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James huntsman (jon's brother) sues church for 'fraud'


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1 hour ago, Analytics said:

 

The problem is that Ensign Peak Advisors (allegedly) isn't using the investment income for charity either. Literally not a single penny over its entire existence.

According to the IRS:

"Private foundations are required to spend annually a certain amount of money or property for charitable purposes, including grants to other charitable organizations.  The amount that must be distributed annually is ascertained by computing the foundation’s distributable amount.  The distributable amount is equal to the foundation’s minimum investment return with certain adjustments.

The distributable amount must be distributed as qualifying distributions.  However, a foundation may set aside funds for up to 60 months for certain major projects. Excess qualifying distributions may be carried forward for a period of five tax years immediately following the tax year in which the excess was created.  Special transitional rules apply to foundations created before May 27, 1969.

A foundation that fails to pay out the distributable amount in a timely manner is subject to a 30 percent excise tax under section 4942 on the undistributed income. "

Taxes on Failure to Distribute Income - Private Foundations | Internal Revenue Service (irs.gov)

That is why Ensign Peak Advisors is arguing so adamantly that that it is NOT a private foundation. If the IRS decides that it is a private foundation, its excise tax bill under section 4942 will be in the tens of billions.

How do you know that EPA hasn't been spending its investment income.

It is registered with the State of Utah as a non-profit, whose business is "Grant Making."   I don't have a clue as to whether it is a private foundation or not.  I am not a non-profit expert by any means.

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56 minutes ago, Bob Crockett said:

How do you know that EPA hasn't been spending its investment income.

It is registered with the State of Utah as a non-profit, whose business is "Grant Making."   I don't have a clue as to whether it is a private foundation or not.  I am not a non-profit expert by any means.

According to David Nielsen, the senior portfolio manager at EPA who blew the whistle with the IRS in December of 2019:

"[EPA] made 0 distributions in the first 12 years of its existence. It has made 0 distributions in the past five years. It did have two outflows in 22 years. Neither was planned, and neither went to the furtherance of EPA's exempt purpose nor that of its parent."

The first outflow was about $600 million in 2009 to bail out Beneficial Financial.

The second outflow was a series of payments between 2010 and 2014 of $1.4 billion "to shore up cost over-runs (also on the heels of the financial crisis) in the construction of the opulent City Creek Mall--with an award winning retractable roof, luxury storefronts, and a fish-filled river. Raising capital from the usual sources of project finance would have been untenable. From 2010 to 2014, if EPA were honest in its dealings and comparable to peer foundations, it should have spent at least $9.8 billion on its exempt purpose. EPA paid $1.4 billion exclusively using tithing dollars on a for-profit mall. Is the religious, educational, or charitable activity of the mall >95% per IRS requirements? No."

Letter To An IRS Director | PDF | The Church Of Jesus Christ Of Latter Day Saints | Tithe (scribd.com)

Its articles of incorporation claim it is an integrated auxiliary. But according to the tax code, to be an integrated auxiliary it must first be a public charity. Does it qualify as a public charity, given what it actually does? 

 

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34 minutes ago, Analytics said:

But according to the tax code, to be an integrated auxiliary it must first be a public charity.

Building that mall certainly did some good to the public to help revitalize the community and keeping it from becoming run down. Is the Church making any profit from the project?

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27 minutes ago, Analytics said:

According to David Nielsen, the senior portfolio manager at EPA who blew the whistle with the IRS in December of 2019:

"[EPA] made 0 distributions in the first 12 years of its existence. It has made 0 distributions in the past five years. It did have two outflows in 22 years. Neither was planned, and neither went to the furtherance of EPA's exempt purpose nor that of its parent."

The first outflow was about $600 million in 2009 to bail out Beneficial Financial.

The second outflow was a series of payments between 2010 and 2014 of $1.4 billion "to shore up cost over-runs (also on the heels of the financial crisis) in the construction of the opulent City Creek Mall--with an award winning retractable roof, luxury storefronts, and a fish-filled river. Raising capital from the usual sources of project finance would have been untenable. From 2010 to 2014, if EPA were honest in its dealings and comparable to peer foundations, it should have spent at least $9.8 billion on its exempt purpose. EPA paid $1.4 billion exclusively using tithing dollars on a for-profit mall. Is the religious, educational, or charitable activity of the mall >95% per IRS requirements? No."

