Analytics

I think it is an interesting case study. I apologize for the way I said that. I meant to imply that tithing is a commandment, and the Church doesn't meet generally accepted transparency standards. I appreciate your efforts with this and for telling us about it.

All the bolded statements are statements of belief, right? They are subjective and are largely informed by your personal feelings about the church and interpretations of the doctrines it teaches rather than being supported by evidence. They seem like examples of belief bias, which are hard to square with your earlier statements about how your personal biases are not impacting your conclusions on this topic. It is an objective fact that the Church doesn't provide members with financial statements that allow them to see how their donations are or would be put to use. It is an objective fact that the Church says paying tithing is a commandment. It is an objective fact that the Church says they should pay tithing even though they aren't given any real information on what the Church does with its donations. It's a value judgement that you should evaluate how organizations spend money before donating, but it is a widely held one. For example:

A couple of points. First, to the extent that any of the dollars in Ensign Peak are actual tithing dollars, I would think that per D&C 120, their disposition continues to fall under the purview of that Council. As it is, the actual mechanics of this emphasize my point that accumulating money is functionally the Church's highest priority. Think about how this works. The top leaders of the Church first decide that the full $15 billion of investment earnings will be reinvested to turn the $200 billion reserve fund in the beginning of the year into a $215 billion reserve fund by the end of the year. This is mathematically equivalent to saying "we never expend more than what we estimate will be coming in terms of tithes and offerings." That is the most sacred ground rule of the entire thing. And these top leaders might peel off a layer of tithing to be added to that, so it becomes a $216 billion reserve fund by the end of the year. After that, they go to the full Council on the Disposition of tithes and say the budget for the year is $8 billion of the $9 billion of tithing that is expected to come in. At that point, if Elder U wants to increase the missionary program's budget by $1 million, he can argue that the million can come from reducing the genealogy department's budget by a million, or the temple construction budget or the education budget or the humanitarian budget. In principle it can come from anywhere except from the $16 billion that the higher-ups have already decided must be invested in growing the reserve fund. Functionally, this process makes it clear that growing the reserve fund is the most sacred allocation. If it worked the way I'm suggesting, Elder U would be able to argue that the million dollars he wants for the missionary program could come from the increase of the reserves rather than another Church mission, and that the Church would be okay if its year-end reserve was only $215.999 billion rather than a full $216 billion. Ultimately I don't really care. I'm just trying to answer your questions and explain to you why accumulating money sure appears like it is the First Presidency's and Presiding Bishopric's everlasting goal. And this seems to illustrate a point made by the Evangelical Council of Financial Accountability, which requires under it standards that "Every organization shall provide a copy of its current financial statements upon written request [to anybody who asks to see them]." When explaining why, they say: Of course you aren't bound by this, but it does illustrate the general principles I'm talking about. More to the point, they seem downright prophetic in their claim that organizations without transparency are at risk of having reserves that are too large. Can you clarify? Are you asking me to provide references that tithing is a commandment, or are you asking me to provide references that the Church isn't transparent?

First, it should redefine as "what it takes in" to include investment income and not merely tithes and offerings. If it said it aimed to always deploy 90% of its total income--including investment income--I'd have no problem with it. Beyond that, there is a wide variety of things it could do, but it should be done strategically and not in compliance with a simplistic "fixed principle" that mathematically forces the majority of its income to go towards exponentially increasing the size of a bloated reserve fund, and is done in a way that allows its own fiduciaries the information necessary to fulfill their responsibilities in a responsible way. But what's the point of having such a tool if it comes with a rule that it may never be used? In any event, you can have faith in whatever you want to, and there are worse things you could do with your money than give it to an organization that by any objective measure is going to hoard it. If that's what you want to do, knock yourself out. But don't be surprised when a ton of members eventually realize that they needed the money more than the Church did, and resent being manipulated into donating, and become bitter critics as a result. The emphasis here should be on prudent reserves. Grossly excessive reserves don't do anything to support those things. I thought the Lord commanded that "We never expend more than what we estimate will be coming in terms of tithes and offerings." If the real mission somehow involves deploying the vast majority of its annual income on growing its reserves so that someday it can completely change course and do it on a scale order of magnitudes greater than what it's doing now, it should clarify that. This line of thought contradicts your bottleneck hypothesis in a huge way, but if this were the real goal, they should be transparent about it.

