Shriners In Hot Water Again?
By Cassandra Frost
Four years ago, Vernon Hill, a retired insurance broker and Shriner of 15 years, was driving sick children to the Shriners Orthopedic Hospital in Greenville, North Carolina and Cincinnati, Ohio. As he waited to drive the kids back home, he'd visit with other Shriners from around the country and began to hear things that disturbed him. Like how officers in various Temples allegedly misappropriated the money that was raised for the hospitals. How the general membership had no idea of the way donations seemed to go towards any and everything but the hospitals they were raised for.
As Hill began asking questions, he learned of a series of investigative articles published by the Orlando Sentinel in 1986 that the popular advice columnist Ann Landers characterized as distressing. In response to a reader, Landers wrote:
"The Sentinel reported that in 1985 the Shriners kept a whopping 71 percent of the money raised, about $21.7 million.
This went to pay for a range of clubhouse expenses, including the upkeep of private bars, restaurants and golf courses. They also used the money to pay for conventions, travel and entertainment for their 880,000 members and, again, fund raising.
The Shrine's most lucrative source of income is the circuses throughout the country. They generated about $23 million in 1985, the paper reported. The records show that LESS THAN 2 percent, or $346,251, went to the medical care of the children. I find this shocking. The Sentinel cited Internal Revenue Service records showing that although the Shrine is the richest charity in the nation, it gave its 22 hospitals for children less than one-third of the gross collected from the public in 1984. The REMAINDER was spent on food, travel, entertainment, fraternal ceremonies and fund-raising."
Later that year, the Shriners Announced Fund-Raising Guidelines For Temples and according to an AP story dated October 28, 1986:
"TAMPA, Fla. - The Shriners have agreed to a new set of fund-raising guidelines after a newspaper reported that less than one-third of the money raised by the fraternal organization each year goes to its charities. A list of 10 recommendations was unanimously adopted Monday by the Shriners board at a quarterly meeting, according to a news release.
The standards "are intended to assure the public that information on Shriners fund-raising activities is sufficient to easily identify those activities which benefit the Temples and those which benefit Shriners Hospitals," said Mike Andrews, Shriners public relations director.
Under the guidelines, all 189 temples nationwide must maintain detailed financial records relating to all fund-raising, the head of each temple must approve all fund-raising done under the auspices of his temple, and temple accounts must be regularly audited or reviewed by accountants."
Expecting the Shriners to abide by their own new guidelines, Hill kept asking questions and found information to the contrary. The head of an online nonprofit group suggested that he contact a tax specialist named Paul Dolnier. After a few emails, they spoke on the phone.
"Paul asked me about ten questions and after fifteen minutes, we knew we could work together," Hill explained. Dolnier has been a tax accountant since 1991, has a Masters Degree in Taxation and spent three years as an IRS Revenue Officer. "After working for the IRS, I became a nonprofit consultant of sorts," Dolnier explained. "They are unique clients and I helped them with their IRS applications and accounting." "I don't have an axe to grind," Dolnier stated. "What I do know is that after I checked out his story, I've worked with Vernon the past 16 months to obtain hundreds of pages of documents from the IRS in Ogden, Utah. We requested the 990's directly from the IRS rather than ask the individual groups. As I reviewed the forms, it became clear to me that the Shriners have over $8.5 billion in the bank. They have the largest charitable endowment in the USA according to the Forbes Magazine Charity List for 2004. If they don't raise another dime, they can run the hospitals for the next 40 years, no problem."
According to Dolnier, "The Orlando Sentinel investigation emphasized the need for the Shriners to keep detailed financial records related to all aspects of fund raising. Today, the question needs to be asked: Why do the overall percentage of fund raising expenses All over the country based on REVIEW, always favor the fraternal fundraising (as in LOWER % of expenses) and always have higher expenses for charity?
"It would seem that maybe some expense shifting might be going on to 'keep more money' in the local Shrine Temples for fraternal member's purposes RATHER than sending more to help support the Charity Hospital," Dolnier suggested. Back in 1999, Hill remembered over hearing the Potentate or head of his Shriners Temple. "I was standing four feet away and heard the Potentate tell a new officer about all the good times they were going to have, about all the trips they'd go on."
As Hill asked more questions of the Shriner's leadership, a letter from the group's corporate offices told the head of the Sudan Shrine Temple to do what they wanted to Hill. He found himself removed from the Road Runners, the group that drives the sick and crippled children in the vans to the hospitals. He was also removed from the temple's PR committee.
It appears that Hill was removed from both committees for asking about the group's financial accountability as well as for asking "Where does all the money go?"
This ties into an issue cited in an April, 2005 report on the Shriners provided by Give.org, the nonprofit watchdog group that is part of the Better Business Bureau. The report states:
"Shriners Hospitals for Children (Shriners) does not meet the following Standard for Charity Accountability. 10: Avoid accumulating funds that could be used for current program activities. To meet this standard, the charity's unrestricted net assets available for use should not be more than three times the size of the past years expenses or three times the size of the current years budget, whichever is higher.
Shriners does not meet this standard because according to its 2003 audited financial statements, total unrestricted net assets (after excluding $757,707,000 of land, buildings and equipment) are $6,266,520,000. This amount is greater than 11 times the total expenses ($535,834,000) for 2003. As a result, Shriners does not meet this standard."
The Give.org report did state that the Shriners met all the other charity accountability standards except this one. The specific issue that both Hill and Dolnier are currently focusing on involves Shriners temples in the state of Pennsylvania. Dolnier formed, along with Hill and others, a new-profit organization called Charity Watch Center.