Letter To An IRS Director | PDF | The Church Of Jesus Christ Of Latter Day Saints | Tithe (scribd.com)

Its articles of incorporation claim it is an integrated auxiliary. But according to the tax code, to be an integrated auxiliary it must first be a public charity. Does it qualify as a public charity, given what it actually does? 

 

I may be a lawyer and I represent private foundations and non-profits, but that doesn't mean I understand the intricacies of regulatory compliance; I don't do that kind of work.

But "outflow?"  That doesn't make sense. This is just an accounting exercise.  Moving money to an investment is not the same thing as spending money on charitable objectives.  In other words, liquidating an investment in Boeing and investing in Gamestop is not an expense. Similarly, pouring more money into City Creek is not an expense.  "EPA paid $1.4 billion exclusively using tithing dollars on a for-profit mall."  The statement is no different than buying farmland or financing a real estate development in Fresno.  (I suspect and think I recall from past experience that EPA is the largest landowner in Kern County, California; farmland. Using money to buy almond groves is not an "expense.") Bailing out Beneficial is not an expense, either.   So what this whistleblower is saying is inflammatory to the uninitiated but otherwise means nothing.

Furthermore, what is a "distribution?"  What is an "outflow?"  He's using terms that aren't "capital investments" or "expense" or "donation."  Businesses make (1) long term capital investments (R&D), (2) invest cash in non-cash assets (stock market, real estate) (3) expenses (salaries, supplies, rent) or (4) charitable donations.  My business, which I own, does all these things except R&D. 

An integrated auxiliary applies only to churches.    It must be a "public charity" under IRC 509(a)(1), (2), or (3). I am not aware that a public charity integrated with a church must actually donate money for charitable purposes, as oppose to accumulate money for future charitable purposes. 

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2 hours ago, JAHS said:

The real question is what does the prophet know is going to be needed for the future? Does he know something we don't know? 

Possibly. If the prophet(s) and apostles don't tell us what they know, we can only speculate that they might know something we don't.

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It turns out that to the extent that specific dollars can be traced and identified as either tithing dollars or investment dollars, $1.4 billion of the investment in the mall was from tithing dollars and not from investment dollars.

I was just reading the actual "Letter to an IRS Director", and it actually has an insider view about how the EPA manages its funds.

The EPA has what's essentially a "EPA Treasury Account" that only contains deposits made from the Church with tithing. EPA then moves tithing dollars from that account into its investment universe where the funds are comingled with investment income.

When EPA wired a series of payments to fund the mall, the money came from the "EPA Treasury Account" which contained no investment income--only recently received tithing.

From the perspective of a treasurer, this is a smart and effective way to do things so we shouldn't be at all surprised. After all, you don't want to spend money on transactional costs to liquidate "investment income" to pay for the mall only to spend more on transactional costs to invest new tithing dollars in the "EPA Treasury Account." Just use the cash in the treasury account.

From the Letter: "The [Church] promulgates the belief among its members and apologists that the church keeps its "sacred tithing funds" and investments in separate places. No semblance of this belief is true. EPA receives tithing surplus regularly (even weekly); the next activity is always to integrate that surplus into the entire investment portfolio, or the "EPA Universe."

Edited by Analytics
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10 minutes ago, Analytics said:

It turns out that to the extent that specific dollars can be traced and identified as either tithing dollars or investment dollars, $1.4 billion of the investment in the mall was from tithing dollars and not from investment dollars.

I was just reading the actual "Letter to an IRS Director", and it actually has an insider view about how the EPA manages its funds.

The EPA has what's essentially a "tithing checking account" that only contains deposits made from the Church with tithing. EPA then moves tithing dollars from that account into its investment universe where the funds are comingled with investment income.

When EPA wired a series of payments to fund the mall, the money came from the "tithing checking account" which contained no investment income--only recently received tithing.

From the perspective of a treasurer, this is a smart and effective way to do things so we shouldn't be at all surprised. After all, you don't want to spend money on transactional costs to liquidate "investment income" to pay for the mall only to spend more on transactional costs to invest new tithing dollars in the "tithing checking account." Just use the cash in the checking account.