It's an important principle of good corporate governorship. There is a ton of academic research into what makes an organization effective, and this research makes it into the real world in MBA (and SOA) curriculum. Why is it important that the people who deploy resources know what the resources are? GPT articulated the issue well: No. [What the church does] would not be considered best-practice board governance. A board can delegate investment management to a committee, but it should not create a two-tier board where most fiduciaries are intentionally denied knowledge of the organization’s material assets. BoardSource describes nonprofit boards as ultimately responsible for oversight, accountability, stewardship of entrusted resources, and legal/ethical compliance; that requires access to full, material financial information. (BoardSource) The resource-allocation rule is also poor practice. “Spend less than donations every year and save the rest” is not a mission-based capital policy; it is a mechanical accumulation policy. Best practice is to set reserves based on risk, obligations, liquidity needs, strategic plans, and mission opportunities—not simply to grow the fund forever. (National Council of Nonprofits) The life-tenured, elderly, insider-informed structure adds another problem: weak renewal and weak challenge. Good boards need informed oversight, independence of judgment, succession planning, and enough transparency inside the boardroom for real debate. This structure would tend to suppress all of that. My best reference that really explains the feel of it is Elder Bednar's conference address from Fall 2013: https://www.churchofjesuschrist.org/study/general-conference/2013/10/the-windows-of-heaven?lang=eng Other references to piece it together are Hinckley's comments, David Nielsen's insights, that 2020 Deseret News article, etc. Bednar said, "In that first council meeting I was impressed by the simplicity of the principles that guided our deliberations and decisions..." and later in the article he called this process, "the Lord's own way." I suppose in principle a young apostle could sat that they need to revisit this and that as an apostle on Disposition of Tithes committee, he felt that he really needed to understand the full picture of the Church's resources in order to fulfill his fiduciary duties, and that they should be open to spending more than that year's tithes and offerings if they felt confident could put it to good use. But really? I just can't imagine somebody questioning "the Lord's way" in front of 14 senior apostles and the Presiding Bishopric. I'm not advocating for any of that. I'm merely pointing out the fact that the Church's reserves are way too big by any objective measure of such things, that the Church is objectively guilty of hoarding, and that functionally, asset accumulation is the Church's dominant financial priority. That's my entire point. What should they do about it? I'd suggest four things: Be completely transparent with the apostles with their finances and show them complete consolidated financial statements of the entire Church. Be completely transparent with the general membership and show them the financial statements, too. Hire a consultant (Clayton Christensen?) to come in and give them best practices for setting the size of the reserves. Then figure out how to best deploy their resources for their mission. They don't have to do any of that, of course, but if they keep waiting for a revelation to tell them what to do then functionally, asset accumulation will continue to be their dominant financial priority. Probably. But from my point of view, that is off topic. What I'm talking about is how the apostles aren't allowed to know how much money the church has, aren't allowed to know what its investment income is, and how they "never expend more than what [they] estimate will be coming in terms of tithes and offerings." Because they can't fulfill their fiduciary duties without that information. Not really. I think responsible individuals should weigh their own needs vs. the needs of the organization they are donating to before making donations. The Church refuses to give members the information they need in order to be good stewards of their resources that way, and instead claim that it is a commandment for them to donate blindly to them. Some people are okay with it. Some aren't. And others (e.g. Huntsman) will donate for a while, and will then figure out that their faith was misplaced. If the Church wants to avoid members feeling disillusioned and getting upset, they should be transparent with them in the first place.

Almost none of what you said above addresses my actual point, but one thing did. According to the 2020 article you quoted: “The church practices what it preaches in terms of setting aside and having budgets,” Bishop Davies said. “We never expend more than what we estimate will be coming in terms of tithes and offerings. And also by definition we set aside a certain amount every year in reserve for those times when there will be a need” It doesn't follow this rule because of a bottleneck in how hard it is to responsibly deploy resources to fulfill its mission. It does this because it is the "fixed principle" that was established last century. A fixed principle like this makes sense for an individual who is bound to become disabled, retire, and/or die, and needs funds for those events. But according to widely agreed upon best principles of organizational finance, it does not make sense for an institution that is existing into perpetuity. We know that on November 30, 2019, the Church had $122.86 Billion in reserves. I did a projection with the following assumptions. In 2020, tithing and offering revenue was $7 billion, and increases by 5% per year Every year they deposit $1 billion of of tithes and offerings into the reserve fund The portfolio earns 7.4% per year (this comes from the portfolio's historical performance) With those assumptions, in 2025 the Reserve fund hit $200 billion. It did all of the wonderful things you've been talking about with $8 billion of tithes and offerings, and put an additional $14 billion into EPA, meaning 66% of its revenue went to grow the size of its investment portfolio. Assuming it continues to abide by the fixed principle, they maintain their commitment to never expend more than what they estimate will be coming in in tithes and offerings, and the investment portfolio continues to generate a relatively modest 7.4% investment return, in 2048 they will hit $1.068 trillion in assets, with a total income of $101 Billion, 74% of which will go to grow the size of their reserve fund. Then in 2057, something that is easily within our lifetimes, it will grow to $2.042 trillion. When that happens, its total income will be $183 billion, 77% of which will be going to increase the size of the Reserve fund. So yes. Trillions. You can assume that the Church will need this money for some pending emergency and that when the time comes it will become capable of successfully deploying it. But the fact remains that according to well-established principles for churches and non-profits, this is objectively called over-accumulation, under-deployment, and hoarding. If the Church's main mission is to accumulate a massive investment portfolio, this is success. But if the Church's main mission has something to do with perfecting the saints, redeeming the dead, spreading the gospel, and charity, then this is failure.

