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But ECFA also said it had found no evidence that "the deficiencies were willful on the part of the ministry" or that "the ministry's effectiveness or outreach had been compromised." Nelson characterized CRI's actions as "naïve."

The ECFA said in mid-June that CRI had become compliant with ECFA standards, but that the compliance review remained open. It said CRI had provided "significant reimbursement for certain disbursements that could not be clearly substantiated as having a ministry-related purpose."

Neither CRI nor the ECFA would provide details on repayments to CRI. Hubbard, Williams, and Scott, however, produced receipts from last year that may illustrate some of the problems:

1. CRI paid Kathy Hanegraaff, Hank's wife, $3,141 for miscellaneous personal expenses.
   
   
2. The ministry paid nearly $8,000 in flooring for Hanegraaff's home office.
   
   
3. CRI paid two months of dues, totaling $3,100, at the country club in the gated community of Coto de Caza, where the Hanegraaffs and their nine children live.
   
   
4. CRI paid for Hank Hanegraaff's vitamins and for flowers he sent to his mother.
   
   
5. The ministry paid maintenance bills for Hanegraaff's children's computers in the amounts of $400, $300 (twice), and $200.
   
   

Paul Young, CRI's executive vice president and a board member, declined to comment on the misuse of tax-exempt money.

Employees were also concerned about Hanegraaff's salary. According to publicly available financial disclosure forms, CRI paid Hank Hanegraaff $251,886 in 2001 (the most recent year for which statistics are available). This represents an increase of $52,886 (26.5%) over the previous year. Kathy Hanegraaff received a salary of $87,600 as CRI's director of planning.

Young, who keeps the ministry's books and earned $130,475 in 2001, told CT he could not remember the amount of Hanegraaff's raise.

The ECFA announced in June that CRI had implemented stronger internal controls to track spending. Formerly, the five-member CRI board wasn't adequately monitoring spending, Nelson said. The current board includes Hank Hanegraaff (the board's president), Young, longtime board member Everett Jacobson, Lewis Neely, and Chuck Merritt.

The ECFA said, "CRI is actively seeking to increase the size of its Board, as well as the diversity of professional disciplines represented on the Board."

Nelson declined to provide specifics concerning transactions involving potential conflicts of interest with related parties. But he acknowledged ECFA looked into the actions of Chuck Merritt, who has been an unpaid member of the board since 1999.

Merritt was senior vice president at Dallas-based KMA Communications, responsible for overall business development. Financial disclosure documents show that in the past three years, CRI paid KMA $868,811 for development and fundraising services, including $386,943 in 2001. In June, ECFA decided the Merritt connection was not a conflict of interest, because in "recent months" Merritt had changed his status with KMA, becoming a consultant, Nelson said.

But Michael Barrick, spokesman for Wall Watchers, a ministry monitoring agency, said the board link between CRI and KMA at least gives the "appearance of impropriety."

"They're spending 19 percent of their income on fundraising, where the industry average is 7 percent," Barrick said. "That does raise a question in my mind regarding that KMA connection."

Merritt declined to comment.

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August 2003, Vol. 47, No. 8