From the Letter: "The [Church] promulgates the belief among its members and apologists that the church keeps its "sacred tithing funds" and investments in separate places. No semblance of this belief is true. EPA receives tithing surplus regularly (even weekly); the next activity is always to integrate that surplus into the entire investment portfolio, or the "EPA Universe."

Non profits typically operate using funds based accounting, not profit and loss accounting like businessses do.

Funds are not the same as checking accounts.  Cash management doesn't have to be done on a fund by fund basis.

You can restrict funds without getting new checking accounts for each one.  Most organizations who use a funds based accounting system don't maintain seperate checking accounts for each fund. Some of my clients will often come to me with multiple checking accounts for each fund and I have to explain that they are just overly complicating things and increasing costs (reconcilation, bank fees, checks, etc).

It would be entirely normal for a fund disbersment for different funds to come from the same account.  There would be no need to liquidate investments to make a disbursement if there were significant cash reserves. One would just credit  cash and debit the fund account.  

 

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25 minutes ago, Analytics said:

It turns out that to the extent that specific dollars can be traced and identified as either tithing dollars or investment dollars, $1.4 billion of the investment in the mall was from tithing dollars and not from investment dollars.

I was just reading the actual "Letter to an IRS Director", and it actually has an insider view about how the EPA manages its funds.

The EPA has what's essentially a "tithing checking account" that only contains deposits made from the Church with tithing. EPA then moves tithing dollars from that account into its investment universe where the funds are comingled with investment income.

When EPA wired a series of payments to fund the mall, the money came from the "tithing checking account" which contained no investment income--only recently received tithing.

From the perspective of a treasurer, this is a smart and effective way to do things so we shouldn't be at all surprised. After all, you don't want to spend money on transactional costs to liquidate "investment income" to pay for the mall only to spend more on transactional costs to invest new tithing dollars in the "tithing checking account." Just use the cash in the checking account.

From the Letter: "The [Church] promulgates the belief among its members and apologists that the church keeps its "sacred tithing funds" and investments in separate places. No semblance of this belief is true. EPA receives tithing surplus regularly (even weekly); the next activity is always to integrate that surplus into the entire investment portfolio, or the "EPA Universe."

Of course, if the EPA keeps 1.4 billion in a checking account, then I might be critical of their cash management abilities. THat they keep that much of their investments in checking accounts and are getting the alleged rate of return, I might take it as a sign of supernatural help.

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22 minutes ago, Bob Crockett said:

I may be a lawyer and I represent private foundations and non-profits, but that doesn't mean I understand the intricacies of regulatory compliance; I don't do that kind of work.

But "outflow?"  That doesn't make sense. This is just an accounting exercise.  Moving money to an investment is not the same thing as spending money on charitable objectives.  In other words, liquidating an investment in Boeing and investing in Gamestop is not an expense. Similarly, pouring more money into City Creek is not an expense.  "EPA paid $1.4 billion exclusively using tithing dollars on a for-profit mall." 

The mall and bailout were outflows from EPA's perspective--it was money that went out of EPA. From the perspective of the Church's entire balance sheet you are right--it was just reallocating assets.

22 minutes ago, Bob Crockett said:

The statement is no different than buying farmland or financing a real estate development in Fresno.  (I suspect and think I recall from past experience that EPA is the largest landowner in Kern County, California; farmland. Using money to buy almond groves is not an "expense.")

That's incorrect. EPA only has financial assets--stocks, bonds, derivatives, etc. A Church-owned corporation (most likely Agricultural Reserves) is probably the largest landowner in Kern County California. 

22 minutes ago, Bob Crockett said:

Bailing out Beneficial is not an expense, either.   So what this whistleblower is saying is inflammatory to the uninitiated but otherwise means nothing.

You missed the point. The point isn't that the money was wasted on these things. The point is that EPA has spent literally zero dollars on the "religious, educational, and charitable purposes meeting the requirements for exemption provided by Section 501(c)(3) of the Internal Revenue Code."

Can it rightly be considered a public charity if it does absolutely no charitable work?

