Syosset, New York
June 13-14, 2006
Your Beatitude, Metropolitan Herman and Members of the Metropolitan Council,
Two sets of financial guidelines are being used as the basis of all operating fund and designated fund activity. The first became effective late in 2005 — View document — and the second in January 2006 — Download document (PDF).
At our 2005 fall meeting, His Beatitude, Metropolitan Herman announced that beginning with the year 2004, an independent audit of the finances of The Orthodox Church in America would be conducted annually as a normal practice.
In fulfillment of this announcement, Metropolitan Herman authorized the engagement of the accounting firm of Lambrides, Lamos & Multhrop in January 2006. This accounting firm’s primary work is with religious and other not-for-profit organizations. When they began their work in January 2006, they anticipated that their work would be complete by March 31, 2006.
At the request of the Holy Synod, Metropolitan Herman extended the engagement of the accountants conducting the 2004 audit to also include the financial records and activity related to the annual and special appeals for years 2001 through 2005.
Conducting the 2004 audit as well as the annual and special appeals audits required an inordinate amount of time. Much data had to be reviewed—going back as far as 1998-1999 and even earlier. Though a progress report concerning the audit will be presented to you this afternoon by a representative from the accounting firm, it is important that we comprehend the history of all independent as well as internal audits of central church administration finances conducted since the 1980s.
The firm now conducting the audits was the same firm that conducted independent audits for the Church from early in the 1980’s. In each instance, after the independent audit was completed for a given year, the Church auditors officially elected at each All American Council held during those years, would also fulfill their responsibilities as internal auditors.
It is important to note that between 1999 and 2004, the financial audits were only conducted by the duly elected Church auditors. In lieu of an independent audit, a compilation report was prepared for each of those years. This fact is affirmed in correspondence I received from the accountant who prepared these reports. He wrote:
I just realized that you used the phrase, “your Orthodox Church in Americaaudit
“ in your message to me.
The term “audit” has a very specific meaning in accounting terminology, and carries with it much higher reliance than that for which we were engaged for 1999 through 2004. Our engagement was to compile the financial statements each year and issue our report based on such standards as set by the American Institute of Certified Public Accountants. Specifically, our report contained the language “A compilation is limited to presenting, in the form of financial statements, information that is the representation of management. We have not audited or reviewed these statements and, accordingly, do not express an opinion or any other form of assurance on them.”
The second important decision from our last meeting was the request that the central church administration of The Orthodox Church in America subscribe to “Best Practice Principles for Non-Profit Financial Accountability”. As you may remember, though Metropolitan Herman came to the meeting and announced that beginning with 2004, independent audits would be a normative practice, he also accepted the suggestion coming from a member attending the meeting, that the “Best Practice Principles” be accepted as the standard used particularly as they relate to the management of central church administration funds.
With the blessing of Metropolitan Herman, Protodeacon Peter Danilchick prepared a draft of a basic document and a number of amendments for consideration. We will receive the document and discuss it tomorrow as part of our morning session — Download document (PDF).
In addition to Protodeacon Peter, Matushka Mary Buletza Breton, and Mr. Robert Kornafel are also participating in this effort. You may want to familiarize yourself with their talents and previous Church service — Download document (PDF).
When we met last fall, we also agreed that as Acting Treasurer, I would try to secure a loan offer or offers to consolidate our indebtedness.
Because we only had compilation reports for years 2002, 2003 and 2004—all of which reflected a negative cash flow—my efforts came to naught.
The Honesdale National Bank which has a history spanning more than 150 continuous years of service to the public has a stellar reputation that speaks for itself. However, the willingness of their Board of Directors to make a loan offer to us in a formal commitment letter comes as a result of their deep respect for Metropolitan Herman. They consider him as a man of honor, of integrity, whose word can be trusted, someone who has borrowed and met every obligation made with them on behalf of St. Tikhon’s Monastery and St. Tikhon’s Seminary over many years. St. Paul speaks to the qualifications for bishops. In chapter 3, verse 7 of his first letter, he teaches that a bishop “he must have a good testimony among those outside (the Church)”.
In preparation for our teleconference meeting, in addition to the full text of The Honesdale National Bank’s commitment letter, I also sent a Fair Share Support Report as of March 31, 2006, a Designated Appeals and Restricted Income 2006 Report, and a FY 2006 Operating Budget with a comparison of income and expenditures to budget for January, February and March 2006 to keep you informed as member of the Metropolitan Council.
During our teleconference meeting of May 18, 2006, we accepted the loan offer from The Honesdale National Bank.
The following facts are excerpted from the commitment letter and included here:
1. AMOUNT OF LOAN: $1,700,000.00
2. PURPOSE OF LOAN:
The Orthodox Church in America Summary of Outstanding Debts
as of April 4, 2006
Other information concerning the Rate of Interest, Terms of Payment, Maturity, Prepayment Privilege and Security which were contained in the letter were the following:
3. The Rate of Interest will be 7.97% for the first 48 months of the mortgage from the closing date. It will have an interest rate floor of 7%
4. Repayment will be made in monthly installments of $14,300.00 applied first to interest and then to principle. On the 49th month, the rate of interest may change to the following:
A New York Prime interest rate plus .25% for the next 12 month period and a new payment shall be calculated to amortize the balance over the remaining term and shall readjust every 12th month thereafter for the term of the loan.
