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On the Corporate Governance of the SGI-USA

The purpose of this page is to provide general information about the legal status and financial management of the corporation Soka Gakkai International-USA (“SGI-USA”).

The corporation employs full- and part-time staff to carry out the many different tasks needed to support the growth and health of the SGI-USA organization and its activities, which are familiar to most members from participating in discussion meetings and reading our publications. These activities include developing national study materials and programs; acquiring and maintaining facilities; publishing the World Tribune newspaper and Living Buddhism magazine together with books and other materials about Nichiren Buddhism and the Soka Gakkai; collecting and administering contributions from the members, and many others.

The SGI-USA corporation was established in California under that state’s Nonprofit Religious Corporation Law and is an exempt church organization under Section 501(c)(3) of the Internal Revenue Code, having received its exemption notice from the Internal Revenue Service in 1968. Section 501(c)(3) grants tax-exempt status to groups “organized and operated exclusively for religious, charitable, scientific and educational purposes.” As such, all of SGI-USA’s assets (cash, equipment, real estate, etc.) are irrevocably dedicated to its religious purposes and all contributions are tax-deductible to the donor.

Exemption under Section 501(c)(3) of the Internal Revenue Code provides two advantages: 1) the income of the organization is not subject to Federal income tax; and 2) contributions to it are tax-deductible expenses for the donors.

The SGI-USA functions as a church within the definition of American law. Churches and their related facilities are usually exempt from local property taxes. Some states also exempt churches from the requirement to pay or collect sales taxes.

There are several conditions attached to this granting of tax-exempt status. None of the assets of the organization may benefit any private individual. Another condition is that none of the assets of the organization may be used “on behalf of or in opposition to any candidate for public office.” It may provide information to its membership concerning issues and the stands taken by various candidates on them, but it cannot as an organization urge the election or defeat of a particular candidate.

The SGI-USA provides support to its members in their efforts to practice and propagate Nichiren Buddhism and the humanistic philosophy of the Soka Gakkai International. It has clearly defined sources of income and expenses. The overwhelming majority of its revenue comes from direct contributions by members.

All contributions, regardless of timing or location, are used for SGI USA’s religious purposes: to support the faith and practice of SGI-USA members and promote the propagation of Nichiren Buddhism and the SGI philosophy throughout the United States.

The SGI-USA’s revenue is derived from the following sources:

• Contributions (including those given during the May Commemorative Contribution period, at World Peace Prayer meetings, or mailed in during the course of a year);
• Subscriptions to our periodicals—World Tribune, Living Buddhism and Esperanza —and bookstore sales;
• Fees for participation in conferences (primarily those held at the Florida Nature and Culture Center) and larger events; and
• Other sources, including investment income.

Revenue for 2006 is shown by source in the pie chart below.

No contributions are made by the SGI-USA to SGI organizations in other countries.

Funds are used in the following ways:

• Programs and Activities: Support of member activities at the local and national level. Included in this category are:
  - Expenses related to larger meetings held at SGI-USA or third-party facilities, the creation of promotional materials, transportation, travel, and related expense;
  - Touring exhibits. In 2006, for example, funds were used to promote and support the Victory over Violence, Children are the Future, Building a Culture of Peace, and Gandhi-King-Ikeda exhibits in support of our movement for peace, culture and education.
  - Expenses related to the ongoing Buddhist Learning Review program, the Leadership Development Program, videos and DVDs, and many others,
  - Costs of creating and editing books and publications such as the World Tribune, Living Buddhism, and Esperanza.
  - Personnel-related expenses for staff to support programs and activities, as well as related travel.
  - Relief efforts in support of members who have been affected by natural disasters.
   
• Facilities: The SGI-USA currently owns or leases more than 90 facilities throughout the country exclusively for the use of its members. Included in this category are:
  - Capital expenditures for purchase, renovation and repair of new or existing
  facilities;
  - Rent for facilities used by members throughout the country;
  - Maintenance and repair of all facilities; and
  - Expenses for personnel and travel to support the facilities program.
  
  In 2006, significant capital expenditures were ongoing improvements and post-hurricane repairs at the Florida Nature and Culture Center, the San Francisco Culture Center, and the construction of the new Washington D.C. Culture Center (please go to www.sgi-usa-washingtondc.org to get an
  update on this project). In 2006, the SGI-USA also opened 3 new activity centers for the use of the members at various locations around the country.
• Administration: This includes expenses related to the purchase of office supplies and equipment, insurance, accounting, legal, and advisory expenses, and related personnel and travel.
• Long-term Savings: The SGI-USA has placed a high priority on building a long-term savings program that can be used to support our kosen-rufu activities far into the future. A substantial portion of contribution income is set aside and invested in a diversified portfolio of securities based on the advice of top-tier, established investment professionals.
  
• Fundraising: SGI-USA does not use third-party media, specialized fundraising organizations, or other such techniques to promote contributions from its membership. Instead, such activities are conducted based on person-to-person dialogue, individual encouragement, and study of Buddhist concepts related to the spirit of contribution (please click here for more on this topic). Fundraising expenses are incurred by SGI-USA for printing receipts and envelopes, purchasing of acknowledgment gifts for contributors (photographs, calendars, etc.), database administration, postage and related travel.
  
  During 2006, SGI-USA’s fundraising expenses accounted for less than one percent of total contributions received from member donations, and less than one percent of total functional expenses. This one-percent fundraising expense ratio is far less than the 35 percent benchmark contained in the Standards for Charity Accountability established by the Better Business Bureau’s Wise Giving Alliance (www.give.org).
  

A pie chart showing fund usage by category in 2006 follows.

Below are responses to some frequently asked questions:

• What is the purpose of an audit? Who are the SGI-USA’s auditors?
  An independent audit of the SGI-USA at every level of financial management is conducted annually. The purpose is to prevent fraud or abuse and give confidence to all contributors that their funds are being used for the intended purpose.

  The firm of Moss-Adams LLP, one of the leading accounting and auditing firms on the West Coast, currently serves as the auditor of the SGI-USA. Moss-Adams was selected after an exhaustive screening process based on that firm’s reputation for integrity, independence and experience in auditing not for-profit organizations.

Moss-Adams gave an unqualified opinion as a result of their audit of the SGI-USA that the organization’s 2006 financial statements were in conformity with Generally Accepted
Accounting Principles in the U.S. and accurately reflect its financial condition.

• What is the function of the SGI-USA Board of Directors? Who are the current directors?

The primary functions of SGI-USA’s Board of Directors are to oversee the operations of the corporation, establish policies with respect to those operations, and review its
financial statements and internal controls.

The Board of Directors is composed of nine members (please click here for more information on the individual directors). All directors are long-term SGI-USA members who bring a variety of professional expertise to their fiduciary responsibilities. The SGI-USA General Director is a member of the Board of Directors.

Directors receive no compensation for their service on the Board.

• What is the relationship between the SGI-USA and Soka University of America?

Soka University of America and SGI-USA are separate and independent legal entities.