22 minutes ago, Bob Crockett said:

Furthermore, what is a "distribution?"  What is an "outflow?"  He's using terms that aren't "capital investments" or "expense" or "donation."  Businesses make (1) long term capital investments (R&D), (2) invest cash in non-cash assets (stock market, real estate) (3) expenses (salaries, supplies, rent) or (4) charitable donations.  My business, which I own, does all these things except R&D. 

Using those terms, the EPA has made two "donations" that went back to the LDS Church. These donations were made for the expressed purpose of propping up the insurance company and building the mall and not for any religious, educational, or charitable purpose.

22 minutes ago, Bob Crockett said:

An integrated auxiliary applies only to churches.    It must be a "public charity" under IRC 509(a)(1), (2), or (3). I am not aware that a public charity integrated with a church must actually donate money for charitable purposes, as oppose to accumulate money for future charitable purposes. 

The way I read the information in your link, before it can be considered an actual integrated auxiliary of the Church, it must first qualify as a public charity on a standalone basis.

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1 minute ago, Danzo said:

Of course, if the EPA keeps 1.4 billion in a checking account, then I might be critical of their cash management abilities. THat they keep that much of their investments in checking accounts and are getting the alleged rate of return, I might take it as a sign of supernatural help.

The 1.4 billion was made in a series of much smaller payments over a five-year period from 2010 to 2014.

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13 minutes ago, Danzo said:

Non profits typically operate using funds based accounting, not profit and loss accounting like businessses do.

Funds are not the same as checking accounts.  Cash management doesn't have to be done on a fund by fund basis.

You can restrict funds without getting new checking accounts for each one.  Most organizations who use a funds based accounting system don't maintain seperate checking accounts for each fund. Some of my clients will often come to me with multiple checking accounts for each fund and I have to explain that they are just overly complicating things and increasing costs (reconcilation, bank fees, checks, etc).

It would be entirely normal for a fund disbersment for different funds to come from the same account.  There would be no need to liquidate investments to make a disbursement if there were significant cash reserves. One would just credit  cash and debit the fund account.  

EPA doesn't use fund-based accounting. Since it doesn't actually spend any money on non-profit things and doesn't do any non-profit work, it shouldn't be surprised that its accounting practices resemble that of a hedge fund more than a non profit.

To get some insight into how EPA works, please see the following link.

Letter To An IRS Director | PDF | The Church Of Jesus Christ Of Latter Day Saints | Tithe (scribd.com)

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7 minutes ago, Analytics said:

EPA doesn't use fund-based accounting. Since it doesn't actually spend any money on non-profit things and doesn't do any non-profit work, it shouldn't be surprised that its accounting practices resemble that of a hedge fund more than a non profit.

To get some insight into how EPA works, please see the following link.

Letter To An IRS Director | PDF | The Church Of Jesus Christ Of Latter Day Saints | Tithe (scribd.com)

I sorry, the letter is really convoluted and my time is valueable.  Can you quote the section where it describes the accounting method used internally by EPA.

Is the author even an accountant? 

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7 minutes ago, Danzo said:

I sorry, the letter is really convoluted and my time is valueable.  Can you quote the section where it describes the accounting method used internally by EPA.

Is the author even an accountant? 

The author has an MBA from Harvard.

He says, "The [Church] promulgates the belief among its members and apologists that the church keeps its "sacred tithing funds" and investments in separate places. No semblance of this belief is true. EPA receives tithing surplus regularly (even weekly); the next activity is always to integrate that surplus into the entire investment portfolio, or the "EPA Universe."

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Just now, Analytics said:

The author has an MBA from Harvard.

He says, "The [Church] promulgates the belief among its members and apologists that the church keeps its "sacred tithing funds" and investments in separate places. No semblance of this belief is true. EPA receives tithing surplus regularly (even weekly); the next activity is always to integrate that surplus into the entire investment portfolio, or the "EPA Universe."

That sentence says nothing about EPAs method of accounting, or how it segrates its funds.

An MBA is not the same as an accountant.  Most MBAs are not accountants.

 

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9 minutes ago, Danzo said:

That sentence says nothing about EPAs method of accounting, or how it segrates its funds.

