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DOCUMENT TITLE: Church of Scientology "CST"--Fiscal Year End 1987 Tax Work Planning Memo
SUBJECT: Fiscal Year 1987 tax planning for the corporation known as "Church of Spiritual Technology" (CST)
PARTIES: CST; Accounting firm Grant Thornton LLP; Gerald Engel, Managing Partner of Grant Thornton; Michael Smith, Manager of Grant Thornton; Sherman Lenske, Stephen Lenske, and Lawrence Heller, Special Directors of CST (not named in document); Lyman Spurlock, President/Director of CST; Nancy O'Meara, Treasurer/Director of CST; Dan Przybylski, Vice President/Director of CST; Leo Johnson, Secretary of CST; Terri Gamboa, Marion Meisler, and George Wilhere, Trustees of CST; Monique Yingling, Legal Counsel of CST
BACKGROUND AND NOTES
This 11 November 1987 document lists the Officers, Directors and Trustees for CST, while omitting the most powerful people in the organization, the Special Directors.
It also identifies Washington, D.C. attorney Monique Yingling as "legal counsel" for CST. Yingling later signs the IRS Closing Agreement with power of attorney (POA) for CST.
The accounting firm the document is from is Grant Thornton LLP, a Canadian organization with international offices. The office that this was most likely created in is the office at Suite 800, 18300 Von Karman Avenue, Irvine California 92612. This is the closest office to the Twin Peaks and San Bernardino, California locations of CST mentioned in the document.
This is the only known document in which a San Bernardino mailing address is listed for CST: 314 West Fifth St. Suite 1, San Bernardino, CA 92401.
Some of the language of this document reflects the false public relations front that CST and IRS have held up to the general and Scientology public that CST is nothing more than some innocuous and low key "archival" operation, designed to hide the fact that IRS's Meade Emory had set CST up specifically to own and control all of Scientology. But of particular interest is the statement in the fifth paragraph that a portion of the storage function of CST is "HIGHLY CONFIDENTIAL" and known only by "a select small goup of scientologists [sic]."
The "on Highway 189, one-quarter mile after the junction with Highway 18" location is Twin Peaks, California, not far from Lake Arrowhead in the San Bernardino mountains.
November 11, 1987
To: Gerald Engel, Managing Partner From: Michael Smith - Manager
Client: Church of Scientology "CST"
Subject: Fiscal Year End 1987 Tax Work Planning Memo
The Church of Spiritual Technology (CST) is the scientology
organization whose purpose is to preserve all scientology
materials that were written by L. Ron Hubbard (LRH), the founder
of the scientology religion. In addition, CST has options from
the Religious Technology Center (RTC) on the scientology
CST has two functions as follows:
1) Recording all original LRH documents to ensure their
2) To store such documents and recordings to preserve them for
A portion of second function discussed above is of a HIGHLY
CONFIDENTIAL nature and is only known by a select small group of
scientologists (nor is it made known to the general public). DUE
TO THE CONFIDENTIALITY OF THE MATTER, IT SHOULD NOT BE DISCUSSED
IN GENERAL DURING OUR ENGAGEMENT, ASIDE FROM THE CST OFFICES.
CST is located on Highway 189, one-quarter mile after the
junction with Highway 18. CST's mailing address is 314 West
Fifth St. Suite 1, San Bernardino, CA 92401. Total assets as of
April 30, 1986 (fiscal year end) were approximately $24,000,000
with total fiscal 1986 revenue of approximately $3,700,000.
Ellen Reynolds - Office of Special Affairs International
Nancy O'Meara - CST
(213) 669-8465 (Los Angeles)
(714) 338-7197 (Local - Twin Peaks, Area)
Lyman Spurlock - President/Director
Nancy O'Meara - Treasurer/Director
Dan Przybylski - Vice President/Director
Leo Johnson - Secretary
Terri Gamboa - Trustee
Marion Meisler - Trustee
George Wilhere - Trustee
ZUCKERT, SCOUTT, RASENBERGER AND JOHNSON
888 17th Street N.W.
Washington D.C. 20006-3959
PROCEDURES TO BE PERFORMED (handwritten circle-1 PRIMARILY)
The entity utilizesund accounting with a single entry system,
on a cash basis. (Flow charts are located in the permanent
file). Income is (circle-1) derived from (crossed out--a contractual agreement with)
Religious Technology Center (RTC) by which CST receives 90% of
RTC's licensing fees. Aside from research expenses and the
purchase of fixed assets, CST has only modest operating expenses.
