In 1987 the United States Congress held a hearing on religious broadcasters because of the Jim Bakker scandal. In response to a question televangelist D. James Kennedy said, "I would think that if a person is going to give money to something, that they have ... a responsibility to learn where it is going."
So how do donors learn where their donations are going?
In the United States nonprofit organizations except for churches are required to file a Form 990 with the Internal Revenue Service. Nonprofit organizations with less than $50,000 in revenue may file the Form 990-N online.
Guidestar collects these completed documents from the IRS and makes them available on their website.
The Form 990 discloses total revenue, total expenses, total assets, a breakdown of expenses, names of affiliate organizations and compensation of key personnel.
Although no laws in the United States require churches to make public their financial statements, many churches provide these documents at monthly or quarterly business meetings. If a church's board of elders or pastor refuses to provide financial statements, a donor should consider withholding his financial support and supporting a church that is more transparent with finances.
Churches and other nonprofit organizations can lose their tax-exempt status for a couple of reasons. The law prohibits excessive compensation paid to pastors, priests, and elders. Also, there are laws that make some forms of self-dealing illegal. Self-dealing occurs when someone controls both a nonprofit organization and for-profit company, the two entities do business with each other in such a way that the person excessively profits off the nonprofit.
For example, a pastor or televangelist owns a publishing company and sells his book to his church or nonprofit at full retail rather than wholesale price. This transaction is illegal and could cause the pastor to pay tax penalties if convicted of self-dealing.
The IRS offers a reward to informants who turn in people that deliberately evade paying their taxes.