The money was supposed to go to support the California Family Council's charitable mission, instead, most of it went into the pockets of the organization's employees.

Since 2003, the public has given the Riverside, Calif.-based California Family Council (CFC) nearly $3 million to support charitable work that the organizations says "protects and fosters judeo-Christian principles in California's laws." But, according to its federal tax returns, little more than $500,000 of that money has gone to "program services," or expenses directly related to that charitable work.

In contrast, the CFC's top two employees, including its founder and executive director, Ron Prentice, were paid a total of $1.1 million over four years. The CFC's other employees earned a total of $900,000 in compensation -- bringing the total spent on employees at the Council to about $2 million since it began in 2003.


To meet financial accountability standards, watchdog groups like the Better Business Bureau's Wise Giving Alliance say at least 65 percent of a tax-exempt organization's expenses, or most of the money it spends, should go to program services.

The CFC's tax returns, however, show the opposite: the Council's employees have received about 70 percent of the money the organization has spent over the last four years and only about 18 percent has gone to program services.

In its first two years, the CFC reported spending nothing on program services, despite receiving approximately $1.6 million in donations.

See a year-by-year breakdown of the CFC's income and expenses.

(The two percentages above overlap slightly, as the the CFC has listed nearly $250,000 in employee compensation (an amount equal to about two year's salary for Mr. Henderson) as program services on its last two tax returns. If employee compensation is removed from the numbers, the Council's program service expenses drop to about 12 percent of its total spending.)

"The ratios are terribly wacky," Dr. William Crookston, an expert in business management and nonprofit organizations at USC, said in an email.

He noted that the six figure salaries that Mr. Prentice and Mr. Henderson draw are high for the amount of money the CFC has received, particularly for an organization that's just a few years old.

Mr. Prentice's last listed salary, for example, is about $100,000 more when benefits are included than he earned at his previous job as a vice president at Focus on the Family in Colorado Springs. At the CFC, he now earns an average of $60,000 to $70,000 more than his former bosses at Focus -- an organization that received $144 million in donations in 2007.

Gene Takagi, an attorney who specializes in nonprofit organizations and who writes the Nonprofit Law Blog, said the legal intricacies of nonprofit finances are complex. He pointed to an article he wrote in the American Bar Association's The Practical Lawyer on nonprofit governance.

In the article, he warns that "(a)n organization that engages in an inurement transaction (such as paying an unreasonable compensation to an insider) may face revocation of its exempt status" and that nonprofits have to show that they are working to benefit public interests, not private ones.

Mr. Prentice didn't respond to questions about the CFC's finances nor did he acknowledge a request for the organization's audited financial statements. Questions about the organization's governing board, which appears from its tax returns to be made up of only Mr. Prentice and Mr. Henderson, also went unanswered.

Both the Wise Giving Alliance and the Evangelical Council for Financial Accountability say a tax-exempt organization's governing board should be comprised mostly of unpaid volunteers to avoid a conflict of interest. And though tax-exempt organizations are required to disclose the names of their board members to the public even if they aren't paid, the CFC only lists Mr. Prentice and sometimes Mr. Henderson, its highest paid employees, in the sections for officers, directors and trustees on its tax returns.

Again, questions about the makeup of the CFC's governing board went unanswered, but if its tax returns are accurate and complete, that would place Mr. Prentice and Mr. Henderson in complete control of the CFC, indicating that they likely set their own, six-figure salaries.

Mr. Prentice, a former marriage and family therapist from San Diego, is also president of California Renewal, a nonprofit that controls Protectmarriage.com.

Protectmarriage.com is a ballot measure committee supporting proposition 8, a constitutional amendment that would take away the right of gay and lesbian couples to marry in California.

Currently, however, California Renewal is suspended from doing business in the state for failing to pay several years' worth of franchise taxes.

In an email, Andrew Pugno, California Renewal's attorney, said he doesn't feel clearing the suspension is a high priority and insisted that California Renewal is tax exempt and doesn't owe the state any money.

"I hope you understand I am extremely busy and don't have much time to deal with this other than wait for the (franchise tax board) to contact me to let me know if anything else is required to revive," Pugno said in an email.

He also promised to provide documentation of California Renewal's tax exempt status, but failed to do so.

It became clear, however, that Pugno had confused California Renewal with the California Family Alliance, another nonprofit run by Ron Prentice that has also been suspended.

According to the Secretary of State's office, the California Family Alliance, formerly known as the Committee on Moral Concerns and listed on the CFC's tax returns as an asset worth about $20,000, failed to file an annual information return for tax exempt organizations.

Mr. Pugno said he doesn't know what the California Family Alliance does but that all required forms have since been filed with the secretary of state. He blamed the suspension on a clerical error and a mix-up with the Post Office that he says has now been corrected.

The secretary of state's office, said however, that if the proper forms were filed the suspension would've been lifted immediately.

And despite the suspension of California Renewal, Mr. Prentice and the organization have continued to operate Protectmarriage.com, raising legal questions that experts don't have answers to.

"There's nothing within the political reform act that would address that issue," Roman Porter, executive director of the Fair Political Practices Commission, said.

Still, even though state law is silent on the issue, Daniel Lowenstein, a UCLA law professor who helped write the political reform act and was the first chairman of the FPPC, said he didn't believe the state could stop an organization like California Renewal from running a ballot measure committee--even if its corporate rights and powers have been suspended.

But he added that "It doesn't look good politically. You've got a committee being sponsored by a business that's involved in what amounts to a pretty shady situation, not paying its taxes."
 
Mr. Pugno said they believe they've done everything they're supposed to to keep Mr. Prentice's nonprofits compliant with the law, but, again, doesn't think the supensions are a high priority.

The state sees things differently, though, according to John Barrett, a spokesman for the tax board.

"Their number one job right now should be setting things right with the state of California," he said.


(disclosure: During my interview with Lowenstein, he failed to mention that he had donated money in June to another ballot measure committee, unaffiliated with Protectmarriage.com, but that nonetheless supports proposition 8.)

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