An MBA is not the same as an accountant.  Most MBAs are not accountants.

 

Senior fund managers at multi-billion dollar hedge funds who have MBAs from Harvard know whether or not their firm uses find-based accounting. The paragraph I quoted and the rest of the letter in context clearly imply it does not use fund-based accounting. 

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3 minutes ago, Analytics said:

Senior fund managers at multi-billion dollar hedge funds who have MBAs from Harvard know whether or not their firm uses find-based accounting. The paragraph I quoted and the rest of the letter in context clearly imply it does not use fund-based accounting. 

Senior fund managers at multi billion dollar hedge funds who have MBAs from harvard should know how to report on methods of accounting explicitly without implying anything.   The method of accounting an organization uses is a simple fact, not really subject to interpretation.

Your statement above does not reference a method of accounting, I just repeat the tired old myth that funds segregation requires a seperation account for each fund.

I get it, Accounting isn't always easy to understand.   People are always complaining about local governemts not being able to use street fund money for generaly services and sewer maintainance funds for the Police department.  The actual money for the police, sewer and streets are kept in the same bank accounts but funds accounting requires funds not be used for the wrong purpose.  

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45 minutes ago, Analytics said:

The mall and bailout were outflows from EPA's perspective--it was money that went out of EPA. From the perspective of the Church's entire balance sheet you are right--it was just reallocating assets.

. . . .

You missed the point. The point isn't that the money was wasted on these things. The point is that EPA has spent literally zero dollars on the "religious, educational, and charitable purposes meeting the requirements for exemption provided by Section 501(c)(3) of the Internal Revenue Code."

. . . .

Using those terms, the EPA has made two "donations" that went back to the LDS Church. These donations were made for the expressed purpose of propping up the insurance company and building the mall and not for any religious, educational, or charitable purpose.

I think you are wrong.  Either EPA donated the funds to a religion which then owned the mall or EPA holds an investment in the mall.  Either is acceptable.  

In my local town a private foundation accumulates and invests in investments using donated funds. The board members are elected officials in the high school district or a lawyer for the district. The district then asks for 10 million dollars from the foundation and gets it.  The district then acquires a high school site.  Activists challenged the foundation, saying it was really a government entity and lost.  

This seems be common. A non profit handles funds of a religion or a public or private school. 

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3 minutes ago, Bob Crockett said:

I think you are wrong.  Either EPA donated the funds to a religion which then owned the mall or EPA holds an investment in the mall.  Either is acceptable.  

The former is what's happening; EPA donated the funds to a religion which used the funds to build a mall.

There is nothing wrong with that per se. Of course. The alleged problem is that it doesn't do anything charitable with the money. Ever

3 minutes ago, Bob Crockett said:

In my local town a private foundation accumulates and invests in investments using donated funds. The board members are elected officials in the high school district or a lawyer for the district. The district then asks for 10 million dollars from the foundation and gets it.  The district then acquires a high school site.  Activists challenged the foundation, saying it was really a government entity and lost.  

This seems be common. A non profit handles funds of a religion or a public or private school. 

That's great, but is very different from what EPA is allegedly doing. The local foundation donating money to the school district is a noble charitable endeavor. By making qualified donations like that, the private foundation avoids taxes on failure to distribute income.

In contrast, EPA doesn't make any qualified donations.

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17 minutes ago, Danzo said:

Senior fund managers at multi billion dollar hedge funds who have MBAs from harvard should know how to report on methods of accounting explicitly without implying anything.   The method of accounting an organization uses is a simple fact, not really subject to interpretation.

Your statement above does not reference a method of accounting, I just repeat the tired old myth that funds segregation requires a seperation account for each fund.

I get it, Accounting isn't always easy to understand.   People are always complaining about local governemts not being able to use street fund money for generaly services and sewer maintainance funds for the Police department.  The actual money for the police, sewer and streets are kept in the same bank accounts but funds accounting requires funds not be used for the wrong purpose.  

In summary, the Church promulgates the belief among its members and apologists that the church keeps its "sacred tithing funds" and investments in separate places.

You think that this belief is true and that they do this through funded accounting.

In contrast, Lars Nielsen thinks no semblance of this belief is true.