A questionnaire will be completed during an interview with one of
the officers of the organization. The questionnaire covers the
specific questions normally asked in the 990 tax return as well
as other general questions. The officer to be interviewed will be
selected by the manager.
accounts and obtain:
as well as savings
and CD accounts
in the U.S. and
The entity utilizes six checking accounts. Obtain the
reconciliation for April 1987 (fiscal year end) and review the
reconciliation procedures. Agree the balance per the bank
statement to the reconciliation as well as any transfers between
accounts. In addition, the entity maintains several time
certificates of deposit. Verify their existence at year end [handwritten--by
comparing to bank statements. (illegible)
The reconciliations at (illegible) to (illegible) (represent?)
During fiscal 1987, CST made significant renovations to its Twin
Peaks location (Mile High) as well as making significant
expenditures on a document storage facility. Documentation
should be reviewd and copies retained for our workpapers on
these transactions (if deemed necessary). [handwritten 32?? - 322? (illegible)]
Other fixed asset additions will be judgementally reviewed
depending on significance of activity. (handwritten--not considered significant)
At April 30, 1986, CST had no major liabilities. (handwritten--No Liab
All revenue is recorded on income invoices and deposited on (handwritten at least) a
weekly basis. Deposits are made in full with no cash retained.
Revenue summaries are maintained on a monthly basis.
Judgmentally select two months for detail testing as follows:
a. Foot quarterly and agree to annual summary.
b. Invoices are grouped by income category and in numerical
sequence. Foot category batches and agree to the monthly
summary. Review numerical sequence batch for continuance of
sequence, verify to invoice number log, and the prior
month's ending and next month's beginning invoice numbers.
(If this cannot be done then foot the numerical sequence
batches and agree total to the total of the category
(handwritten to left of previous para--footing? par? format?)
c. Scan individual invoices for proper category classification
and relationship to entity's tax-exempt status.
d. Agree quarterly revenue to the "Gross Monies Banked"
schedules. Trace the quarter's deposits from this schedule
to the bank statement. Any other deposits noted on the bank
statements and not on the schedule should be further
e. Select and summarize the 5 largest dollar categories and
agree the total to the annual summary.
f. Agree annual summary to (P/L crossed out, to I/E) working papers and combining
g. Agree (P/L to I/E) working papers to 990 tax return.
h. Agree RTC donations received during the quarter (90% of RTC
licensing fees) to appropriate documentation. (handwritten illegible done
on Annual Basis)
CST received rental income from two leases maintained on two of
the land parcels. The income is for grazing rights leased to
ranchers until the land is put to its ultimate Scientology
purpose of preserving scientology archives for future generations
as discussed earlier. As this is passive income and no
acquisition indebtedness was incurred, it has been determined
during the prior years that it is NOT unrelated business income.
1. All disbursements are recorded on disbursement vouchers.
Vouchers are grouped first by bank account number and sub-
grouped by expense category.
Disbursements are summarized on a (handwritten monthly +) quarterly basis by
checking account. Judgmentally select two months for detail
testing as follows:
a. Foot quarterly summary and agree to annual summary.
b. Foot category batches and agree to monthly summary.
Review numerical sequence batch for continuance of
sequence, verify to disbursement number log, and to
the prior month's ending and the next month's
beginning voucher numbers. (if this cannot be done
then foot the numerical sequence batches and agree the
total to the total of category batches.)
(handwritten in left margin of previous para--Footing Performing?)
c. Scan individual vouchers for proper category
classification and relationship to entity's tax-exempt
d. Select and summarize the 5 largest dollar categories
and agree to the annual summary.
e. Agree annual summary to (P/L to I/E) working papers.
f. Agre (P/L to I/E) working papers to 990 tax return.
g. Obtain a sample of a voucher for workpaper retention.
2. We will also trace a sample of expenditures to the original
source documents. The sample size will be determined by the
manager based on the number of checks utilized by the entity
during the year. The samples will be randomly selected and
judgmentally selected per review of the check register. The
following procedures will be applied to the sample:
a. Agree to disbursement voucher.
b. Agree to purchase order.
c. Agree to vendor invoice or other supporting
d. Agree signature to authorized signatory.
e. Agree endorsement to payee.
f. Review for reasonableness of expense category.
3. Obtain copies of quarterly payroll returns #941E and agree
total annual amount reported to the total annual salary
expense being reported on the 990 tax return.
GRANT THORNTON WORKPAPER TERMINOLOGY
Throughout these tax preparation supporting documents and
schedules various words are used such as: traced, agreed,
vouched, observed, reviewed and tested. In using these words and
others, we do not imply that the procedures applied are a part of
an audit. No audit is intended by or will result from the work
performed. The objective of the procedure is to familiarize
ourselves with the operations of the organization, not to enable
us to render any opinion or give limited assurance thereon.
ADDITION TO REVENUE PROCEDURES
For transfers within the CST accounts,
agree to deposit on bank statement
of CST & to withdrawal on
the transferring accounts bank statement
for all transfers for the months selected
for revenue testing 6012 + 60illegible)
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