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3.10.06

Major Diversion of Funds Confirmed By Internal OCA Financial Statement

The accompanying notes to the most recent financial statement of the OCA, compiled by the accounting firm of Konsen & Hostelley LLP of Independence (Cleveland) Ohio, confirms that major diversions of charitable and appeal funds took place as recently as 2001, 2002 and 2003.

These explanatory notes, dated May 2004 and addressed to the Metropolitan Council, were apparently never distributed to the Council. Sent only to the Bishops, and then only in November 2005, the notes reveal that monies collected from the three annual charitable appeals (Mission, Seminary and Charities), as well as 4 other project funds, (The Military Chaplains Fund, The Clergy Care Endowment (which provides support to retired clergy needing health care coverage beyond Medicare), The Publications Fund and The Archives Project) were not used for their intended purposes, but diverted to pay administrative and operating costs. The whole report, obtained by OCANews, confirms Syosset’s misuse of these “temporarily restricted” funds was not a singular event, but a pattern that has extended over years.

The Notes

In the five-page document entitled “Notes to the Financial Statements” that accompanies the Church’s statement of financial position as of December 31, 2003, Konsen & Hostelley reveal that:

“As directed by His Beatitude, Metropolitan Herman, the Chancery transferred $62,997 of temporarily restricted funds in 2003, $469,017 in 2002 and $98,461 in 2001 to meet current obligations of the Chancery.”

Recognizing the problem created by the diversion of the funds from their intended purposes, the report states:
“These funds will be transferred back to temporarily restricted funds as soon as practical”. However, the report itself makes clear that this will not be anytime soon given the growing debt of the OCA. In the same report under “Notes Payable”, Konsen & Hostelley write:

“As directed by His Beatitude, Metropolitan Herman, the Chancery obtained a line of credit commercial loan (sic) from Commerce Bank for $600,000 of which only $500,000 has been utilized to date, to meet the current obligations of the Chancery.”

Although the firm of Konsen & Hostelley does not specifically indicate when the loan was taken out, it is clear that this money was not used to repay the funds diverted above - but again, taken “to meet the current obligations of the Chancery”. Moreover, as “Funding the Vision”, a paper presented to the 2005 All American Council in Toronto made clear, the operating deficit of the OCA for the year 2004 alone was over $430,000. It is unlikely the diverted funds, totaling more than $630,000 by 2003, have even begun to be repaid.

There are, as yet, no figures detailing how much money was diverted from these charitable and other temporarily restricted funds for 2004 & 2005, if any. According to the recent press release of the Synod of Bishops, an audit of OCA finances for 2004 is expected no later than March 31, 2006 and may shed light on this question and practice.

The Missing 9/11 Funds

If what is stated in the report raises troubling administrative and ethical questions, what is not in the report raises even more.

Missing totally from this report is any mention of an additional $285,000 in funds raised in a special OCA appeal in September-October 2001 for the victims of 9/11. Nowhere in this statement of the OCA’s financial position as of December 31, 2002, or in 2003, is any mention made of a balance of funds for the 9/11 Appeal.  This can only mean the monies were either fully distributed by December 31, 2001 (since no opening balance was shown in the 2002 report) – or they have “vanished” from the OCA books entirely.


OCANews has reported earlier that the Committee created to disburse the 9/11 Funds met for the first time in December 2001. It was only at their second meeting, in February 2002, though, that the Committee agreed on how to disburse the Appeal monies. (Read article here) It is possible that all the Appeal Funds were distributed six weeks before the Committee that was to disburse them met to decide on how to do so? The only other explanation is that the money has indeed “vanished”.

Either option raises disturbing questions.

The Bishops’ New “Review”

The mystery of the 9/11 Funds may shed some light on the Bishop’s recent decision to “review the disposition of all monies collected through all OCA appeals from 2001.” On February 28, 2006 the Synod announced:

“Our objective is to have a report from the external CPA firm of Lambrides, Lamos, Moulthrop, LLP for presentation to the Holy Synod by the time of the Spring 2006 meeting.”

But critics ask why another “report” and not a full audit? The distinction between the two is important. As Konsen and Hostelley state in the opening remarks to this report: “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.”

In other words, a “report” offers only those numbers that management, or in this case, Syosset, reveals. An audit, on the other hand, is the highest level of financial reporting. Only an audit requires full financial statement presentation, footnote disclosures, includes testing transactions, invoices, confirmations to third parties and other procedures to provide the highest level of assurance available.  A "report" does not.

A “report” from one external CPA firm - Konsen and Hostelley- for the years in question (2002-2003) already indicates where the monies are, and where they are not. If it is accurate, critics ask, what is the point of wasting time and money on a new "report"?

Or, are the Bishops implying that the 2004 Konsen and Hostelley report is not accurate? If that is the case, and as Konsen and Hostelley have been providing counsel and reports to the OCA since 1998, then perhaps everything needs to be revisited, not in yet another “report”, but in a full audit.

The Ongoing Problem

There can be no dispute that obvious ethical lapses – lapses bordering on outright fraud – have continued year after year, in the form of Appeal funds that are diverted from their intended purposes. Syosset’s own documentation now fully confirms this practice and pattern. But all the Appeal and project monies are still not accounted for - and only an audit can do this. Until this is done, and until those responsible are held accountable for the evident financial misconduct, questions regarding the integrity of the OCA and its leadership will continue to multiply...

- Mark Stokoe

 

 

 
 

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