My point is that "best practice is a reserve policy with a purpose, target range, board oversight, disclosure, and rules for use and replenishment—not endless accumulation by default." A "revelation" is whatever the president of the Church says is a revelation. Not exactly. My point is that when you look at total resources (tithing plus investment income), the Church has waayyyyy more resources than it knows what to do with. This situation isn't a temporary bottleneck. It is endemic to the structure and culture of the Church. That is the problem. Of course. Effectively deploying resources of this order of magnitude is incredibly tough. Would you agree with me that as a first step, the Church ought to tell the apostles how much money the church has? Or do you think it can better deal with this issue by keeping the apostles in the dark regarding the resources at the Church's disposal? I think the Church is using the vast majority of its resources to make the size of its investment portfolio bigger and that as it continues to do that, this problem will get exponentially worse. I think their councils work exactly the way Bednar suggested. The junior apostle comes in to the meeting about the deposition of tithes. Along with the other apostles, he isn't told how much money the Church has. He isn't told what their investment income is, either. He is instructed that they "simply" do what they have always done--they set and manage towards a budget based on their projected tithing revenue, send extra money to Ensign Peak Advisors, and are not allowed to see what happens to it. I believe they are instructed to have reverence to this process. I believe a fundamental part of their process is that regardless of how many wonderful ideas they have about how the Church should deploy its resources, at the end of the day they have a budget equal to 90% of that year's tithing projection, so if they want to increase funding for project X by a dollar, they must reduce funding for something else by a dollar. According to everything I've seen and heard about the Council of the Deposition of tithes, that is how they operate. And they aren't allowed to question the process. If you look at this from the perspective of an MBA, their process is fundamentally flawed. I think doing that is wonderful. But it doesn't change the fact that the Church uses the vast majority of its financial resources to grow the size of its investment portfolio, which makes the problems you are talking about exponentially more difficult. I think that is all wonderful. But it doesn't change the fact that the Church allocates the vast majority of its resources to growing the size of its investment portfolio rather than to these things. Q: The Church does some amazingly good things with the 30% of its annual income that it deploys towards its mission. Did you take that into account when analyzing its transparency, the size of its reserves, and its internal decision making processes? A: Yes. That matters, but it does not answer the whole governance question. Doing substantial good with the deployed 30% is highly relevant to mission effectiveness. It shows that the organization is not inert, fraudulent, or incapable of impact. But it does not by itself resolve questions about the remaining 70%, especially if that portion is repeatedly accumulated, not clearly tied to a reserve target or deployment plan, and not fully visible to relevant decision-makers or donors. Governance analysis looks at the whole system: impact, transparency, capital policy, oversight, opportunity cost, and whether donor resources are being used consistently with the organization’s mission and representations. So the fair conclusion would be: the good work should be credited, but it does not immunize the reserve policy or governance structure from scrutiny. I know effectively deploying resources is tough, but I don't have any expertise in that area. And this is a fundamentally different issue of whether the Church is being wise when it refuses to share its financial information with apostles, whether it is wise to have a "fixed principle" of always operating on less than that year's income, and whether its reserve fund is obscenely too high. Really? Do you think, for example, that the United Way should stop telling its board of directors how much money it has saved, and should start using 70% of its resources to increase the size of that fund regardless of how big it gets? Hmmm. I think that's great as far as it goes. But it doesn't address any of the concerns I've raised in this thread. I think those are totally valid issues, but it is ultimately a different question than the question of how big reserves should be, whether the Church's "fixed principle" is wise, and whether the church should be more transparent with the apostles, general membership, and society at large. I realize charitable endeavors are really difficult. Just like building a high-quality temple on-time and on-budget is difficult. Or choosing a new employee is difficult. Or just like anything else is difficult. And I also believe that the leaders of the Church are genuinely good guys who aren't making themselves personally rich off of the thing. In fact, for reasons I can't discuss I could be more confident about this than you are. What I do know about is how to think about reserve levels and how to evaluate whether the reserves are too small, too big, or broadly justifiable. And I do know some things about organizational governance and how groups should be structured to avoid predictable pitfalls such as groupthink, institutional inertia, deference to seniority, secrecy norms, and distorted incentives. My criticisms against the Church on these issues of structure, transparency, and fallacious principles. It isn't against the brethren as individuals.

Compared to mainstream nonprofit reserve guidance. A typical operating reserve benchmark is often 3 to 6 months of expenses, though the right amount depends on revenue volatility, fixed obligations, program risk, liquidity needs, and strategic plans. The Council of Nonprofits says no single reserve policy fits every organization, but notes that nonprofits are often advised to keep 3 to 6 months of operating funds on hand. (National Council of Nonprofits) Other nonprofit finance guidance commonly frames two years of expenses as a very high-end reserve level, not a normal operating reserve target. (Nonprofit Financial Commons) So 30 times annual expenses is not just “above average.” It is roughly 360 months of expenses. Compared to a 6-month reserve, it is about 60 times larger. Compared to a 2-year high-end benchmark, it is about 15 times larger. That does not prove the reserve is wrong, but it shifts the burden heavily onto the organization to explain why such a level is mission-necessary. Compared to what? Certainly not compared to how much you spend every year purchasing more shares of Nvidia, Bank of America, Meta, and United Health. If it was clearly disclosed to you, a tithe-paying defender of the Church, you wouldn't have to speculate about why they are doing what they are doing. Posing your question to GPT: “Clearly disclosed” mainly means disclosed to the governing board, and then disclosed to donors and the public at a level appropriate to the organization’s legal status and fundraising claims. There are two different bases: Legally, ordinary U.S. public charities generally disclose major financial information through Form 990, which is publicly inspectable. Churches are largely exempt from that specific Form 990 filing requirement, so the legal disclosure floor for churches is lower. That means the law may not require the same public disclosure from a church that it would require from a comparable secular charity. (IRS) Ethically and as governance best practice, the basis is broader: nonprofits hold assets in trust for a mission, rely on donor confidence, and receive tax-favored status. Independent Sector frames good nonprofit practice around legal compliance, public disclosure, effective governance, financial oversight, and responsible fundraising. (Independent Sector) BoardSource similarly describes board members as trustees of the organization’s assets who must exercise due diligence and oversight over the organization’s financial condition. (BoardSource) So the strongest “must disclose” claim is internal: the full board or equivalent governing fiduciaries should know the material facts. The public/donor disclosure claim is more nuanced: not every investment position must be public, but donors should not be left with a materially misleading picture of the organization’s financial capacity, reserve philosophy, or use of donated funds. Serious question here. In what way are "millions of members" a financial obligation of the Church? When I hear "millions of members" I envision millions of tithe payers and millions of people doing volunteer work to keep the Church going. How is having members a liability? These things have always been financed by the membership through tithing and volunteer work. Are you envisioning a future of the Church where there is no tithing revenue and no volunteer service? These are assets, not liabilities. Do you envision a future without tithing revenue and volunteer service? It is also less expensive there--building a meeting house in Mali is a lot cheaper than building one in Logan. In any case, if they have a deliberate strategy to save up $500 billion (or whatever) to subsidize the Church in Africa, they should clearly explain that this is the goal and why that is the amount they need to operate there. So what? Are you saying that the future Church needs giant reserves because it is both going to be insanely expensive to operate and it won't have any future tithing dollars or any future volunteers? You still haven't explained why the "fixed principle" of living within the Church's means is going to break down in the future, requiring trillions of dollars in assets. And if spending 70% of the Church's annual income on growing its investment empire is actually a strategic goal for these purposes you speculate, why doesn't the Church just explain this to the members? Yes, wisely spending money on the Church's religious and philanthropic mission is difficult and risky, just as wisely investing money is risky. That is why GPT suggested that the Church's actions look more like the servant who was afraid to invest and instead hid the money. He was taking it safe. While that's true, it doesn't change the fact that they claim the money is being saved for a rainy day and not for a day that they figure out a way to safely use it for charitable purposes. Stated another way, the amount of subsidization you are speculating will be needed doesn't seem anywhere near in proportion to the amount of money being saved.

