Sports ministry reaps millions

By Gary Henderson  

JANUARY 7, 2009 7:22 a.m. (0)

Upward's Form 990 submitted to the federal government

 

In 1986, when Gregory “Caz” McCaslin was the minister of recreation at First Baptist Church of Spartanburg he envisioned a program to blend athletics and evangelism.

The children of the church, he reasoned, would be more likely to use the teachings of Jesus Christ in their everyday life if they also saw it on the basketball court. That meant equal playing time, no matter the talent. It meant coaches who did not have a win- at-all-cost mentality. It meant children full of self-esteem and Christian values.

The program was so popular – not only with church members, but with other families in the community – it quickly outgrew its space. An old gym in the church basement that had been a youth meeting place was reopened and basketball goals were installed for younger kids.

Within a decade, the Southern Baptist Convention came calling. Could McCaslin put the program in other churches?

That was the beginning of what today is a $28-million-a-year ministry directed from a 58-acre campus beside the North Tyger Lake reservoir. McCaslin’s departure from First Baptist brought about Upward Unlimited, an independent nonprofit ministry. As such, the organization pays no federal, state or local taxes, meaning government, in effect, subsidizes its operation because it serves the public good.

But during the past five years, as Upward’s programs have spread to some 2,000 churches across the country, the ministry has begun to act more like a business, according to a Journal review of 10 years of audits and other documents non-profits are required to file.

The Journal found McCaslin’s salary has grown 566 percent in the past 10 years, reaching $261,000 plus a housing allowance that covered the mortgage payments on his $498,000 home. Last year, the ministry also bought him a new GMC Suburban. The heads of two much larger youth ministries do not make as much or have a housing allowance.

The salaries for Upward’s six top employees range from $106,000 to $140,000. The ministry spent $600,000 on travel last year.

 

Land Donation

Property assessment for Upward's headquarters

Upward’s two-year-old, $15-million headquarters east of the Highway 29 and Interstate 85 interchange is mortgage-free and features two bronze life-size sculptures by renowned Christian artist Max Greiner Jr. that cost almost $80,000.

Administrative fees take more than a quarter of its income and last year Upward reported $18 million in gross profit on the $28 million it took in.

“If this were a for-profit company, I’d tell you to go out and invest in it,” said Lillian Gonzales, a Wofford College accounting professor who reviewed Upward’s public documents. “It is a well-run company that is making lots of money.”

Ron Romine, the recently retired director of the Center for Nonprofit studies at the University of South Carolina Upstate, said any money earned in excess of expenses should be poured back into the organization to benefit the people it serves, not the people who work there.

“They are not supposed to accumulate wealth,” Romine said. “This operation is so different than most non-profits. Usually, people are coming in for service and you’re worried if you have enough money.”

Romine said Upward’s gross profit and management salaries show the organization does not need a tax-exempt status. It is a business, he believes.

“This is over the top,” Romine said. “This is in a class with Jim and Tammy Faye Bakker.”

Both professors said Upward is not doing anything illegal, but the law governing non-profits is a loose one with little oversight. But that could change.

Others challenged

The tax-exempt status of nonprofits that collect virtually all their revenue by the sale of products, fees and services and show little evidence of charitable giving are being challenged because it’s difficult to distinguish them from for-profit businesses. Earlier this year a non-profit day care in Minnesota lost its property tax exemption because it did not give away care.

Hospitals are being asked to justify their status based on charity care. Colleges are being asked to use more of their endowments to reduce tuition.

Six evangelical ministries have been asked to justify their tax exemptions by the U.S. Senate Finance Committee. Creflo Dollar and Bishop Eddie Long have refused to cooperate. Joyce Meyer Ministries and Kenneth Copeland have submitted documents.

At the very least, Upward’s practices should be questioned ethically, Romine and Gonzales said.

“I think it violates the spirit of the IRS law,” Romine said. “It’s hard to get people to understand that when they’re doing the Lord’s work.”

McCaslin said Upward’s board sets his salary based on information provided by Phillip Blount Associates, an Atlanta company that specializes in compensation consulting and leadership development.

In addition, he said he donates royalties on books he wrote and fees he received for speaking engagements at churches to Upward. He did not respond to a question about how much that amounted to.

