MCA

Members for Church Accountability Inc.

Third Quarter 2003

This is the quarterly newsletter of Members for Church Accountability. The objective of this organization is to promote accountability within the Seventh-day Adventist Church. MCA itself is primarily an umbrella organization within which representative/agents and their supporters can work to further this objective.

Section 1 - Financial Report

Summary financial statement for third quarter 2003:

MEMBERS FOR CHURCH ACCOUNTABILITY INC.

For any of you that would like to contact us by e-mail our address is: advrnca@aol.com. We get the usual flood of unsolicited e-mail at this address, so it would be well to title your letter in a way that will make it distinguishable from the junk. Our web site address is: http://www.advmca.org. Again we would like to encourage MCA members to read this web site and to invite their friends to read it. If you don’t have access to the web, perhaps you could ask a friend who does, to let you read it. We are NOT asking that our members get our newsletter from the web rather than regular mail. It is still better for us to send our newsletter to our members by regular mail since so many do not have e-mail, however, this web site is an economical means of spreading the word about MCA to prospective members. Mass mailings to prospective members are quite expensive by comparison. Information about a web site can spread quickly on the Internet. If each person mails the site address with their recommendation to several friends, and they in turn tell others, the word is soon passed to a large number.

We encourage members to notify us when their address changes. We do appreciate those of you who have sent us your change of address. When you move and don’t notify us we are not able to continue sending you the newsletter. Your newsletter, of course, is still sent to the old address and is then discarded. We know nothing about your address change until we do a first class mailing (required every so often by the P0 for bulk mailings). At that time we either get your newsletter back with your current address or if the “P0 forwarding order” has expired, it is sent back with no current address. We then have to remove your name from our mailing list.

MCA Trustee

One year ago we wrote:

The by-laws of MCA provide that:

“Trustees shall be elected or reelected by a simple majority of the responding MCA members. Separate votes with options of “elect” or “not elect” will be taken for each trustee under consideration. Persons may be nominated for election to trustee by a majority of the trustees or by a petition of ten percent of the MCA membership.”

A majority of the current trustees have voted to nominate Richard Sheldon as an MCA trustee. Richard Sheldon has been working with George Grames and Stewart Shankel for several years in [Southern California Chapter of MCA]. He graduated from Loma Linda University as an MD in 1968. He is in the practice of Pulmonary and Critical Care with the Beaver Medical Group in Banning, CA. He is a Clinical Professor of Medicine at Loma Linda University and is the Medical Director of the California State Respiratory Care Board. He and his wife Judy have two married daughters.

The by-laws also provide that:

“Nominations for trustee will be published in the next newsletter. The election will be conducted in conjunction with the newsletter one year later, in order to allow time for discussion in the newsletter if members desire.”

Since the year has now passed, it is time to vote. A ballot is included at the end of this newsletter.

MCA Research

The MCA research project sent a letter to 65 conferences in the North American Division. We thought that we should get a more accurate assessment of how open the conferences in fact are with their financial information. We have not seen that the financial statements of the conferences contain any information that would be harmful to disclose to any interested party. The letter we wrote was included in the last newsletter (which is available on our web site). MCA researcher Doug Hackleman has written the following summary of the responses to that letter:

MCA’s Transparency Survey of NAD Treasurers Concludes

In line with its concerns for the financial integrity of the Seventh-day Adventist Church, and consistent with its confidence that there is a strong positive correlation between financial transparency and the safety of the tithes and offerings that flow to the denomination’s administrative centers, Members for Church Accountability made the effort this summer to assess the degree of transparency that the treasurers of the North American Division’s union and local conference offices would permit.

In the summer of 2003, MCA approached individually by letter the leading financial officers of the North American Division—the Division treasurer, the nine union conference treasurers and the 58 local conference treasurers.

MCA’s brief letter identified the sending organization, the nature of its concerns and explained openly that it was attempting to learn the degree of financial transparency that the addressed treasurer would demonstrate by his or her response to a request for "a copy of the most recent complete, annual audited financial statements."

The letters were mailed in the second half of July and by the first week in September eight treasurers (seven conferences and one union conference) had responded, with one additional union treasurer writing back in late October. (One MCA letter was returned as undeliverable.)

From the 58 treasurers who did not respond at all, MCA is prepared to infer that they were not anxious to provide MCA with their most recent, annual, audited financial statements.