This sounds reasonable in abstract, but when you look at it more closely, not only is it inconsistent with the Church's stated reasons for why the over-accumulation came into being in the first place (it exists as an economic inevitability of perpetually following the fixed principle of living on less than income, not because they are saving for anything in particular), it doesn't even make Economic sense--you can't eat shares of Nvidia, Bank of America, Meta, or United Health. What would you think of the Church revoking the law of tithing? The Church has the financial resources to do that very easily now, and the 200th anniversary would be a great day to drop that revelation. If that (or something that grand) is the top-secret plan, then what they are doing makes sense. Otherwise, it doesn't. If you think that, you haven't been paying attention to what I've been saying. If they were being excellent stewards, they wouldn't be over-accumulating assets. In any case, I'm not talking about what they should do with their assets, other than pointing out that by any reasonable standard, they are over-accumulating. I'm also talking about how the Church goes about making decisions on how it deploys resources. You are talking about whether the leaders of the Church are good men. These are two different things. From my perspective, the Church has not been exonerated in the tithing lawsuits--even though it has been cleared of committing fraud in the legal sense, it has in fact fallen far short of being adequately transparent with the people from whom it seeks donations. And while reasonable minds can disagree on what the Church does with its money in an abstract way, I don't think any reasonable and informed minds could argue that other churches or charities should follow the Church's example on the issues we've been talking about--nobody is going to argue that the United Way should discontinue being transparent, should perpetually operate on 90% of its donations and invest the balance in a rainy day fund, and should effectively turn into a wealth-accumulation machine that hides these details from its own board. That's true even if the members of the United Way's board were all good, honorable, smart men. That's true even if they weren't getting rich off of it. The best argument you have is special pleading. But it is clear to me that its decisions are driven by its decision-making processes, which are driven by groupthink, deference to authority, loyalty pressure, information asymmetry, insider control, institutional self-preservation, status-quo bias, moral licensing, and diffusion of responsibility. That is why the governance issues I keep bringing up matter. Quinn thinking they are in excellent shape proves he doesn't know what he's talking about--the finances are in terrible shape because the Church saves as if the accumulation of assets is its everlasting purpose and goal. If that is the objective then sure, it's in great shape. If that isn't the objective, then it is failing financially. But we do have clues. The clues include their statements about how things work. They include their explanations for what's happening. They include documents that have been leaked. They include its lack of transparency in and of itself. They include the size of its "rainy day fund". These things all paint a consistent picture. I agree with you that the leaders are good, smart, and well-intentioned. But the institution itself is dominated by culture, structure, and processes that prevent them from making the bold decisions that are needed and result in their resources primarily being dedicated to over-accumulation of more and more resources as if that were an end until itself. If that is their mission they are succeeding. If that isn't their mission they are failing. I'm not blaming them as individuals. I'm blaming the institution itself.

I certainly wouldn't begrudge you for not being interested in reading the AI content, but if you are interested in my thought process, feel free to read the prompts I wrote.