The Charity Watch Center web site alleges: "Attorney General's Office of Charitable Registration for the State of PA is looking at this group as a "matter of great interest " concerning past and current charity fundraising policies and procedures throughout the entire State of PA which includes ALL Shrine Temples and Groups and Clubs located within the State of PA." 1 Dolnier explained how he recently met with the chief investigator, auditor and counsel for Pennsylvania's Charitable Special Investigation unit. "They were in Florida on another matter and I sent them documentation.
They took it so seriously that instead of flying straight home, they came to Fort Lauderdale and spent about six hours with me as I explained what I've found." According to Leslie Amoros of the Special Investigation Unit's Press Office "We can't confirm or deny any investigation. Period."
Charity Watch Center explains that: "Under (Pennsylvania) State Charitable Solicitation Law, when you ask the public for donations, and you tell them the proceeds will be going to a non-profit public charity, BY LAW you will transfer 100% of the net proceeds to that named charity. If the organization that made the charity solicitation, FAILS to do what it promised the public to do, it is in VIOLATION of the Charity Solicitation laws of the state. Based on the FACTS that Charity Watch documented from this groups Federal Tax Returns for the State of PA, Charity Watch investigation documented facts that show that this group FAILED to transfer 100% of the net charitable proceeds to the approved public charity as REQUIRED by state and federal charity and tax laws. The Internal Revenue Service has serious concerns regarding organizations that FAIL to completely transfer 100% of net charitable proceeds to an approved 501(c)(3) public charity.
"IRS allows for the following actions for groups that fail to do this, the Donations made to this organization will be considered as "Non-Tax Deductible donations" under IRS Tax Code Section 501(c)(10).
Plain English Explanation: If your donation was made and you deducted it on your personal federal and/or state tax return and IRS deemed it to later be "non-deductible," you would be REQUIRED to go back and AMEND every year of your previously filed tax return and REMOVE the deduction, and pay any taxes that might be owed when that happens."
Dolnier's 15 years of tax accounting experience, his Master's in Taxation and his experience as an IRS Revenue Officer dealing with IRS rules and regulations has enabled him extensively review Shriner returns from Pennsylvania, New York, California. These results are posted on the Charity Watch Center website at: help-page-nonprofit.org
"This is an on going review that provides the latest updates and additions to the site as things develop," Dolnier explained. "The returns show either bad book keeping or that someone may be hiding things. My analysis shows that only 23% to 48% of the Pennsylvania groups' charitable donations are going where they are supposed to."
"Take, for example, the 2003 return for Pennsylvania's Irem Shriner Temple that is posted online," he continued. "According to my calculations, the Temple listed a net income, which is the reported fundraising portion of the temple's income, of nearly $300,000. Half of this is supposed to go towards local charities. Under "Functional Expenses: Page 2, Line 43," Charitable Contributions are listed as $50,000. So, Charity Watch Center asks: "Where did the other $100,000 go?"
"Another confusing thing," he added, "is that the returns aren't clear if the money raised through bingo or the circus or raffles or other events is for the fraternity or the charity? It is ok for the fraternity to raise money for the member's benefit as long as it is listed as such. It is not ok to raise money through bingo or the circus or the raffle for the hospital and not label it as such. The returns don't seem to indicate how much money is raised through the events for the fraternity and how much is raised for the charity. The returns are done by certified public accountants and I'm surprised that these types of details may be either overlooked or may be intentionally left out." According to Hill, things seem to have not changed since the 1986 investigation. "Today, they seem to be more secretive with no accountability. If you ask questions, they kick you out of the Shrine. I want to emphasize that the average Shriner, the general membership, has no idea what is going on. To everyone, it's Chevrolets and apple pie. I've spoken with numerous other Shriners in other states and they allege corruption but no one does anything because they are scared of losing their positions, both in the Shriners and in their professional lives." "It's a good old boy system," Hill continued. "In my temple, the Sudan Shriners, the 2003 tax returns showed that they spent $154,000 on miscellaneous expenses with no documentation. If anyone asks what the money was spent on, they will be thrown out. Is that any way to run an organization?" Hill maintains that the "good old boys" got "appointed, anointed, and electedto run things in a secretive mode of operation on a 'see nothing, hear nothing, admit nothing, know nothing' basis to the general membership."
"The Orlando Sentinel investigation proved that they solicited charitable donations through the circus to help burned and crippled children and that the millions raised did not go to the hospitals," Hill concluded. "I've spent the past four years digging into this and have sent emails, letters and documentation to everyone from the FBI to the Pennsylvania Director of Charitable Giving to the heads of the U.S. Senate Committee on Finance who are holding hearings on rewriting the IRS nonprofit laws and regulations. The Shriners had a chance to make things right, seem to have failed and may have been caught again. What I find amazing is that I'm seeing the power of how one or two people can make a difference by standing up for what we believe in."
Background on the Shriners
The Shrine is an international fraternity of approximately 500,000 members who belong to Shrine Center throughout the United States, Canada, Mexico, and The Republic of Panama. Founded in New York City in 1872 the organization is 191 Temples, or chapters, located in the United States, Canada, Mexico and the Republic of Panama.
Next: Shriners Response and Reaction
1 Legal Disclaimer: The Charity Watch Center does NOT provide legal counseling or legal opinions.
Cassandra "Sandy" Frost is an award winning e-journalist who has investigated the nonprofit claims of the International Remote Viewing Association the past three years. Her articles can be found at: http://blogs.salon.com/0003531/
She is the author of upcoming "The Cassandra Frost Collection" which will be published by Dandelion Books.
Read my blog at: No Fear