenue of the church segment of the company. Not that the church was ailing. Its tithes and offerings during the same nine-month period were $1.8 million, a 19 percent increase over the same period in 1993.
Where did the church segment's money go? During the first nine months of 1994, nearly $1 million went to "Church Administrative Expense." (Another $1 million from the ministry segment went to Church Administrative Expense, too.) But the church stayed in the black even in the operations of its separate Couples Ministry, Men's Ministry and Women's Ministry. Its two youth ministries, Fresh Fire and Youth, also took in more than they spent. In fact, the company spent more on the church's Fine Arts and Sound department than it spent on either its Couples Ministry or Women's Ministry.
It's the ministry segment, however, where the real money was made--and spent. In addition to the excess revenues produced by direct-mail and Outpouring, the ministry took in $751,435 at special events--mostly Marilyn's speaking engagements--and spent only $308,423.
And, despite the numerous appeals made by the Hickey organization on behalf of desperate people overseas, the ministry listed only $27,077 in revenue under World Missions and $1.6 million in revenue under the Undesignated category.
Religious organizations can opt out of Social Security and are exempt from income tax and property taxes, among other levies that regular corporations must contend with. And they don't have to disclose as much about their operations as even other nonprofits do. Although local IRS officials won't discuss the status of any investigations into religious organizations, they don't lean too heavily on churches, because they can't. It takes an order from a regional commissioner to even open an investigation of a ministry. Under the current laws, there's no action or penalty the agency can levy except the radical step of trying to yank a misbehaving organization's tax-exempt status. And even starting an investigation is difficult because of the First Amendment's protection of religious practices, notes Denver-based examiner/ auditor Scott Walk. "There are abuses out there," says IRS official Janet Hughes. "The depth, we don't know."
That puts any government entity at a disadvantage when trying to extract money from churches. So it was no surprise that the year 1992 started well for the Happy Church with what its board minutes termed a "very successful" negotiation to reduce the Arapahoe County property-tax bill from $494,000 to $14,000. (Government officials had claimed that Beau Monde, which started life as a $30 million ritzy mall, still was a commercial building. The Colorado attorney general's office later determined that none of the property should be taxed because it was owned by a religious nonprofit organization, and the mall currently is listed on tax rolls as "fully exempt." Recent changes in the law, however, may mean that Hickey's company will have to start paying property taxes on the part of the mall it rents to commercial tenants.)