Sunday, November 12, 2006

New Covenant's $1 Million Problem

I've spent the last week or so dealing with the discovery that over $1 million in funds donated by church members to the PCUSA's special offerings were not forwarded by New Covenant Presbytery, but were diverted to pay for mission projects of the presbytery by the director of financial affairs for the last 3 years. I can blog about it now because a press release on the situation was sent to the PCUSA and to the Presbyterian Outlook--you can read the Outlook's report here.

The money given to the special offerings (Christmas Joy Offering, Peacemaking Offering, One Great Hour of Sharing, etc) is sent to the presbytery from the churches and then presbytery forwards it to the denomination for distribution to the agencies and groups that benefit from the offerings. They are essentially funds held in trust by the presbytery and passed on--the money should never have been used to pay any obligations of the presbytery. There was no authorization for this and the employment of the director of financial affairs was terminated.

An interim director should be in place this week and last week additional financial control procedures were instituted to make sure this situation cannot be repeated in the future. New Covenant has had annual audits by an independent accounting firm that did not discover this unauthorized diversion of funds. Apparently the auditors didn't understand that these funds were supposed to be passed on to the PCUSA and should not have been applied to presbytery obligations. Curiously, the GA offices never asked why the offerings had not been forwarded--and New Covenant is one of the largest presbyteries in the country.

The only explanation offered so far is that the former director of financial affairs started using the funds to cover short-term cash flow problems and then the numbers mushroomed into a never-ending cycle of robbing Peter (the PCUSA special offerings) to pay Paul (New Covenant). While the investigation into the situation is still ongoing, there is no evidence so far that the former director personally benefited from these unauthorized actions.

This coming Saturday there will be more discussion at the regular meeting of presbytery. I won't be there because I am attending the Moderator's Conference in Louisville. At this time, I am the "Moderator elect-elect" and don't have a role in the meeting, but in 2007 when I chair the General Council I will be dealing with the after-shocks of this revelation.

Our Vision 2010 which involved plans to grow more disciples and churches in New Covenant is threatened. There were already discussions about the need to develop a long term strategy to address the cash flow and budget deficit problems of the presbytery, which now will begin in earnest. Not only must we find a way to pay back the $1 million owed for the special offerings, but we will have to cut back on the items that we thought we could afford but were being paid for by the special offerings rather than by presbytery's money.

I'm praying that in the long run good will come out of this million dollar problem: that the churches will agree on and support a plan for repayment that will allow presbytery to pursue its vision and purpose; that the presbytery will establish better financial control procedures; that the presbytery will focus on and perform its essential functions well and that the churches will cooperate with each other and with presbytery to do the "nice to do" functions that foster mission, connectionalism and community.


Songbird said...

Oh, wow. You will have your work cut out for you. But they couldn't have called on a more upright and steadfast person to be in the role you will play over the next few years. I'm glad they have you!

Becky Ardell Downs said...

QG, I'm so sorry to hear about this. What a complete mess. But I'm also glad you'll be there to help deal with it-- I know you'll handle everything with grace and integrity.

Anonymous said...

Ouch! What a mess...

At least you can be thankful that your presbytery HAS a vision for the future.

Our presbytery has a future, but it would best be described as Vision 1910. :)

Purechristianithink said...

QG--I read about this on the web and figured you must be in the thick of it. What a mess. Sounds like the Presbytery's Financial Affairs person did not want to have to be the bringer of bad financial news--always a "downer"--and so figured out a way not to have to do that. I know next to nothing about New Covenant Presbytery, but I guess the question I would be asking is this: Was this a personality thing with the Financial Affairs person, or is there something about the culture of that Presbyetery that discourages reporting of "bad news"--that subtly signals,"We don't want to hear about things that aren't successful, growing, healthy, etc."?

Presbyterian Gal said...

My prayers will be with you in handling this mess. I have one thought for you, having worked in money business for a few years: Part of the fallout will likely be angry congregants who will decide to withhold giving to special offerings. An explanation that might help promote healing is this: The person who did this was fired immediately. The accounting firm is a business and not a Christian organization. They are better trained now than they were before. And most important, the basic structure of your presbytery shows honesty and integrity in conducting the church's business by the openness is divulging the problem once discovered. (and you might want to publish quarterly or bi annual audit reports to the members for the next couple years)

will spotts said...

I can't speculate on people's motivations, but this is a very disheartening development. This is a certainly a mess, but at least they have you to help sort it out. Personally, I think if you are upfront about the situation, congregations will be understanding for the most part (after the predictable initial shock, disappointment, and anger). I think Presbyteiran Gal's suggestion of publishing quarterly or bi annual audit reports would be a good idea.

At least the person doesn't appear to have personally profited from this.

the tentmaker said...

Auditors are supposed to review your policies and procedures and use those documents to determine if the funds have been appropriately applied.

Are your policies and procedures written down and up to date? If not, that ought to be a major order of buisness.

Sorry to hear about this. My prayers are with you as you try to sort it all out and guide the presbytery through a tough time of healing.

God bless,


Quotidian Grace said...

Thanks, everyone, for the prayers, support and suggestions.

We are working on new policies and procedures and have educated the new auditing firm about our financial statements. There is definitely work to be done in this area. We're also going to encourage more questioning and reporting to all committees of presbytery and are working on making sure that accounting for all funds is consolidated in one place so there are no more "sugar bowl" accounts that aren't included in the operating statement.

Our largest congregations have been very supportive and are stepping up to the plate with financial commitments that will keep our new church developments going. So far there have been few recriminations or anger. The presbytery meeting Saturday will allow folks to ask questions and get all the information that we have then.

I'm confident we can work out a way to repay the special offerings without abandoning our efforts to grow disciples and churches. I think that is what the churches will want us to do.

Gannet Girl said...

Many prayers for all of you. I have a feeling that your Presbytery is going to be forever grateful to have named you as Moderator. If anyone can provide graceful leadership toward resolving this mess, it will be you.

revabi said...

Wow what a mess. Hope it gets cleared up and that there is healing. How awful to step into this as the elect moderator or something like that. Prayers for all concerned.

jean said...

I don't envy you or anyone else the task of sorting out this mess. I'm praying.