Q: Bonus question. Can you name *two* specific charities or churches that have the issues I've been alluding to in these questions? A: Yes. The obvious one is The Church of Jesus Christ of Latter-day Saints, through Ensign Peak Advisors. That example fits several of the issues you’ve been describing: very large accumulated reserves, limited internal/external transparency, shell-entity disclosure problems, and an official rationale that the funds exist to support the Church’s mission. The SEC found that Ensign Peak’s structure obscured the Church’s investment portfolio, which had reached about $32 billion in reportable securities by 2018, and the Church and Ensign Peak paid a combined $5 million settlement. (SEC) A second example often discussed in the same broad category is the Church of Scientology—not necessarily for the exact same reserve-ratio mechanics, but for recurring concerns about wealth accumulation, complex church/corporate structure, tax-exempt status, governance opacity, and whether resources are primarily serving religious/charitable purposes. Its tax-exempt status and organizational structure have been the subject of unusually long-running IRS, litigation, and scholarly scrutiny. (texastechlawreview.org) So: LDS/Ensign Peak is the cleanest match. Scientology is a plausible second example, though the factual pattern is not identical.

I'd just point out that Jacob 2 says "And after ye have obtained a hope in Christ ye shall obtain riches, if ye seek them; and ye will seek them for the intent to do good—to clothe the naked, and to feed the hungry, and to liberate the captive, and administer relief to the sick and the afflicted." I don't recall anywhere that it says your riches should be saved for a rainy day. “Fiduciary” may not be the right word for what I do. Insurance companies issue contracts, and they have legal, regulatory, and ethical obligations to honor those contracts, deal fairly with policyholders, and maintain enough financial resources to meet future claims. There is a highly developed regulatory framework around how companies do that, and the Appointed Actuary’s role is to formally opine on reserve adequacy. But I'm not a fiduciary in any of my current roles. I'm not going to write an essay about the differences between an insurance company and a church. Sorry. I'll just say that I have a very deep and broad education about finance and corporate management, and that is what I'm relying on in my comments. As I see it, the most fundamental part our disagreement is that for religious reasons, you think everything the church does is good and wise by definition, and have set out to rationalize everything they do. That's why you are quoting Michael Quinn on this topic--it isn't because his analysis on it is sharp (it's not), and it isn't because you think he's a brilliant authority on how to judge the nuances of the Church (you don't). Rather, you like what he says on this topic. That's it. No, I don't think I harbor much animus against the church, and yes, I think my assessment on these issues is in fact purely clinical and empirical. But recognizing that I may be biased, I had the following conversation with ChatGPT. The conversation below is completely unedited and unabridged--I didn't omit any prompts or redo any prompts mining for it to say what I want to hear. All highlights are from GPT. Q: Let's have a conversation in a question and answer format. The entire conversation will be published on the Internet in a discussion forum. I'll ask questions one by one, and you'll answer them from the perspective of an expert on the best practices in non-profit finance, leadership, corporate structure, boardroom dynamics, and management. Your position is that which is best supported by research and taught in the nation's best business schools. Keep your answers brief and conversational, usually just a short sentence or two, but longer if necessary in order to make the point. Any meta-questions before we begin? A: No meta-questions. That format works. I’ll answer as a neutral expert in nonprofit finance, governance, leadership, corporate structure, and management best practices—not as an advocate for any particular institution. I’ll keep answers brief, practical, and grounded in mainstream governance and business-school principles. Q: For churches and non-profits in the U.S., is transparency with donors, potential donors, and the public at large a well-defined concept? A: Yes, but with an important caveat. For most nonprofits, transparency has a fairly well-developed meaning: clear financial reporting, truthful fundraising, public access to required filings, disclosure of conflicts, and enough information for donors to understand how resources are obtained, governed, and used. The IRS requires many exempt organizations to file and disclose Form 990, but churches are generally exempt from that annual filing requirement. (IRS) So legally, churches often have a lower disclosure floor. But as a governance best practice, transparency is still a central expectation because public trust is essential to nonprofit legitimacy. Independent Sector’s governance principles expressly treat legal compliance, public disclosure, financial oversight, and responsible fundraising as core nonprofit practices. (independentsector.org) Q: Should churches and non-profits have reserves? A: Yes. A well-run church or nonprofit should have reserves. Reserves protect the mission from ordinary volatility: delayed revenue, economic downturns, lawsuits, emergencies, donor shortfalls, or major capital needs. The best-practice question is not whether to have reserves, but how much, for what purpose, under whose authority, and with what plan for use and replenishment. A common nonprofit rule of thumb is several months of operating expenses, but there is no universal number. (councilofnonprofits.org) Q: Would it be considered best practices run a church or non-profit off of 90% of donations and save the balance in a perpetually growing reserve fund? A: Generally, no. Saving 10% each year can be prudent if it is tied to a defined reserve target, capital plan, endowment policy, or future mission need. But a policy of automatically diverting 10% into a perpetually growing reserve fund with no clear target or spending discipline would usually be seen as weak governance: it risks converting current donor support into institutional wealth accumulation rather than mission delivery. Best practice is a reserve policy with a purpose, target range, board oversight, disclosure, and rules for use and replenishment—not endless accumulation by default. (councilofnonprofits.org) Q: Imagine a Church or non-profit that lived off of 85% to 90% of donations every year from 1960 to the present day, and grew a reserve fund that was now about 30 times its annual expenses. Should this be considered success? A: Not by itself. It would be a financial accumulation success, but not necessarily a mission success. For a church or nonprofit, the relevant question is not “Did the reserve grow?” but “Was the organization responsibly advancing its mission with the resources donors entrusted to it?” A reserve equal to 30 times annual expenses is far beyond a normal operating reserve. It would need an unusually compelling explanation: a clearly disclosed endowment strategy, specific long-term obligations, restricted funds, catastrophic-risk planning, or a major future mission purpose. Without that, most nonprofit finance and governance experts would see it as evidence of under-deployment of charitable resources, not exemplary stewardship. Q: Imagine a Church or non-profit in this financial position of having a reserve fund 30 times its annual expenses, and when including investment income, used 70% of its annual income to grow the the size of the reserve, and the remaining 30% for its mission. What word objectively describes its use of resources? A: The most neutral word is accumulation. The more evaluative governance word would be under-deployment. And if the reserve is unrestricted, perpetually growing, poorly disclosed, and not tied to a credible future mission need, the plain-English description “hoarding” would not be unfair. It means the organization is retaining resources far beyond normal prudence instead of deploying them for the charitable or religious mission donors are funding. Q: Let's talk about corporate governance. Let's say this hypothetical church or non-profit had the following board structure. Should the leaders of the organization that make decisions about how the Church or non-profit spend donations be allowed to know the size of the reserve fund, or is it better for them to make decisions that are based just on knowing what the donations are? A: They should absolutely be allowed to know it. In fact, the board or governing leaders responsible for spending decisions need to know the full financial position: donations, expenses, liabilities, restricted funds, reserves, investments, risks, and long-term obligations. Otherwise they cannot exercise informed fiduciary oversight. Nonprofit governance norms emphasize active, informed oversight and strong financial accountability. (independentsector.org) Making leaders allocate current donations while concealing a massive reserve from them is not better governance. It creates distorted decisions, weak accountability, and a serious risk that leaders will over-constrain mission spending because they are operating with incomplete information. Q: If an organization is committed to keeping its annual expenses less than its