The draft of the Orthodox Church in America’s financial statements and independent auditor’s report for the year ending December 31, 2006 was released on Monday, June 25, 2007.
A PDF of the draft is posted on the OCA web site at www.oca.org/PDF/finances/draftoca2006v0625.pdf.
A financial update statement by the Very Rev. Paul Kucynda, OCA acting treasurer, the full text of which appears below, accompanies the draft.
“The 2006 financial statements of the Church have been audited by Lambrides Lamos Moulthrop, LLP. Today, we are releasing a draft of the audited financial statements. We do not anticipate any significant changes in the final numbers. Except for two significant issues, the independent auditor’s opinion is that the financial statements referred to in the first paragraph present fairly, in all material respects, the financial position of Orthodox Church in America as of December 31, 2006, and the changes in its net assets and its cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America.
“At the November 2005 meeting of the Metropolitan Council, His Beatitude, Metropolitan Herman proposed that independent audits of the Church’s financial records for years 2004 and 2005 be undertaken. Lambrides was engaged in January 2006 to do this work. Their task was hampered due to the lack of significant documentation required to do the independent audits. It is important to remember that from 1999 to 2005, only compilation reports were available. Lambrides was also engaged at the request of the Holy Synod to review the supporting documentation for the annual and special appeals income and expenses for the years from 2001 to 2005.
“There are two significant issues that remain to be addressed:
- “Funds - Designated appeals and contributions to endowment funds.
- “For several years, many thousands of dollars of disbursements were made from designated appeals without adequate documentation to substantiate that the expenses were consistent with the purpose publicized in the appeal.
- “Some funds received by the Church were not deposited in accounts on the books of the church. Some of these funds may have been purpose restricted.
- “Although we have not been provided any specific documentary support, there may have been some contributions intended for the endowment fund that were not deposited in Church accounts.
- “Since the issues have not been resolved, the ‘Net Assets’ on the report are combined as one total. When we resolve these issues, the net assets will be separated to reflect unrestricted, temporarily restricted and permanently restricted net assets in accordance with not for profit generally accepted accounting principles.
“Alaska properties - The ownership of certain properties in Alaska has not been resolved.
“We have initiated an investigative process to determine the amount of restricted funds that were not disbursed in accordance with the intended purpose. Our objective is to honor the donors’ intent and comply with appropriate laws and regulations. This may take some time to resolve.
“We are also seeking any information regarding endowments or trusts that may not have been funded properly. Although we have not been provided any such information, we assure you that we will follow the donors’ intent and any applicable laws or regulations related to endowment and trust funds.
“Together with the Metropolitan Council, we will continue to work toward a resolution of the Alaskan properties issue.
“We have not achieved the objective of resolving these issues, but we have achieved the objective of providing audited financial statements for the year 2006.
“Supplemental information regarding the 2006 audited financial statements:
- “1. Cash and cash equivalents.
- “a. We have cash on hand at 12/31/06 to fund the outstanding restricted amounts financed by the Honesdale loan and to fund the other purpose restricted contributions / appeals.
- “b. We do not have sufficient cash to fund the significant amount of prior year disbursements that may not have been expended in accordance with donor intent.
- “a. The endowment investments are sufficient to cover the endowment fund (permanently restricted original gift) plus any temporarily restricted funding requirements.
- “b. The annuity and unitrust investments are sufficient to fund any trust agreements.
- “We achieved an unrestricted operating surplus for the year of $524,000.
- “Extraordinary expenses for legal and accounting fees related to the ongoing investigation totaled $411,000. We have expended significant dollars to attempt to investigate and resolve issues related to the proper depositing, recording and disbursement of Church funds. We anticipate that we will expend more before this issue is fully resolved.
- “The net change in unrestricted operating assets is a surplus of $88,000.
- “We disbursed $470,000 of restricted funds which was funded by current year contributions and the Honesdale loan. The restricted funds shows a decrease in net assets for the year of $47,000 because we paid out some of the funds received in prior years.
- “Overall, the Church had a positive increase in net assets of $61,000.
“2007 Unrestricted Operations.
- “Previously, we provided an Income Statement (Statement of Operating Revenues and Expenses compared to Budget) for the first quarter.
- “Revenue exceeded the budget by almost $9,000.
- “Expenses were almost $80,000 below budget.
- “Net surplus for the quarter was $107,000.
“2007 Financial reporting.
- “Our objective is to issue the following reports quarterly within 30 days of the close of the quarter:
- “Statement of Financial Position.
- “Statement of Activities.
- “Statements of Unrestricted Operating Revenues and Expenditures compared to budget.
- “Statement of Restricted Funds/Designated Appeals.
- “General ledger system, new software. The new software was implemented in 2007. As with any implementation, we have had some hurdles to clear and have hit some speed bumps along the way. We have also acquired new equipment and changed information technology providers during this same period. We anticipate having a smooth running operation by the end of July.
- “One of our most significant challenges in 2007 is locating a qualified person to serve as treasurer. At the June 2007 meeting of the Metropolitan Council, a report was presented from the Reorganization Task Force. They affirmed that the task of finding a suitable candidate matching the job description established earlier has been difficult. After the two most qualified candidates declined to accept the position, no new candidates had been identified by the time of the meeting. Following the meeting, resumes were received from two applicants. They are now being interviewed by the Treasurer Search Committee of the Task Force. This position remains open. Additional applications will be received until an appropriate candidate is found.
“In conclusion, when all the work related to the 2006 Audit is complete, for the first time in many years, we will issue the audited financial statements. We will continue to have the financial statements of the Church audited annually.