Board chairman Coleman Young, who owns an Upstate dry cleaning business, and McCaslin said Upward teaches Christian principles to children through healthy competition on basketball and soccer teams and is well within the law regulating non-profit organizations.

Praise for the program

And the ministry has been well received all over the nation.

“They perform a worthwhile mission that we take part in,” said Ronnie Norris, recreation minister at Cudd Memorial Church north of Spartanburg. “We’ve been very satisfied.”

Barry Miller, Upward league director at Columbus Avenue Baptist Church in Waco, Texas, said he has been pleased with the program, too.

“The tools they provide for us are very effective in leading kids to Christ,” he said.

Young said McCaslin’s salary has grown as the responsibility for overseeing such a large and dynamic organization has grown.

In 1997 – when Upward branched off from First Baptist – McCaslin’s annual salary was $39,000. By 2001, it was $76,811 plus $51,077 for a housing allowance. By 2006 his total remuneration had increased to a quarter of a million dollars a year.

In comparison, Les Steckel, former coach of the Minnesota Vikings and now president of the Fellowship of Christian Athletes, a worldwide nonprofit twice the size of Upward, earned $150,000 in salary and no housing allowance.

Denny Rydberg, a writer and former chaplain for the Seattle Supersonics and longtime president of Young Life, a Christian organization that worked with a million high school students last year, earned $258,638 in 2006. That organization had revenue of $213 million and donated $3.1 million to similar charities.

House purchase

McCaslin also benefited from Upward purchasing his house on Gillette Court for $240,000 in January 2002 after he built a house on Matchlock Commons that is now appraised for $478,000. The Gillette Court house in Spartanburg had been on the market for six months and Young said board members were concerned about McCaslin being saddled with two house payments.

That was the year McCaslin had received a $51,077 housing allowance. The board sold the house for $245,000 in March 2002.

After McCaslin bought the Matchlock Commons house in Spartanburg in 2001, his housing allowance was $4,256 a month. Spartanburg tax records show he has a 30-year mortgage for $498,000 that was taken out with a Kansas bank in 2003.

Upward offers its employees generous salaries and raises. Bill Palmer, vice president of ministry, received a 22 percent increase last year, bringing his salary to $140,786, according to reports Upward filed with the Internal Revenue Service.

Pamela Westbrooks, the vice president of administration, also earned a double-digit raise – 14 percent – from $93,756 to $106,742. Upward’s 2006 income tax return shows 23 employees make more than $50,000.

A nonprofit’s performance is judged by how much revenue is spent on administration and management. Upward’s was 75 percent higher than the average paid by similar nonprofits with youth- and sports-related missions that were members of the Evangelical Council for Financial Accountability.

“You want to see that in the low 20s,” Gonzalez said. “(Upward) did really well for a while, but something happened in 2003. That’s when the numbers started to go up.”

Upward’s administrative and management expenses rose from 15 percent in 2002 to a high of 26 percent four years later, based on Gonzalez’s calculations.

One member of the Evangelical Council – Campus Crusade for Christ – ­reported spending as little as 6.7 percent on administration.

McCaslin said the increases in management expenses were caused by the addition of “nine or 10” staff members each year, setting up an account to handle merchandise write offs and $200,000 related to a new software program.

Few donations

Upward does not seek cash contributions. Since it began 13 years ago, Upward has received $57,000 in cash donations. Its largest contribution was land for the ministry’s new office and distribution center valued at $988,610, from Stan and Paula Baker of Spartanburg.

“Because we do not fundraise, we have no fundraising expenses,” McCaslin added. “Alternatively, we incur sales, marketing and servicing expenses that are included in management expenses.”

Upward’s 2008 audit showed the organization spent $10 million on uniforms and other materials and sold them to participants in its sports programs for $28 million.

Besides a uniform shirt participants in Upward programs receive, member families can purchase additional merchandise from Upward’s Web site.

Each child pays about $80 to participate, a price that has held relatively steady for 10 years.

McCaslin said Upward Unlimited has made charitable donations and waived fees and provided merchandise to churches 218 times because they could not afford to pay for participation. He declined to provide the names or locations of the churches or to say how much the charity was worth.

