When Pastors or Leaders Spin-Off Their Own Ministry

Posted On
03/28/2008

When Pastors or Leaders Spin-Off Their Own Ministry – Who Pays?

One of the things that the financial crisis at Oral Roberts University pointed out recently was the apparent internal direction of funding. The Oral Roberts Ministry was founded first, and during the evangelistic ministry of the founder Oral Roberts, the ministry organization was used to help fund the university. In essence, the ministry spawned the university, and for many years used it’s national television program and direct mail outreach to raise significant funding for the university.

But apparently,
about a decade ago it changed, and the tail began wagging the dog. I don’t have this confirmed as true, but a reliable source tells me that as many as 10 years ago the university began funding the ministry. To be honest, it’s tough to tell. The ministry finances and the university finances have probably been so mixed up for so long – that it’s tough to know what’s what.

For most people, that doesn’t matter, but for those involved in either organization, if true, it could mean that the ministry television program and direct mail outreach began shrinking to the point that the student tuition and fees, alumni giving, and university donors could have been helping to carry the ministry led by Richard and Lindsay Roberts.

Perhaps more accurate, Richard might have gone on the air to raise money for ORU projects. Then, those donations would go to ORU, but it could have been out of those donations that OREA (Oral Roberts Evangelistic Association) was possibly subsidized.

This is confusing stuff, and I actually doubt there was enough money from tuition and fees to have any surplus to help OREA from those funds. Of course, it could be totally legal depending on the pitch. However, if ORU was subsidizing OREA and at the same time borrowing money each year (because it had the assets to pledge), then is much of the current debt on the University due to OREA? You simply can’t tell from the 990’s that are public information. Either way, if it’s true, some would call that embarrassing and possibly shameful.

Complicated. But why is it significant? Because it happens out there more than you might think. There are a number of media ministries that are funded by the church where the leader pastors. In some cases, the church is everything: (church, ministry leader, ministry organization are all the same organization.) As long as the church board approves, everything’s fine.

But some pastors spin off a ministry. That’s why you’ll see a church pastor who is also head of his own separate ministry. That’s done for a number of reasons – usually so the pastor can own the copyrights to his sermons, books, and teaching materials, and so any profits of those materials can go to him or her without the filter of the church. Good or bad? I’m not an expert on church governance, but I do believe that a pastor or ministry leader has the right to his or her original materials, be they sermons, teaching, writing – whatever.

There are tax implications, so I always recommend a pastor or ministry leader get good legal and tax advice for these things.

But if the pastor sets up his organization to reap the profits of his intellectual property, then he or she also needs to accept some of the expense of the endeavor and the risk of failure. I’ve seen plenty of pastors set up separate “ministries” to get an added income, but the expense of the venture is carried by the church. For example, how many pastors are reaping the financial benefits of the sales of teaching CD’s or DVD’s but don’t bear any of the expense of the audio or video equipment or crew that recorded, edited, or distributed the products?

Again, it’s usually legal if the church board approves and it’s a royalty issue. But these things are often more reason for distrust on the part of the congregation, when they see the pastor or ministry leader financially benefitting in addition to his pastoral salary without sharing in the risk of the venture.

So what’s my point? Be careful in the way you set up a church or ministry spin-off. As I said, the intellectual property of a pastor or ministry leader should be theirs, but using a spin-off “ministry” that the church funds may be viewed as financially dishonest at best, and a rip-off at worst. As the Bible says, we should avoid even the appearance of evil, and the truth is, is pretty easy to spot those appearances today. But don't get me wrong – I have no problem at all with these spin off organizations – as long as they're done with integrity.

No matter how you look at it, I think these governance issues may be key in Senator Grassley’s investigation, and I would not be surprised to see a major change in IRS regulations soon, especially if we get a Democratic President who wants to punish the religious right for their past influence in politics. I think Grassley may also revisit the personal profit issue and make it much harder for individuals to personally benefit from tax free funds.

And if that happens, the church and nonprofit world will have a handful of TV evangelists to thank.

This entry was posted on Friday, March 28th, 2008 at 11:20 am and is filed under Uncategorized. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

Mike Walker

Great post Phil! You and I have had some interesting discussions regarding this and I am glad to see you put it out there for a public discussion.

Leaders and ministries need to understand that the playing field has changed and they are more easily scrutinized than ever before because information is more readily available.

Thanks for opening up the conversation.
Bart Breen

Phil,

Very strong entry. I hadn't considered how much of the carried "debt" ORU found itself carrying might be internal. If that is the case than the contribution by Mart Green and family may well have been more of a buy out than a bail out. I have to believe however, that he was informed clearly and knew enough what he was doing and how he did it, that the situation was acceptable to him in that regard or he could have pulled out.

