Questions & Answers
What Can You Do?

Reflections On The Scandal

Two Questions for the Metropolitan Council

Archpriest John M. Reeves State College, PA

It's impossible to borrow one's way out of debt, even if it is for the “good of the Church. Once debt is acquired, it has to be paid. To get out of debt means at least one of two things: to increase income or to decrease spending. Usually it means both. Living beyond one's means has consequences, and unless one changes the values and habits which incurred the indebtedness in the first place, a recurring pattern of more spending and more debt, and more spending and more debt, without thought as to the ultimate cost, will be the inevitable result.

Still living beyond our means?

Currently, the Metropolitan Council has authorized the encumbering of the OCA’s real assets in order to consolidate its current indebtedness, in the amount of $1.7 million. Of this amount, some $500,000 is to "pay off" existing debt against a line of credit at a bank in NY. Thus, a financial institution has a claim against the Church. Of course, we are not getting out of debt by "paying off" this debt. We have merely transferred our indebtedness to another lender, having previously paid at least interest to the first bank to keep the line of credit open.

Another $427.8K is designated for outstanding bills and expenses, some of which pertain to 2005's All American Council. Certainly, it will be easy enough to produce "outstanding" invoices to pay them. Again, the need to pay these bills is certainly necessary, although we will be paying twice the amount of the original debt once the loan is satisfied. And whether or not these bills and invoices include possible late payment charges because of our arrearages is not detailed.

Finally, slightly over $700,000 is to "pay back" internal accounts from which funds have been diverted from purposes other than originally intended, including special appeals and endowments. (Based upon the Treasurer's statement, one cannot ascertain whether this latter amount includes the interest which would have accrued on those accounts, especially the endowments, except for the diversion.) (Link TreasurerÕs Report)

As currently projected, the loan will be set up on a 20-year term, with an initial four-year rate of 7.97 %. And as noted, the monthly payments will run slightly over $14,000 (roughly $170,000 per annum). At this rate and term, there is as much scheduled be paid out in interest as the value of the note itself, should the full 20 years be required.

It might be readily explainable that there are creditors to satisfy and outstanding bills to pay. In fact, those do have precedence in any debt reduction plan. But it’s the necessity to pay, in effect, three times, for the special appeals and endowments, that begs for an answer. This is what the original value of the diverted special appeals and endowments monies plus the cost of the loan to restore those funds will amount to. We are told that restoration of these funds is necessary as part of the ongoing investigation. (Link)

Yet, in this case, we have "borrowed" from ourselves: We are our own creditor. But now, the Church is now being expected to spend $1,400,000 to pay itself back the almost $700,000 of appeals’ and endowment monies which it has used in some fashion. Though, it has been difficult to establish to what purpose these funds were diverted.

Two Questions

So, the first question is this: Why, then, is there the insistence to include re- paying ourselves back at the price of another $1,400,000 over the life of the loan? ($700K X 7.97% @ 20 yrs = ~ $1. 4M]) Why, indeed, absent a complete auditor's report did this amount get included? Put another way, why are we so quick to spend an additional $1,400,000 in funds we do not have? We are hurrying to mortgage more of the Church's financial future, all for the good of the Church, I suppose.

Yet prudence and reason demand that those entrusted with fiscal stewardship in the Church be (made) aware of why these particular monies need to be included in this loan. It is not a question of whether restitution of these funds needs to be made. It does. But spending $1.4M to restore charity appeals and endowments worth $700K simply is not good stewardship. Absent knowledge of the ultimate purpose for which these funds were diverted, this is quite unwise.

Second, prudence and reason demand something else, as well. The Metropolitan Council adjourned without having adopted a financial plan to service the debt it is willing to incur for the Church. In any properly functioning entity, administration, in consultation with Council members, would have already developed such a plan for discussion and possible action prior to any meeting to approve the debt. And approval of the loan would and should have been contingent upon approval of the debt-service plan.

Of course, this is not the case here. There is no record that such a plan was submitted. The minutes only indicate that discussion ensued without resolution of the matter. It is neither prudent nor reasonable to authorize debt without authorizing a plan to pay it off.

The Metropolitan Council must answer the question that the bank itself will ask: ÒHow do you intend to pay back this money?Ó The bank must be satisfied that the means exist to service this debt before granting the loan; and so must the FDIC. Banks do have auditors and auditors do ask questions. What will it have been told in this regard and by whom? Will some assets be liquidated? Will special appeals be made? Will staff be furloughed or positions eliminated? What fait accompli will be presented the Council to ÒapproveÓ at its next meeting this fall?

Unless it is can answer these two questions, the Metropolitan Council is not doing well by us. Might we not need more businessmen and women on the Metropolitan Council to see that these questions are answered in the future? Might not the dioceses seek to select their Council representatives very carefully this year with this view in mind?

Since administration has not proven itself to be trustworthy or equal to the task in the past, it is incumbent upon the dioceses to select sober individuals who, in word and in deed, are. That is, individuals who are Òfull of wisdom and the Holy Spirit (to) appoint over this business.Ó (Cf Acts 6: 3) Indeed, the appointment of any future Chancellor will come before the Council for its consent. So, future selection of Council representatives must no longer be a matter of mere formality or episcopal preference.

Absent answers, and absent a Metropolitan Council willing to obtain them, it might only be logical to presume that we will continue to live beyond our means, and continue to try to borrow our way out of debt, all for the "good of the Church". As of now, another blank check has in effect been signed over to administration. We are down $3.4M over the life of the loan and, without a debt-service plan to the contrary, we can only presume that current income will be held hostage for this amount for the foreseeable future.


The Orthodox Church in America Summary

of Outstanding Debts as of April 4:

Commerce Bank Line of Credit $500,000

FOS Endowments $ 42,880

Other Endowments - Smith Barney Main Acct.

$ 85,000

Chechen Relief   $30,000

Medical Assistance for clergy $ 13,000

Outstanding All-American Council Expenses

$ 140,000

Outstanding Invoices $ 287,800

Mission Appeal $ 87,560

Seminary Appeal $ 151,940

Charity Appeal $ 41,750

Christmas Stocking Project $ 16,600

9/11 Emergency Funds $ 90,590

Beslan Relief $ 34,640

Florida Hurricane Relief $ 13,920

IOCC Appeal $ 3,300

Publication Reserve $ 27,500

Academic Fellowship Fund $ 52,800

Seminary Internship Fund $ 7,960

Military Chaplain Reserve $ 270

Earmarked Funds: 4 Russian Orphanages $ 25,000

Closing Expenses/Miscellaneous Expenses $ 47,490







Other Reflections:

Fr. Paul Harrilchak
Holy Trinity, Reston VA

Fr. Ted Bobosh

St. Paul, Dayton OH

Otche M 

Special to

Holy Trinity, Boston