Among the nine treasurers who responded to MCA’s transparency assessment, neither of the union conference treasurers was inclined to cooperate. Both indicated that the financial statements were provided primarily to their conference committees and, quinquennially, to the union delegates at a constituency meeting. One of the two union treasurers wasn’t "sure what purpose it would serve for those fifty-eight Conferences, nine Unions and the north American Division to send financial statements to the members for church accountability each year." The other argued that "since the statements are technical in nature, we want to be sure that the person reviewing them understands what the statement is saying."

While all of the responding treasurers affirmed the notion of transparency, five of the seven responding local conference treasurers indicated more or less directly that their transparency practices did not extend beyond their constituents. Nevertheless two of them promised to present MCA’s documentation request to their conference executive committees with one explaining, "This committee will make the decision as to how transparent they wish for us to be with respect to your request."

One conference treasurer sounded as though he would be willing to send the financial statements but was "sorry that I cannot send what you request" because "I do not have any extras."

Although several of the respondents were unacquainted with MCA, only one made a point to explore the organization’s website "and read several of the recent newsletters and other general information available there in addition to your letter."/p>

Finally, one of the responding treasurers was obviously the friendly acquaintance of an MCA officer and was clearly sympathetic to its extra-organizational effort toward more open and independent financial accountability. This particular treasurer questioned the independence of the General Conference Auditing Service and suggested as an alternative "each organization procuring independent audits from outside CPA firms."

It appears from this survey that one of 68 church administrative treasurers in the North American Division was willing to provide MCA with his conference’s audited financial statement.

Perhaps as discouraging as any result from this survey is the apparent failure of either of the two conference committees that were given the opportunity to authorize their treasurers to cooperate with MCA’s request for records.

As MCA’s treasurer Norm Smith has opined in the past, the denomination ought to consider instituting something like the American government’s Freedom of Information Act first effected in 1967. But for such a policy to be added to the General Conference or North American Division’s regulating documents would require a substantial culture shift among church leaders—one that would view tithe paying members more like valued stockholders than as nosy children.

Section 4- Member Letters

This section is for printing the letters that members send in. It provides the means for members to communicate with one another. It is also one way that representative/agents can communicate with those in their group. Needless to say, these letters do not speak for the MCA organization itself. So far as time and budget allow, we intend to print all letters from members which appear to be written for inclusion in the newsletter (please say so if you do not wish your letter to be printed). We will print the shortest letters first. Where it seems appropriate, the editor will make comments in response to letters. (There were no letters from members to pass on this quarter.)

Norm Smith writes: As noted above most conference treasurers did not bother to respond to our letter inquiring about obtaining a financial statement. I do appreciate those who did respond. While disappointed at the general unwillingness to share information, I have to view the willingness to respond to a letter as a major step better than the lack of response we sometimes get from the GC. I thought readers might be interested in reading a response. The letter from G. Thomas Evans, the treasurer of the Mid-America Union was one of the more thoughtful responses. His letter follows together with my letter back to him.

Generally speaking, it appears that conference treasurers are willing to share some information with a member of their own constituency provided it is on an individual basis. Perhaps they feel that individual inquiries can be more easily brushed aside. The thought of interacting with an organization of concerned church members seems to be more than they wish to deal with. What strikes me the most is that almost all conference treasurers (and presumably presidents) seem to have no appreciation of the enormous absurdity of this whole situation. Church leaders expect that members should contribute ten pIus percent of their income to the church, yet they seem insulted when members attempt to verify that the church is operated with a high ethical standard. Even when a significant number of members have joined in an organized effort to obtain accountable behavior, they amazingly do not seem to be asking "what is wrong with this picture?"

Elder G. Thomas Evans, Vice President for Finance of the Mid-America Union writes:

I appreciated meeting you at the Rocky Mountain Committee some weeks ago as you made your presentation to the group.

Thank you for your letter of July 30, 2002. I don’t entirely agree with you, as I told you at the Rocky Mountain meeting, regarding your request to receive financial statements from all the conferences in the North American Division and the North American Division itself.

I take very seriously my obligation to the Mid-America Union Conference Committee to present the financial statements and accounting data that they can use in judging whether we are financially sound in the Mid-America Union. I also function very actively with the Association Board. As you know, a good share of those members are lay-members and they have the responsibility to give oversight to what I do. Therefore, I am accountable to them.