Contributions raised by OREA for ORU where the stated cause was for the university would create no receivable back as the designation by donor would make it clear OREA was to have no benefit. If OREA was directing general revenue back to the school you could argue that that could be structured as a loan or obligation but I suspect there would be very strong documentation required to structure that and carry it properly on the books and it should appear from the time of the receipt and not be an afterthought year later to justify a switch in the direction of revenue.

Tuition in a University is usually only really a very modest contribution toward the overall costs. Contributions and foundations usually factor in very highly.

The general point is a very strong one, and again this goes to somethings I've said on other threads, and that is that there is a lot that goes on in Religious organizations that doesn't go on in secular ones because of the veil of separation of Church and State. Reporting is a major one. ORU and OREA have to file the 990 informational returns. Most churches do not, except for those elements that fall outside of direct ministry. While I believe most Churches and religious organizations make a good faith effort to run their finances and organizations in a way that is above reproach, it is sad to say there are a few that don't and the most obvious ones to point to are the largest and least regulated and those include some of the larger media based ministries, especially those that are not based in the context of an established Church within a denomination that exercises oversight in this regard.

Good internal controls and accountability by their very nature are inconvenient, uncomfortable and carry cost. Often times ministries will try to justify foregoing these costs by appealing to the stewardship of not spending funds "unnecessarily or they will appeal to the faith and trust that needs to be placed in the leadership. Big warning sign. When a ministry appeals to that and then an outside organization gets involved, and government and courts are showing strong signs that they are willing to do so, the next fall back position is to fall back to the separation of Church and State defence and by that time, you have media and perception problems to face as well which unfortunately can spill over from the organization in question and affect local Churches and established reputable charities. That's exactly what happened in the wake of PTL.

I think your warnings are excellent and timely. I don't think there is necessarily anything inherently wrong with how these types of arrangements are made between churches and pastors. There's a broad range of how they can be done. I do think that Church Boards and individual board members have to take seriously their role though to respectfully and faithfully carry out their responsibilities which include, from time to time, saying no to a pastor and not simply serving as a rubber stamp. Tough questions like the ones you raise here need to be asked.

If we don't do that ourselves and voluntarily hold ourselves to an ethical standard that even the secular world recognizes in some aspects of business, then the cause of the Gospel and the credibility of the Christian community will be compromised and while the large organizations that draw the most attention may be the most immediately easy to blame, we have to recognize that often times they reflect what goes on in the Church at large. A lot of this could be regulated naturally as well if Christians as a whole got smarter about how they give to ministries and were not so easily caught in the equivalent of what in Luther's day was Church indulgences. We're a lot more "sophisticated" now. Instead of giving to release the souls of loved ones, we give to enhance our own wealth in this life. What progress has been made ……
http://dailydevotions.com.au Cameron Bailey

Hadnt thought much about this but will do now thanks Phil. With a wife starting a church and building a website "brand" I knew the two needed to be kept separate but hadnt given much thought to the financials (not and issue when staing with nothing of course) but we will need to start properly so things dont get messy later on.

Loving your book too, I am reading it slowly to ensure I take it all in, already using some of the new knowledge at my workplace!!
Anthony Peterson

Bingo!
bygracenotmerit

My understanding is that our accreditation was in jeopardy because the finances of the ministry and the school had become so intertwined that the accreditation board would not renew our accreditation but only extended it. That came with a warning that if the school and the ministry were not separated then there would be no accreditation.

Additionally, while at school, (I just graduated last May from ORU)I gave an offering for the new student association building. We broke ground not long after and then several months later everything was pulled up and that was the end of it. I found out when the lawsuits happened that the money had been taken and applied elsewhere. That was the last time I gave to Richard Roberts.

I have heard through credible sources that the IRS was also looking at ORU for possible violations.

The truth of the matters is I don’t think we will ever know the whole truth of what really went wrong, how bad, and who had their hand in the cookie jar.

Despite that I am glad that betters days are ahead for ORU. It sure would be nice to know that my Diploma would be more readily received. I just had an article rejected because I was an ORU Alumni. One of them, uh huh. That’s okay, I have had 4 published in the past 3 weeks so I’m a happy girl.

Remaining Steadfast,
Dominique
http://anunlikelyperspective2.squarespace.com
http://www.inthatdayteachings.com Robert Winkler Burke

Excellent post!

Phil Cooke

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