annual donations, does that have any implications for how large its reserves should be? A: Yes. If annual expenses are structurally kept below annual donations, the organization is already building in a recurring surplus. That generally reduces the need for an enormous reserve, because the organization is not relying on reserves to cover normal operations. It also means that without a defined reserve target, the reserve will grow automatically forever. That is not a reserve policy; it is an accumulation policy. A proper reserve level should be based on risk, volatility, obligations, and future plans—not simply on a rule that spending must always stay below donations. Q: If a Church or non-profit did everything I've alluded to in these questions, should this be considered a success? A: Only in a narrow accounting sense. It would show strong financial control, discipline, and asset accumulation. But in nonprofit governance, that is not the same as success. For a church or nonprofit, success means advancing the mission responsibly, honestly, and effectively with resources entrusted by donors. If the organization: kept expenses artificially below donations, accumulated reserves far beyond plausible needs, used most annual income to grow the fund, concealed the full reserve from decision-makers or donors, and lacked a clear mission-based deployment plan, then most governance experts would not call that exemplary stewardship. They would call it over-accumulation, under-deployment of charitable resources, and potentially a failure of transparency and fiduciary governance. A nonprofit’s job is not to maximize net worth. Its job is to maximize mission impact while remaining financially prudent. Q: Would your views on this change if you found out that the leaders of the organization were not using the resources to enrich themselves? A: No, not much. Self-enrichment would make the situation much worse—possibly a corruption or private-benefit problem. But the absence of self-enrichment does not automatically make the conduct good governance. A nonprofit can be honestly led and still be poorly governed. The core issue would remain: were donor resources transparently, prudently, and effectively deployed for the mission? If vast resources were accumulated without clear purpose, disclosure, or informed oversight, that is still a serious governance concern even if nobody got personally rich. Q: Now imagine the following board structure. There are 18 board seats. 3 of the seats are the investment managers, who generally forced to retire when they are 65 or 70. The other 15 seats are for life, and the average member of the board is in his 80's. When a new member is chosen for the board, they are explained how the system works: Only the 3 investment managers plus three other senior board members are allowed to know the organization's assets. They operate on the strict principle that they will allocate budgets to keep each year's expenses less than that year's donations, and save the balance in the reserve fund. This principle is strictly followed. Would this be considered best practices for a board structure? What about as a way of allocating resources? A: No. That would not be considered best-practice board governance. A board can delegate investment management to a committee, but it should not create a two-tier board where most fiduciaries are intentionally denied knowledge of the organization’s material assets. BoardSource describes nonprofit boards as ultimately responsible for oversight, accountability, stewardship of entrusted resources, and legal/ethical compliance; that requires access to full, material financial information. (BoardSource) The resource-allocation rule is also poor practice. “Spend less than donations every year and save the rest” is not a mission-based capital policy; it is a mechanical accumulation policy. Best practice is to set reserves based on risk, obligations, liquidity needs, strategic plans, and mission opportunities—not simply to grow the fund forever. (National Council of Nonprofits) The life-tenured, elderly, insider-informed structure adds another problem: weak renewal and weak challenge. Good boards need informed oversight, independence of judgment, succession planning, and enough transparency inside the boardroom for real debate. This structure would tend to suppress all of that. Q: If an organization had this structure and in practice used 70% of its total assets (donations plus investment income) to grow the size of the reserves, would it be fair to say that accumulating assets is its highest objectives? A: Yes—with one wording adjustment. If the organization uses 70% of annual inflows—donations plus investment income—to increase reserves, then it is fair to say that asset accumulation is functionally its dominant financial priority. Whether it is formally the “highest objective” depends on stated mission and intent. But behavior matters. If most available resources are consistently retained rather than deployed, and the governance system is designed to preserve that pattern, then accumulation is not incidental. It has become the operating model. Q: How should the Parable of the Talents best be applied to this situation? A: The Parable of the Talents should not be read as a blanket endorsement of accumulating institutional wealth. Its core lesson is accountable stewardship of entrusted resources. The faithful servants put the master’s resources to productive use; the condemned servant preserves the asset but fails to deploy it. Applied to a church or nonprofit, the natural lesson is not “maximize reserves,” but “use entrusted resources courageously and responsibly to advance the mission.” So if an organization buries most of its resources in an ever-growing reserve while under-deploying them for mission, the parable cuts against that behavior more than it supports it. The “safe” servant is the one rebuked. Q: Imagine somebody who is a Fellowship of the Society of Actuaries and passed all of the actuarial exams in the Corporate Finance track. Would you expect such a person to share your sensibilities on this topic? A: Yes, generally. An FSA with a corporate finance background would be trained to think in terms of risk, capital adequacy, surplus targets, asset-liability management, governance, and opportunity cost. That person would normally understand that reserves are not good merely because they are large; they are good only if they are right-sized to risks and obligations. So I would expect such a person to be skeptical of a perpetually growing reserve equal to many decades of expenses, especially if most board members lack full information and if the accumulation is not tied to a clearly articulated capital policy or mission plan. They might use more technical language than “hoarding,” but the underlying concern would be very familiar. Q: What if one of the board members on the top tier who knew the details of the organization’s resources assured us that the only reason the reserve existed was to further the mission of the organization. Would that change your views? A: It would matter, but it would not resolve the concern. A board member’s assurance is relevant evidence of intent, and it is better than saying the reserve exists for prestige, control, or institutional self-protection. But good governance does not rest on assurances alone. It requires a credible policy architecture: defined reserve purposes, target levels, spending rules, oversight, disclosure, and periodic reassessment. The key question would be: How, when, and under what decision rules will these resources be used to further the mission? If the answer is vague—“someday,” “as needed,” or “the leaders know best”—then the assurance does not change much. A mission-purpose claim has to be operationalized. Otherwise every oversized reserve can be justified rhetorically as “for the mission” while functioning in practice as permanent accumulation. Q: What if you believed the members of the board were all smart, good, and well-intentioned? A: That would affect the tone of the criticism, but not the governance conclusion. Smart, good, well-intentioned people can still build bad systems. In fact, governance best practices exist precisely because even capable people are vulnerable to groupthink, institutional inertia, deference to seniority, secrecy norms, and distorted incentives. So I would not assume corruption. But I would still say the structure is unsound: too little transparency, too little informed board oversight, and too much reliance on trust rather than disciplined governance. Q: Say two people were discussing these issues and interpreted the situation completely oppositely—one thought the high reserves indicated success, and the other thought high reserves indicate failure. Which of the two would you think was better educated in the relevant MBA topics? A: The second person is much closer to the mainstream MBA/governance view. High reserves are not automatically failure, but treating them as success by themselves is financially simplistic. In nonprofit management, the educated view is that reserves are a tool, not the mission. You ask whether the capital level is justified by risks, obligations, strategic plans, donor expectations, and mission opportunities. So the better-trained answer would be: “Large reserves may indicate discipline, but reserves 30 times annual expenses, growing mechanically, with limited transparency and weak board information flow, are more likely evidence of under-deployment and poor governance than success."

