PETERSBURG, KY. -- For Answers in Genesis founder Ken Ham, work has been very much a family affair.
The Boone County, Ky.-based non-profit best known for its Creation Museum, which portrays a non-evolutionary history of the world’s creation based on the Biblical book of Genesis, employed seven of Ham’s family members in fiscal 2012-13. That’s according to the most recent Form 990 – an informational return non-profits file in lieu of an income tax return – that the organization filed with the Internal Revenue Service.
Those family members were Renee Hodge, Ham’s daughter, who earned $34,000 that fiscal year; Danielle Johnson, another daughter, who earned $19,767; Kristel Ham, a third daughter, who earned $13,312; Jeremy Ham, a son, who earned $40,166; David Hodge, Ham’s son-in-law, who earned $59,973; Susan Ham, a daughter-in-law, who earned $21,002; and Stephen Ham, Ken Ham’s brother, who earned $74,856.
Ham himself, who is the organization’s CEO, had $193,361 in total compensation that year.
Altogether, Ham and his family members received a total of $456,437 in compensation from Answers in Genesis Inc. in fiscal 2012-13. That amounts to 4.4 percent of the $10.4 million in total compensation-related expenses that the organization reported that year. That figure includes payroll, insurance, pension accruals and payroll taxes.
According to the Form 990, Answers in Genesis had $19 million in total revenue during fiscal 2012-13, versus $19.5 million in total expenses. But although expenses exceeded revenue by about $500,000, the organization finished the year with more than $17 million in net assets, or assets minus liabilities.
Through spokeswoman Melany Etheridge, Answers in Genesis executives declined to comment for this story. But Etheridge, who works for the Carrollton, Texas-based public relations firm A. Larry Ross Communications, said that based on her agency’s experience representing non-profit ministries, it’s not uncommon for religious non-profits to employ family members “with a shared worldview and passion for ministry.”
She also noted that since Answers in Genesis has a staff of nearly 400, the percentage of staff members who are members of Ham’s family would be only 1 to 2 percent.
Answers in Genesis is a member in good standing of the Winchester, Va. based Evangelical Council for Financial Accountability, she said, which provides accreditation to Christian non-profits that comply with “standards for financial accountability, transparency, fund-raising and board governance,” according to its Web site, www.ecfa.org.
Common Practice To Hire Family
As Etheridge said, it is common to see religious organizations, especially fundamentalist churches not affiliated with a denomination, hire the pastor’s family members to fulfill a variety of roles for the organization, said Marc Owens, former director of the IRS Exempt Organizations Division and now an attorney with the Washington firm Loeb & Loeb LLP.
There is no federal or state law that prohibits a non-profit CEO hiring his family members, he said, but the question for the IRS is whether the family members are receiving more compensation than they should for the work they are actually doing. Also, he added, family members could be receiving benefits that don’t show up on a W-2 form or on the Form 990, such as contracts for the provision of goods or other related-party transactions.
It’s legal for the CEO of a non-profit to employ family members, he said, but “they need to be volunteers or compensated at a rate commensurate with the work they are doing.”
However, Owens added, there’s also a best practices issue. The CEO has a fiduciary duty to put the organization first, not his family members. “When you see a large number of family members employed … it automatically raises a question as to whether those indeed are really the best qualified people for that particular position.”
Ideally, the CEO should not review the job performance of his family members. An independent board of directors should do that, he said, and if board members are doing business with the organization, most state attorney generals and the IRS would say they are not truly independent.
Doing Business With Board Members
According to its Form 990, during fiscal 2012-13, four of Answers in Genesis’ 12 board members were connected with companies that together did $2.7 million in transactions with Answers in Genesis.
Transactions like this with related parties are not illegal per se, Owens said, but they often arouse the curiosity of regulators because of the potential for overcharging. Non-profits can disguise compensation to board members by paying more than market rates for the services provided, he said.
“When you have a board engaged in what appears to be related-party transactions, it makes you wonder if there is an unstated agreement that everyone will approve each other’s deals,” he added.
Hiring CEO family members and doing business with related parties is “a high wire act” for non-profits, Owens said, that can be done but takes special care in documenting that the payments in question are reasonable.
The Evangelical Council for Financial Accountability puts it this way: “Certain related-party transactions may clearly be advantageous to, and in the economic benefit of, the organization. However, even if a transaction is economically beneficial to an organization, it may raise a public perception of questionable integrity or create a perception of self-dealing, and thus, should be avoided.”