“We keep the identity of these churches anonymous for their benefit,” McCaslin said. “We have a plan in place to continue to provide scholarships to churches for reaching children who cannot afford to play. To our knowledge, there has never been a situation where a child has been turned away from playing Upward because of funding.”

Unused merchandise

Last year, Upward wrote off $2.8 million in T-shirts and other merchandise, the majority of which, McCaslin said in April, was still being held in Upward’s warehouse.

“Churches that were in areas affected by Katrina received merchandise,” McCaslin said. “We have also donated to our church partners who use the items for mission trips and we anticipate using some of this inventory for leagues and camps in other countries.”

The organization had already recouped what it spent on the shirts even though it could not sell all of them.

Mason Hardy, president of the South Carolina Council of Nonprofit Associations, said more and more nonprofits are being required to justify their tax-exempt status.

Hardy said it’s easy to understand the challenges from county governments.

“In South Carolina, the counties get the benefits from property tax,” Hardy said. “The counties are getting squeezed. The nonprofits are getting squeezed.”

Sharon West, the Spartanburg County auditor, said if Upward Unlimited were a for-profit company it would pay $266,000 in property taxes and another 10.5 percent on equipment, which she said could easily total more than $200,000.

The Internal Revenue Service and the South Carolina Secretary of State approve applications for a nonprofit status.

After requests are granted, there is no oversight to confirm that organizations are operating according to acceptable nonprofit guidelines.

Danny Brazell, a spokesman for the state’s Department of Revenue, said the agency exchanges information with the IRS. He said the state revenue collecting agency does not have the resources to do further checks.

Long-time board

Upward is overseen by a board that includes Young, Tully Brewer, Hugh Brantley, Bob Caldwell and McCaslin. They are the only board members the organization has had.

Romine said good practice models suggest that board members of nonprofit organizations should rotate off every three years.

Young said Upward’s bylaws require a three-year rotation. He said the board has avoided a simultaneous exit of the four men by staggering their rotation.

“At the end of each term, the board member is asked if he still feels qualified to serve and is desirous of another term (by McCaslin),” Young said. “Obviously, it has been the desire of each of us to continue our service of the board. My service to Upward is my ministry.”

The Evangelical Council for Financial Accountability group recommends a rotation where board members take a year or more sabbatical after they’ve served for three years.

“It’s good to have a term or ‘endurance policy,’ so a ministry doesn’t take on the persona of its more active governance body members,” Joyce Godwin wrote for Focus on Accountability in an article reprinted on the ECFC Web site. “Boards flourish with new members.”

Young is the owner of Master’s Mark Dry Cleaners, Brantley heads the Spartanburg Christian Community Foundation, Brewer is president of Littlejohn Inc., and Caldwell is president of Grace Management Group.

Nonprofits much smaller than Upward Unlimited often have 20 or more board members. Most have policies that require board members to leave for a sabbatical after three years.

Board benefits

Romine also questioned business relationships between Upward and its board members.

A partnership that included Young and 22 of his family members was paid at least $60,000 a year for Upward to lease 15,000 square feet in a building the partnership owned on Southport Road.

“This equates to $4 per square foot; well below market rent,” Young said.

Upward also pays Caldwell $2,500 on a month-to-month basis for warehouse space in a business he owns.

Young said Upward board members abstain from voting when transactions involve them. He said the arrangements were not a conflict of interest.

Young said most board meetings are held in Spartanburg at Upward’s headquarters, although out-of-town board meetings include board members, senior management, including spouses at Upward’s expense and potential advisory council guests. The meetings have been held at resort sites such as Chateau Elan, Grove Park Inn and Hilton Head.

Costs for these meetings are reported to the IRS as management and general expenses.

“To comply with IRS regulation, our spouses’ expenses are taxed as either fringe benefits or 1099 compensation to recipient, depending on the situation,” Young said.

Audrey Alvarado, executive director of the National Council of Nonprofit Associations, said changes in the way Upward’s board operates are needed.

“At the very minimum they need to rotate board members,” Alvarado said.

Church leaders contacted for comments about Upward management practices said they knew little about the operations, other than what they see in their churches.

Miller, the league director in the Waco, Texas, church, said he is not concerned about McCaslin’s income or the management structure. He knows a good program when he sees one.

“If he’s getting rich off it, that’d be between him and God,” Miller said.