In a prior post, I wondered if Gospel for Asia had discretion and control over funds sent to India. I was surprised to read in the ECFA investigation report (disclosed yesterday by Gayle Erwin) that GFA – US leaders claimed GFA’s Indian partners are independent of the American organization. From the ECFA report:
5. Lack of discretion and control over funds granted to foreign entities. During our review on June 3, ECFA staff raised questions regarding GFA’s oversight and control of funds sent to foreign field partners. GFA’s staff indicated that the foreign field partners are completely independent organizations and therefore GFA did not exercise any direct control over field partners. GFA staff also indicated that they did not have a foreign grant process in place to oversee the use of funds.
Given legal requirements on tax-exempt entities to have appropriate discretion and control over the use of funds sent to foreign entities, ECFA staff indicated that GFA’s lack of a grant process appears to violate ECFA Standard 4’s requirement to follow applicable laws. Subsequent to these conversations, on August 21, GFA staff indicated a new foreign grant process was developed with the assistance of its new audit firm and will be in effect as of September 1, 2015.
Our review of the board minutes did not indicate the GFA board had approved, or even been notified, of GFA’s minimal oversight of funds provided to field partners.
In my prior post, I cited IRS guidance on the subject of discretion and control. In short, it sounds like GFA had been operating as a conduit for funds to India (or at least was claiming to be). Read the following ECFA guidance based on a recent IRS ruling:
“American Friends of” organizations support the exempt purposes of foreign organizations by raising financial support for them in the United States. Donations to an “American Friends of” organization are generally deductible, but only if the organization can prove it exercises sufficient control and discretion over the donated funds to ensure that the funds are being used to further the exempt purposes of the organization. In other words, to maintain deductibility of donations, an “American Friends of” organization must be more than a conduit; rather, it must exercise full control and discretion over where its funds are distributed and how they are used.
While I don’t want to raise unnecessary alarm, if GFA’s claim is true, American donations to GFA may not be deductible. GFA claimed to ECFA that GFA did not exercise control over GFA India, Believers’ Church and other groups, and ECFA found fault with GFA for the lack of discretion and control. For donations going to foreign charities to be deductible, the American organization must exercise discretion and control. Since GFA claimed no control, it seems reasonable to wonder if the IRS will reconsider the status of those millions.
My guess is that if GFA’s discretion and control are questioned by the IRS, GFA will flip explanations and play up the degree of control K.P. Yohannan really has in India. It is simply not credible for GFA to claim Yohannan has no control when in fact, he is the ultimate authority in the Believers’ Church and sits on all trusts associated with the church.
In the final analysis, K.P. Yohannan exercises control and authority both in the U.S. and in the Indian affiliates. It is beyond belief that Yohannan and GFA would claim otherwise.