Once again we’ve turned to our money man, John P, to help us dive into some interesting Scientology documents that have turned up in the Netherlands. Scientology is normally very secretive about its finances, but in a couple of countries, like Ireland and the Netherlands, local laws force them to open up their books. That gives us a rare chance to see how the local organizations are faring. And once again, the outlook is not good. In this case, the Scientology drug rehab center in Holland submitted its financial report for 2015, and we turned it over to John P…
A couple of weeks ago, I took a deep Global Capitalism HQ numbers dive into the 2013 and 2014 financial results of Narconon’s operation in the Netherlands. That Dutch organization has now filed its 2015 results, squeaking in just ahead of the July 1 deadline.
Caveat: In this assessment I’ve taken a very quick look at the numbers to see what’s changed since 2014. Note that I wrote this under tremendous time pressure in the car while between appointments, and I worked from memory of the 2014 numbers in several places. This is typical and accepted practice for a first cut on a set of financial results at Global Capitalism HQ, and the key is to get the direction of the argument correct even if the details are slightly off; I’m confident that I’ve done that here even if I’ve misremembered some of the 2014 numbers slightly.
Summary: The numbers for Narconon are not great but it is a significant improvement over 2014. The 2015 numbers are not the coup de grace that will finally put Narconon NL out of its misery after the utterly disastrous prior year, though the best that can be said about them is that the organization ground sideways and stanched the bleeding, coming somewhat close to break-even. It appears, however, that this is from some serious juggling of the expense numbers rather than any improvement in the overall health of the organization. We might refer to this strategy as “rearranging the deck chairs on the Titanic.”
Narconon NL only lost €10,000 versus more than €90,000 last year, and they did it without taking on additional long-term debt. It’ll take more time than I have right now to chase down how they managed to flush enough cost out of the operation to pull this off. A first glance at the numbers suggests that things are very “lumpy” in terms of how some of the line items compared with the same expense items in 2014, which is usually the sign of a desperate rush to try to clean up failing performance. That kind of a “lumpy” cleanup usually doesn’t augur well for future operations in my experience, as the clever tricks you use to get everything back in line usually blow up and make life harder in the next year or two. There’s a good chance we’ll see that in 2016 and 2017 if they don’t see revenue increase.
Revenue: Program-related revenue was up slightly to €72,000 versus €59,600; this could be just a function of getting, say, 4 victims instead of 3 during the year. Donations, however, are lower – perhaps because they go out and solicit just enough donations to keep the thing afloat for another year and get people to donate for other Scientology-related entities when they have enough donations to stanch the bleeding here. Scientology leader David Miscavige has to know that the global Narconon organization is in unstoppable decline, so there’s no real point to help one location have a blowout year given that it won’t ultimately save the organization.
One of the commenters to the previous detailed story suggested the donation line might be to help people write off the cost of “treatment” on their taxes. Tax deductibility for “rehab” is typically only of interest to Scientologists who consider that their “right” after the 1993 decision, and probably isn’t that material to some desperate parent with a kid who’s lying on the couch OD’ing.
Auditor’s notes: Usually, the auditors (the accounting kind, not the Scientology quack therapy kind) notes are a treasure trove of little nuggets. Here, I only had time to translate a little bit of it. Most importantly, the “going concern” note at the top of page 3 is different from last year’s and is somewhat bizarre: It acknowledges that the organization is in dire financial shape but says something to the effect of “but the general opinion is that Narconon must remain because they save so many lives, so we can continue to assume that we shouldn’t go out of business. Because of a multitude of smaller donors, we can continue to save many lives.” This is basically delusional… they “saved” not even a literal handful of people last year. Last year’s “going concern” note didn’t try to sugar coat the bad news with such a breezily optimistic statement.
Expenses: The “Housing costs” line which I initially suspected was a way of funneling money back to the cult by housing victims in Scientology members’ homes turned out (as an on-the-ground commenter in NL revealed) to be an outsourced stay in 3rd party detox at the beginning of the process, required by Dutch law. This line was substantially lower in 2015, €52,900 versus €72,300 last year. That savings is only about 1/4 of the amount by which losses went down between 2014 and 2015, so lower “housing” is not the sole contributor to lower losses. The lower “housing costs” line could be explained by a shorter average stay in detox for the 2015 patient base.
Staff costs were also lower (€10,700 versus €36,400 in 2014). That is a pretty significant reduction, especially since the notes say that they had 3 contractors working there in 2015 just as they did in 2014. Normally, labor costs for the same number of employees or contractors wouldn’t be expected to drop significantly, if at all. I continue to be suspicious that staff salaries at NN are a key avenue for funneling money to the cult, and this would certainly argue for that – they pay the staff whatever they think they can and the staff turns around and donates that to the cult via some other mechanism. The drop in salaries would thus be due to a decision on the part of management to try to demonstrate overall health instead of harvesting short-term cash out of Narconon NL.
Outright royalty payments (i.e., back to NN International) were €720, which is about 1 percent of program revenue versus the traditional 10 percent of program revenue that they reported last year. Waiving royalty payments is certainly “off policy” and appears to support the idea that Miscavige is trying to keep up appearances where warranted by not letting a Narconon center go out of business, instead of continuing to grab all the money as fast as he can and bring it back to International Reserves.
They’re managing cash flow by stiffing creditors. Accounts payable went from €87,700 last year to €108,800 in 2015. Basically, they owe trade creditors a year’s worth of revenue. We’d typically expect well-run companies to pay their bills within 60 days, so that number should be closer to €20,000. Those poor businesses who made the mistake of doing business with Narconon NL are going to end up getting stiffed for a lot of money when this thing finally implodes. I would have to believe that the detox center that they pay all those “housing costs” to would not let them slide for very long since they have some significant hard cash costs for delivering those detox services. One of the on-the-ground commenters for the original piece said that some of the businesses such as cleaning services were owned by Scientologists, so I’m going to guess that a significant chunk of the payables is owed to Scientologist-owned service businesses that won’t fight too hard to get paid if Narconon NL finally does go belly up and is liquidated.
— John P
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Bonus items from our tipsters
One reader, inspired by yesterday’s story about mail from Scientology, decided to show us what she did with the constant flow of unwanted mail that she was getting from the church.
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Posted by Tony Ortega on July 8, 2016 at 07:00
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