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The need for financial transparency at the Orthodox Union

As the Orthodox Union expands its role, it must make crystal clear that all its dealings are kosher
Illustrative: Director of the Orthodox Union's Advocacy Center Nathan Diament speaks at a press conference on the Religious Freedom Restoration Act, July 16, 2014. (Courtesy)
Illustrative: Director of the Orthodox Union's Advocacy Center Nathan Diament speaks at a press conference on the Religious Freedom Restoration Act, July 16, 2014. (Courtesy)

As questions continue to swirl over public accountability regarding recent political activity and decisions by the Orthodox Union, another issue must be addressed as well:

The surprising lack of financial transparency at the organization.

The OU is classified as a 501(c)(3) “religious organization” which means it is both exempt from paying taxes on its revenue and donors may deduct their contributions from their personal income taxes.

But the OU also benefits from a less well known tax and regulatory advantage for some religious nonprofit institutions, 26 USC 6033, which exempts “churches, their integrated auxiliaries, and conventions or associations of churches” from requirements to file Form 990 with the IRS. This is the form which contains important and detailed financial information that both the government and the general public can use to ensure that nonprofit organizations are acting in accordance with their mission and with sound financial practices. It was filings on these forms that contributed to the investigations of financial misconduct at high profile nonprofit organizations like the Wounded Warrior Project and the Red Cross.

While the OU does release an annual impact statement, the financial information in the report is barely more than basic pie graphs detailing broad categories of revenues and expenses. The annually published impact statements lack the detailed financial transparency of the Form 990, which would also include a much more specific description of expenses, a detailed accounting of revenue sources, the salaries of board members and executive officers, the cost of office and fundraising expenses, expenses for conferences, and the budget allocated for general staff salaries and overhead.

There is a long history of exempting religious organizations from the detailed financial filings with which other nonprofit organizations must comply. While Congress has attempted to amend the law on a number of occasions, most notably after a series of scandals at Evangelical mega-churches in the 1980s, it has continued to maintain this reporting exemption for religious groups “in view of the traditional separation of church and state.”

But even if the OU is not legally obligated to report detailed financial information to the government, there is still nothing that would preclude the organization from voluntarily disclosing the information that would normally be included on a Form 990.

The need for the OU to be more open with its revenue sources is even more important now that the organization operates, effectively, like a for-profit corporation. It has divisions dedicated to publishing books, dozens of international summer camps, and its flagship kashrut division. It likely generates millions upon millions of dollars from these revenue sources, and yet still asks for donations to fund its programs. But unlike the private companies or other nonprofit organizations that provide similar services, the OU both claims to represent the broader community while also maintaining a level of financial secrecy. It is able to remain private, benefit from certain tax and legal exemptions, all while claiming to “lead the Orthodox Jewish community” without fully informing the community of its operating budget.

This problem has only become more exacerbated as the OU moves from its traditional role as an internal regulatory service of religious Jewish life in the United States, to one that has made messy and complex alliances with national politicians and other religious organizations. Deciding exactly what is considered kosher, or basic political advocacy for more state-level funding for school busses and security for yeshivot, is much different than taking a position on the exact doctrinal boundaries of the First Amendment.

The OU itself does not even conform with how it encourages its affiliated synagogues to be financially transparent with parishioners. The OU website provides template by-laws that include provisions encouraging financial accountability. But there does not appear to be any similar publicly available information provided by the OU beyond the broad explanations found in the annual report.

None of this is to say that the OU should lose its general 501(c)(3) non-profit status, that its directors are misusing or embezzling funds, or even that the OU should refrain from entering the national stage.

But as the OU continues to become more vocal in the national political arena, especially in areas where there is bound to be far less uniformity of opinion (questions of religious liberty and government regulations, associations with certain political actors, or Conservative opposition to the OU’s stance on gun control) there is an ever greater need for financial transparency and accountability. Only then can members of the Orthodox Jewish community at-large continue to ensure that the body which claims to represent them and their interests is acting responsibly.

About the Author
Zack is a graduate of Columbia Law School. He has previously written for: NBC News,Tablet Magazine, and theSkimm. He can be reached at: zacharyschrieber@gmail.com
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