I wouldn't think Jesus values money in the way that the master does in that parable, but if you think He does, I won't argue with you about your religious beliefs. If I were interpreting the parable, I would think the servant in the parable being afraid to invest the money and instead burying it in the ground is exactly like the brethren being afraid to use the money to further their mission and instead burying it in an investment account. But again, if you think Jesus' objective is gaining worldly riches like the master in the parable, you are free to interpret it that way (but if that is the case, shouldn't "getting rich" become a numbered mission of the church?) For me, I work at an insurance company that has tens of thousands of complicated insurance contracts that generate billions in cash flows, many of which will be in force for 60 years into the future and beyond. I have the responsibility to evaluate whether or not the reserves of this company are adequate, to present my analysis to the Board of Directors, to certify the reserve adequacy in financial statements that are submitted to regulators, and to write and sign detailed reports about how I came to this conclusion. I have had arduous education, experience, and training to become qualified to do this. And I'm good enough at it to have been hired as an expert witness in billion-dollar lawsuits about these issues. I'm not trying to appeal to my own authority on this, but you should be aware that "are the reserves adequate" in the context of a large institution with a long time horizon is something I think about all day every day. All I can do is base my analysis on what they've said. Bednar said: In that first council meeting I was impressed by the simplicity of the principles that guided our deliberations and decisions. In the financial operations of the Church, two basic and fixed principles are observed. First, the Church lives within its means and does not spend more than it receives. Second, a portion of the annual income is set aside as a reserve for contingencies and unanticipated needs. For decades the Church has taught its membership the principle of setting aside additional food, fuel, and money to take care of emergencies that might arise. The Church as an institution simply follows the same principles that are taught repeatedly to the members. My view is based on these meeting working exactly as Bednar described, with additional information such as what Nielsen said, what Church's Financial Standard #6230 says, and the fact that we now know how big the funds are. Individuals saving the way the Church saves actually makes sense. That is because as individuals, we have far more risk than the Church. If I lose my job, I lose 100% of my income. In contrast, if there is a major recession and unemployment shoots up to, say, 20%, then the Church's tithing revenue might go down 10% to 20%. That difference means individuals are at much greater risk than the Church, and therefore should be saving more. And unlike the Church, individuals in all likelihood will become disabled or otherwise forced out of the workforce and will need to survive on their savings. The Church doesn't face that risk. In the year 2046, I'll need my savings to survive. In contrast, in 2046 the Church will have that year's tithing revenue to survive. They are the ones who said it is a "basic and fixed principle" that "the Church lives within its means and does not spend more than it receives." And its proven its commitment to doing just that in both the Great Recession and the COVID-19 pandemic. The professional way of answering this question is to run financial simulations through a wide variety plausible economic scenarios, and to consider what its income and expenses would be in each scenario. Reserves would be considered "sufficient" if reserves, interest income, and tithing are enough to cover expenses in every plausible scenario. Of course this type of analysis makes more sense if the "basic and fixed principle" was that the Church will save excess tithing in good years, and spend down the reserves in bad years. To the extent they are serious about the Church never spending more than it receives, the reserves just don't need to be that big. Personally, I do have the education and experience to comment on these things. If its "particularized mandates" are something beyond what it talks about publicly and involve spending truly astronomical amounts of money in the future on things it hasn't disclosed publically, then sure--it should be saving up to do that. But based on what it claims its mandates are, it isn't planning on doing any such thing. I disagree. They are currently spending 70% of their annual income on increasing the size of their reserves, and 30% of preaching the gospel, perfecting the saints, redeeming the dead, and their now-expanding humanitarian efforts. If they came up with some audacious goal that required a $100 Billion commitment over the next 5 years and were hiring people by the thousands to make it happen, then sure--that would contradict what I said. But they aren't doing anything like that. It might serve the Church's religious, educational, and humanitarian mission in some sort of theoretical way because hypothetically it could dip into those funds if it needed to in support of those things. But actually doing that would contradict their fixed principle of living on less than their tithing revenue.