5. The loan shall mature on the 240th month following the date of the closing, at which time all outstanding principal plus interest, if any shall be due and payable and any amount then due and owing.
6. The Borrower shall have the privilege on any installment payment date to prepay the unpaid principal indebtedness in whole or in part without payment of premium or penalty; no such prepayment to alter the amount of the aforesaid monthly installments.
7. The loan shall be secured with first mortgages on the two properties owned free and clear by The Orthodox Church in America, namely the chancery building and property and the home owned by the Church, both of which are in Syosset.
The anticipated date for closing on the loan is on or before July 3, 2006.
Once the appraisals of the properties are made in conjunction with the loan, they will become a part of the independently audited financial report for year 2006.
In the 1980’s and at a time when computers and computer programs were much more costly that they are today, a used computer was purchased for use by the central church administration from St. Vladimir’s Seminary when they were upgrading their equipment. The data base program that was written for the seminary’s use that came with the computer was adjusted to assist with the financial record keeping needs of the central church administration. In 1984, near the end of my first term as Treasurer, at the suggestion of the Lambrides, Lamos and Moulthrop accounting firm, I proposed the purchase a financial management program entitled, Great Plains Software which was designed specifically for not-for-profit organizations which was the best of three programs in use by them and their other clients. This proposal was rejected by management. As a result, to this day, though some reports can be generated directly from the current software program, man y reports must be prepared by taking information from the data base and then creating a report.
Appropriate software designed for use by not-for-profit organizations must be purchased and in place before January 1, 2007 if we are to maintain our financial records in conformity with currently accepted professional standards.
Since our relationship will continue with the Lambrides, Lamos and Moulthrop accounting firm for the foreseeable future, such a program will make it possible for them to review our financial activity regularly, on a quarterly or monthly basis.
In conjunction with our teleconference meeting, I authored a cover letter concerning confidentiality in matters that pertain to the Metropolitan Council. By some, this has been interpreted as an attempt on my part to “cover up” or “keep information a secret.” It is a normal practice of the Metropolitan Council to disclose decisions after they are made, but public circulation before a responsible body such as this Metropolitan Council makes their decision, is seldom if ever divulged beyond the membership of those who are to act in behalf of others until a decision is made.
As a point of information, confidential material related to the loan, was made available on the internet on a web site that clearly states that they are not officially a part of The Orthodox Church in America, but are in some cases circulating “confidential” information.
Since the purpose of the loan contained in the commitment letter was distributed to the members of the Metropolitan Council after this public posting of the inaccurate information, it is reasonable to assume that information that existed before the commitment letter was finalized, was illegally taken from within this building, divulged, made public and presented as fact.
This, however, was not the only breach of confidentiality that appears to be motivated by an effort to injure the Church and cast doubt on the credibility of those who seek to serve her. During this past week, you received an e-mail which included a number of questions posed to me in preparation for this meeting. One of the questions for the purpose of my report, I will identify as question #5. Question #5 concerns a loan of $50,000 that was offered and received at this time by my office so that current obligations of the Church could be paid. The text of Question #5 supports the conclusion that the author of the question was only able to pose their question on the basis of confidential information available to a very limited number of staff working within this building.
In Matthew 6:3 and 4, our Lord and Savior, Jesus Christ is quoted as saying, “But when you give alms, do not let your left hand know what your right hand is doing that your alms may be in secret; and your Father who sees in secret will repay you.”
The member of our Metropolitan Council who revealed the identity of a faithful member of our Orthodox Church in America, a member of the Church who wished to confer a benefit on the Church and—in keeping with Christ’s mandate—requested to remain anonymous, gave their personal agenda priority over Christ’s commandment. What could possibly justify the violation of one of the basic tenets of the Holy Scriptures and in this case, a mandate from Christ Himself?
As members of the Metropolitan Council, we have a sacred duty to serve the Church and through her, honor those who seek the Kingdom of God and strive to be faithful to Christ and His commandments. The members of this Council are entitled to hear how such an act by a staff member and a member of this Council can be reconciled with that sacred duty.
Assuming that the loan is finalized as anticipated and all funds as identified in the commitment letter are restored, disclosure of financial information available at that time—in conformity with “Best Practices” and the most current federal legislation governing financial disclosure by religious and other not-for-profit organizations—will be made public.
I would like to thank His Beatitude, Metropolitan Herman for his trust and encouragement as I have attempted to approach all of my assignments with integrity and whatever talents I have that can be used to serve the Church. I would also like to thank those of you and others who have offered prayerful support to me since I began my service as Acting Treasurer nearly a year ago.
May the Holy Spirit “come and abide in us, cleanse us from every impurity, save our souls” and permit us to experience the everlasting joy of the eternal Kingdom of God. Every time we are gathered together as brothers and sisters, with Jesus Christ in our midst, may we give thanks to our Heavenly Father who, in spite of our unworthiness, continues to love us and be patient with us as we live as sojourners upon the Earth.
V. Rev. Paul Kucynda, Acting Treasurer