David Platt, president of the Southern Baptist Convention’s International Mission Board (IMB), announced in August plans to eliminate 600 to 800 missionary positions due to a $210 million spending deficit.
However, Platt’s numbers do not add up.
EthicsDaily.com analyzed IMB audits from 1985 to 2014. As explained in part 1, the audits show a nearly $7.8 million surplus from 2010 to 2014.
The IMB’s financial picture gets a bit more complicated considering the practice of selling overseas properties to cover missionary expenses.
An FAQ on the IMB’s financial situation says they “utilized global property sales” to cover $18 million in expenses in 2014.
That number does not match the 2014 audit, which does not include the money from the property sales in the organization’s balance sheet, statement of activities or statement of cash flow.
Instead, the money is addressed in an audit note. Note 13 in the audit explains that the IMB used the proceeds to cover some missionary support expenses.
In 2014, the amount from “overseas real estate sale proceeds” used to cover expenses was more than $35.7 million. This means the IMB’s audited financial statements underreport the organization’s revenue and expenses by more than $35.7 million.
The actual expense amount for 2014 was not just more than $300.2 million but instead nearly $336 million.
The note only mentions the amount spent for the year. It does not say how much money the IMB received from real estate sales, which properties were sold, how much money remains in the account (or accounts) where the overseas real estate sale proceeds are kept, or in which country those monies are held.
EthicsDaily.com asked why the real estate sale proceeds were not included as income in the statement of activities.
IMB spokesperson Julie McGowan responded, “Global property sales are not considered income but rather a reduction of missionary support expense.”
As McGowan acknowledged, the IMB obtains the funds and uses the money to cover expenses. Yet, such funds do not appear in the income or expenses lines in the statement of activities.
Data provided by the Evangelical Council for Financial Accountability (ECFA), which shows the IMB’s surplus and deficit spending for 2012-14, does not include the higher amounts indicated in the audit note.
The IMB joined the ECFA in 2013 and reports financial data to the watchdog organization. One of the “seven standards of responsible stewardship” the ECFA demands of its members is transparency.
When asked about the discrepancy between the FAQ claiming $18 million “utilized” from overseas real estate sale proceeds and the audit note showing $35.7 million, McGowan acknowledged to EthicsDaily.com that the correct number is $35.7 million.
“The FAQ attributes this difference to real estate sales,” she explained. “In actuality, the property sales were $35.7M but there were other non-cash entries in the $21M deficit.”
The 2012 and 2013 IMB audits include similar notes. In 2013, the IMB used nearly $41.5 million in real estate sale proceeds to cover missionary expenses. In 2012, they used more than $63.6 million.
As with the other years, the 2012 audit note includes the previous year’s number for comparison. It records just over $20.5 million in real estate sale proceeds used in 2011.
However, a similar audit note does not exist in the 2011 audit, and the $20.5 million amount is not clearly included anywhere.
Since the 2011 audit does not indicate the amount, the lack of audit notes for 2010 and earlier years does not mean the IMB did not use overseas real estate sale proceeds to cover some expenses off the books.
Two audits between 1985 and 2012 note proceeds from overseas real estate sales. The IMB received $10.8 million in 1995 and $25 million in 1996.
However, for both years the money appears in the IMB’s income section of the statement of activities. It remains unclear in the audits when the practice of moving the real estate sale proceeds out of the statement of activities occurred.
Wade Burleson, an IMB trustee from 2005-08, penned a blog post about Platt’s reduction plan. Burleson noted the IMB overspent for “the past 20 years” and used a fund with monies from overseas real estate sale proceeds.
“Land bought cheap years ago in places like Thailand, South Korea, Hong Kong and other exotic locations were sold in the 2000’s and turned a tidy profit for the IMB,” Burleson noted. “For years the IMB has been selling hard assets to fund annual operating expenses.”
“For tax and legal reasons, the revenue the IMB gleaned from the sale of hard assets in a foreign country would never show up as ‘revenue’ for annual operational expenses in the United States,” he added. “What would happen is that the money would be placed in ‘slush funds,’ similar to what Congress does with money used for ‘black operations’ or for covert agencies that they wish to keep out of public scrutiny.”
The audits do not record how much money the IMB used from such funds to cover operational expenses prior to 2011. The lack of an auditor’s note may indicate the auditors did not know about the funds.
The audit notes begin to appear after Jerry Rankin retired and Tom Eliff became IMB president.
EthicsDaily.com posed several questions to the IMB regarding how much money from overseas real estate sale proceeds remain in accounts, what type of expenses are spent from those funds, or if funds were used in years without audit notes. These questions remained unanswered.
When Platt explained the decision to cut missionary positions, he reported both overspending numbers and proceeds from overseas real estate sales.
The property sales, however, cannot be labeled deficit spending since the properties are not recorded in the IMB’s assets prior to sales. The proceeds provide new income, thus providing no change in net assets.
“The intention of management is to utilize foreign field property and equipment and other assets for the benefit of the local ministries,” audit note 1 of the 2014 audit explains. “In many cases, title to this property is transferred to the local ministries; accordingly, the accompanying balance sheet does not reflect the substantial amount of property and equipment and other assets used in international countries.”
The audits do not indicate the value of the IMB’s overseas assets. Thus, it remains unknown how much money could be used to cover future missionary expenses as has been utilized in recent years. Platt argued the selling of properties is not a sustainable revenue source for the long term.
If the property sales are calculated into the IMB’s overspending – as Platt used them in his justification for the cuts – the numbers still do not reach his $210 million amount.
The surplus spending of $7.8 million from 2010-14 and the nearly $161.4 real estate sale proceeds from 2011-14 would put the IMB’s overspending at just over $153.6 million.
Editor’s note: This is the second of a two-part series. Part one is available here.