Nope--there were no other forms submitted to the SEC that linked Ensign Peak with these securities. The reason this issue came to light is that the Church made a big mistake: somebody had the brilliant idea that Ashmore Wealth Management LLC, Argyll Research LLC, etc., all needed web addresses so that they would appear more legitimate. I surmise that whoever made this decision didn't know that you can trace who owns websites, and simply went through the Church's standard channels to acquire the domain names. Then in 2018, our friends at MormonLeaks decided to research what domains the Church owned. They found that it owned domains of several investment firms, so from there they kept digging. They found that these companies all had their domains registered on the same day, the domains were all hosted by the Church, and all had managers with the names of Church employees. They called up all of the guys at the Church who had these names, and only got in touch with three. Two of them denied any connection to the LLCs (even though we now know they did in fact sign the 13F's stating they were the managers), and the third said he was the manager, but wouldn't confirm or deny that the fund was associated with the Church. (see here) At that point, two of the managers resigned, saying they were uncomfortable with this. In contrast the Church was quite comfortable with this arrangement and found two new fake managers to take the places of the two that resigned. Thirteen months later, in the words of the Church, "the SEC first expressed concern about Ensign Peak’s reporting approach." Are you familiar with Church's Financial Standard #6230? According to that document, the Quorum of the Twelve does not have access to the Church's balance sheet items (i.e. cash, investment securities, other assets, liabilities, net assets)--this information is outside the stewardship of the apostles, and the Financial Standard says, "Employees must not divulge financial information outside of approved stewardships." Given that, the story seems eminently plausible. What part do you find implausible? The part where the President of the Twelve asked to see what the Church's investments were, or the part where the head of EPA followed the Church's Financial Standards?

My suspicion is that he was not telling the full truth. The main treasury may now be classified under "Ensign Peak Advisors" on the org chart, but I believe the Church still works the way Hinckley and Bednar explained. There is a fixed principle that they will live on less than their tithing income, and classic Ensign Peak Advisors--the part that manages the reserves--is simply a place to put excess tithing and save it for a rainy day. Do you think the Church started showing the Council on the Deposition of Tithes how much money Ensign Peak Advisors has and makes? I don't. Remember the story of Boyd K. Packer, President of the Twelve and one heartbeat away from being the prophet, went to Ensign Peak Advisors and asking Roger Clarke to see what was going on there so he'd be ready to take over the Church if God-forbid he were to become prophet? Remember how Clarke had to awkardly explain to him sorry, that is above your pay grade? Am I wrong? When did the Church say its annual expenses would now be more than annual tithing receipts? Abandoning Hinckley's fixed principle would be a big deal. I'd love to hear about it. Nielsen's account is consistent with the "fixed principles" of how the Council for the Deposition of Tithes work, as explained by Hinckley and Bednar. Nielsen's account is consistent with Church's Financial Standard #6230, "Accessing and Securing Financial Information", which shows that the majority of the council on the deposition of tithes--the rank-and-file apostles--aren't allowed to know how much money the Church has saved, nor how much money these assets are generating. It's also consistent with how much we know the Church had accumulated when the EPA financials were leaked. Do you believe my view of this has dated? Has Financial Standard #6230 been rescinded or updated? Are the apostles now allowed to know what the Church's assets are? If not, how could they possibly be expected to make decisions of how to allocate these resources? If the Church radically changes its internal policies and presented these assets and investment income to the Council of the Deposition of tithes, and if it officially revoked the "fixed principle" of always living on less than its annual tithing revenue, I'd consider EPA integrated in the Church in a functional sense. But as long as the apostles aren't allowed to know about these assets and investment income, it is not integrated in a real-world way.