How Offended Should I Be? Humanitarian Edition

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.