It's a big change from previous years. Between 1998 and 2002, the ministry's tax returns showed no contributions to educationalcauses.
"Behold the lamb": Help Ministries founder Richard Ellison wants his ministry to be "a voice in the wilderness."
"Credit counseling is not inherently charitable," says IRS Chief Counsel David L. Marshall.
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Not every credit counseling agency operates like Help Ministries.
With $36 million in revenue last year, Take Charge America in Phoenix is smaller than Help Ministries but still an industry giant.
Take Charge America, which was granted non-profit status in 1991, has drawn fire from the National Consumer Law Center and the Consumer Federation of America, which point out that the agency had more than $6 million left over in 2000 after paying expenses (all told, Take Charge America has reported nearly $20 million in net revenue since 1998). The consumer groups also point out that Michael Hall, the president and CEO, is paid handsomely, with a salary of $410,000 in 2003. Several of his relatives, including his wife and at least one brother, are also on the payroll with generous six-figure salaries. Take Charge America says the salaries were established after market surveys to determine fair compensation.
Unlike Help Ministries, Take Charge America doesn't outsource its account processing nor most of its other work to for-profit businesses, so the public knows financial details and can decide for itself whether salaries are reasonable for management responsible for day-to-day operations. And, unlike Help Ministries, Take Charge America can point to significant spending on education that began before the IRS announced its audit campaign.
John Fisher, business development director for Take Charge America, says the agency fully expects a visit from the tax man. "We expect, when it's done, that we'll be audited because of the group that they're defined," Fisher says. He adds that Take Charge is confident it can withstand IRS scrutiny, though he concedes most credit counseling agencies would say the same thing.
Take Charge America has pledged $10 million to the University of Arizona to fund financial literacy education. The pledge was announced in last year. More than five years ago, Take Charge America started giving money to Montana State University to pay for financial education. While Help Ministries says it's considering working with community colleges to establish financial-education courses, Take Charge America has already done so. Indeed, the agency says every Take Charge America employee, whether they work in the mailroom or answer calls from debtors, is required to go through 40 hours of financial education, with courses provided through Rio Salado Community College.
Fisher dismisses any notion that millions of dollars left over after the company pays expenses makes Take Charge America a for-profit enterprise. Although credit counseling is a burgeoning industry, Fisher says future revenue isn't a sure thing, given increasing costs pushed in part by states that are starting to require agencies to post bonds before they're allowed to do business. But Take Charge America's plans to increase spending on education are the main reason for vast financial reserves, he says.
The company says it's far from a DMP mill interested only in cashing in on financial misery. The company claims just 20 percent of debtors who call Take Charge America end up in DMPs, and employees spend an average of 45 minutes on the phone with everyone, regardless of whether they sign a contract.
"This is a fine organization," Fisher says. He concedes the same can't be said for every credit counseling agency. That's why the IRS audits are necessary.
"We think it's probably a good thing that the IRS is taking these steps because we need a uniform body to bring those people in the industry who aren't where they need to be where they need to be," he says.
E-mail bruce.rushton@newtimes.com or call 602-407-1715.
