New York Times finds lax controls in local Shrine clubs yielding little benefit overall for the Shriners Hospitals, which rely on a huge endowment and direct contributions.
A few months back, I missed a story in the New York Times (Stephanie Strom) about accountability issues among Shriners. The report raised three separate issues:
- The Shriners as a whole raise money for Shriners Hospital for Children (EIN 36-2193608 Form 990), a separate organization, but in the aggregate they contribute only 2% of the hospitals' operating expenses, since the hospitals have a $9 billion endowment and receive contributions and bequests directly. (If the hospitals were a foundation, they would rank in the top five in assets.)
- Of the aggregate $32 million that the Shriners raised, only 43% goes to the hospitals. The rest covers expenses of the local shrines, including their enterainment and travel to Shrine events.
- At the local club level, controls, especially cash controls, can be inadequate, and those who try to bring greater accountability find themselves under attack.
The national headquarters of the Imperial Council of the Ancient Arab Order of Nobles of the Mystic Shrine N.A. (EIN 36-2158164 Form 990), in Tampa, had income of nearly $7.5 million in 2004 (the most recent Form 990 available, for some reason) and expenses of a little under $5 million for a staff of just eleven. Executive VP Charles G. Cumpstone, Jr. received compensation of $248,025. The largest share of expenses are about $2 million for conferences and travel.
There are 191 local shrines (if you are interested, the list of Shrine names can be found here). It appears that each shrine has separate Form 990s for its clubs (as a group return) and for its headquarters building. The IRS Master File lists over 2,100 entities using the AAONMS group return number. The article reports that there isn't any kind of formal auditing of these units, either from the headquarters or the local shrines. Theft due to poor cash controls is a continuing problem.
The story focused on two Shrines in Alabama and Texas.
- The potentate of the Huntsville, Alabama's Cahaba (Cahaba Shrine Clubs EIN 51-0154800 Form 990 and Cahaba Shrine Center EIN 63-0588523 Form 990), Clairence Ballard, tried to institute cash controls at a local shrine club in Decatur, Georgia that was running a charity bingo operation. Revenues increased dramatically after the club started depositing cash receipts (previously it had only deposited checks) and cash registers were installed in the snack bar. But his successor as potentate dismantled the controls and things went back to the way they were. Mr. Ballard was subsequently accused of falsely claiming that there was theft in the club, but was exonerated (and received attorney's fees) after his lawyer played a tape on which one of the members admitted to taking money.
- In San Angelo, Texas, there was an attempt to clean up the Suez Shrine (Group EIN 51-0152806 Form 990, Suez Shrine Temple EIN 75-0787500 Form 990). John Goline was rising in through the ranks of officers and joined forces with Richard Baumbach, a potentate who wanted to institute controls to ensure that charitable and fraternal funds were not comingled. He instituted basic controls like dual signatures and a requirement that travel be approved in advance. But his refusal to reimbuse $3,700 for an unauthorized band trip led to charges being brought against both Mr. Goline and Mr. Brumbach, who were investigated by the headquarters unit and dismissed. When Mr. Goline ran for potentate (typically an uncontested election), a former potentate decided to run against him and busloads of members showed up to make sure Mr. Goline wouldn't win.
The article is helpful in illustrating the dynamic of small groups that hampers financial accountability. A more activist headquarters would help, except that the headquarters leadership consists of people who have risen through the ranks of the local units. But this is not an issue exclusively of the Shriners. We have seen the problem of lax local controls with organizations as different from the Shriners as Alcoholics Anonymous. And both the American Red Cross and the NAACP have suffered from headquarters boards that are paralyzed by being too beholden to local chapters. It took a hurricane and an act of Congress to fix the American Red Cross board. The fate of the Shriners will probably be more like that of the NAACP—a slow fade into the sunset.