You dismiss Lars's judgment on the matter because despite his intelligence, education, and insider knowledge, he still isn't smart enough or educated enough to understand the accounting mechanisms the church is using to keep tithing and interest separate. 

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47 minutes ago, Analytics said:

The former is what's happening; EPA donated the funds to a religion which used the funds to build a mall.

There is nothing wrong with that per se. Of course. The alleged problem is that it doesn't do anything charitable with the money. Ever

That's great, but is very different from what EPA is allegedly doing. The local foundation donating money to the school district is a noble charitable endeavor. By making qualified donations like that, the private foundation avoids taxes on failure to distribute income.

In contrast, EPA doesn't make any qualified donations.

Well, I do know this about non-profit law.

Donating the money to the Church is, by definition, donating to a religion.  That is enough; a religion is considered an eleemosynary institution.  In other words, if all EPA does is receive and transmit money back and forth to the Church, that is enough. "Any enterprise can be operated as a 501(c)(3) nonprofit if its stated purpose is 'religious, charitable, scientific, testing for public safety, literary, or educational purposes, or to foster national or international amateur sports competition (but only if no part of its activities involve the provision of athletic facilities or equipment), or for the prevention of cruelty to children or animals.'" Spencer v. World Vision, Inc., 619 F.3d 1109, 1130 (9th Cir. 2010). In other words, a religion is, strictly speaking, not a charity but it ranks as the same for purposes of IRS non-profit law.

Ensign Peak Advisors is, indeed a section 501(c)(3) organization according to IRS records.  Thus, it complies with the law if its only outflows and inflow are with a religion.  What the religion does with the money is not EPA's concern, but religious use of the funds may not strictly meet the definition of a charitable use.  Of course, if the religion abuses its constitutional protections (it has been held that a religion which engages in more than 50% of activities which are not rightly protected by the constitution) it can lose its tax-exempt status but not its First Amendment protections.

 

Edited by Bob Crockett
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1 hour ago, Danzo said:

Is the author even an accountant? 

Iirc, the author is the brother of the former employee of Ensign.  When it first came out, the actual employee distanced himself from it though his brother claims they worked on it together.  I don’t know if he still does.

https://www.mormondialogue.org/topic/72484-whistleblower-on-church-finances/?do=findComment&comment=1209946941

II is a long thread and I started from the beginning to refresh my memory, so it may take time to get to the posts about the author and the whistleblower and who did what.  My memory says Lars was a medical worker and retired to work on the document and David said no comment except for my brother does not speak for me…but don’t trust my memory because I don’t.

A good early summary of the 74 page doc IMO:

https://www.mormondialogue.org/topic/72484-whistleblower-on-church-finances/?do=findComment&comment=1209947242

 

Edited by Calm
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46 minutes ago, Analytics said:

In summary, the Church promulgates the belief among its members and apologists that the church keeps its "sacred tithing funds" and investments in separate places

Where does it put forward this belief? I don't recall ever being taught about the bank account structuring of the church or associated organisations.

Whether they are in physically separate bank accounts doesn't make much difference. Everything goes into the same bank account if people do money-in-envelope donations, whether it be tithing, fast offering, missionary fund, or even using the "other" box for whatever purpose. The only way you know at a local level how much is in each portion, is because the finance system shows you each amount separately. So at least SOMEWHERE in church HQ the various fund amounts need to recorded. So clearly the church knows how much of their balance is donations and how much is from other sources.

Edited by JustAnAustralian
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48 minutes ago, Analytics said:

In summary, the Church promulgates the belief among its members and apologists that the church keeps its "sacred tithing funds" and investments in separate places.

 

Does the Church really promulgate that?  I can only think of statements that say "no tithing was used for this" or "no tithing was used for that".  I don't recall any statement that says that tithing fund is kept in a completely separate bank account from any other money.

Edit: JustAnAustralian just said the same thing, so I'd delete this post if that was allowed.

Edited by webbles
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I realize that Pres. Hinckley said that tithing funds were not being used for the mall when, in fact the funds used were increases on funds which were originally tithing funds.  Everyone I've explained this to, basically, has a problem with this.  But the "increase" comes after professional management, not contributed funds.   

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