I assume the same thing takes place in all the other fifty-eight Conferences. I am not sure what purpose it would serve for those fifty-eight-Conferences, nine Unions and the North American Division to send financial statements to the members for church accountability each year.

As I told you, since you are a member of the Mid-America Union in good and regular standing I do have some wider responsibility to those members and I do give a report to those members in my constituency meeting every five years as well. Also, I will be glad to sit down with you and go over my financial statement and talk about Union finances when I am in the Colorado area.

I enjoy talking about finances to church members. They don’t always agree with what I have to say, but at least we can have meaningful dialogue.

Perhaps we will meet again in the future and can certainly have more dialogue at that time. Thank you for your interest in the church structure and to see that it runs correctly.

I pray the Lords’ blessing on you and your service to Him.

Norm Smith response to Elder Evans:

Thank you for your letter of October 21, 2003. I indeed appreciate your responding to that letter. It would seem that there is great hope for the resolution of questions that members have when the lines of communication are open. I would like to respond to some of the notions you raised in your letter.

You said, "I am not sure what purpose it would serve for those fifty-eight Conferences, nine Unions and the North American Division to send financial statements to the Members for Church Accountability (MCA) each year." I would have to respond that the overriding purpose to be served would be to take a step toward increasing trust among the members of this group in the integrity of the conferences. I make no claim that such financial statements would be fully understood by our group. I clearly stated in my letter that the purpose of this request was to gather data on what information is currently available to church members. I said, "Through this letter we are probing the existing state of financial transparency by requesting of you a copy of your institution’s most recent complete, annual, audited financial statements." In other words, is it possible for a group of concerned church members to take even an initial step toward accountability by receiving financial statements? Certainly there is more to it than that, but if the conferences are so closed that they will not even share financial statements with all church members, then we at least know where we are starting from.

For some of us it is indeed hard to comprehend why the conferences are reluctant to share information. It is hard to understand why the church would not freely give out information requested by anybody, whether it is Joe Blow in Timbuktu or the Pope himself. It is hard to see the harm in having a church whose dealings are open for the whole world to see, let alone to be seen by concerned members. We are not asking for or expecting information from private employee personnel folders. I myself find it simply amazing that a large fraction of conference leaders seem to expect members to entrust them with the large contributions that most members make, while being so closed with information on how the conferences are being run.

I am convinced that for a significant fraction of church members, trust in the ethical integrity of some conference operations is at a low level. I am not talking about the occasional unethical conduct of individual officers. One would expect that such is not entirely avoidable in any large organization. What troubles members is that such unethical behavior often seems to be generally tolerated and accepted. Where are the sweeping changes in policies and procedures to prevent repeats when problems come to light? Where are the reforms that would prevent the wheeling and dealing involved in the FER debacle in the eastern conferences? Where are the reforms that would prevent the alleged unthinkable conflict of interest surrounding the construction of the Pawtucket care facility? Where is the great "outcry" and reforms that would prevent a union president from promoting huge salary increases for some hospital administrators and then in a classic example of a “revolving door” transferring to such a highly compensated hospital job himself? Where are the reforms that would prevent yearly compensation approaching half a million dollars to some administrators overseeing hospital systems who are doing such an inadequate job as to then seem surprised by financial failures such as at the Boston Regional Medical Center?

You mention that there are lay members on the Mid-America Union Conference Committee who are responsible to judge whether things are done correctly there. Such arrangements are at the core of the problem. Neither these lay members nor the union conference officers are communicating effectively with the general membership to present a convincing case that things are being done ethically. Most of us don’t even know who these lay committee members are, let alone have access to communicate with them. We elect local conference committee members through a quite indirect process who in turn go through some other mysterious process to elect the union committee. How are we to know what is going on or who is doing it? It is extremely easy for us rank and file members to suspect that we have a “good ole’ boy club” going here, where the union officers influence the selection of "friendly" lay members to serve on the committee, where election to conference office positions is itself governed largely by connections and politics.

Given this obscure environment, it is especially hard to understand why even a simple request for a financial statement is denied. Most of the few treasurers who did respond to my letter did indicate some willingness to address concerns of any member of their constituency on an individual basis. The clear implication is that they are not willing to interact with members in general who band together in an organization such as MCA to address accountability concerns. Why this reluctance to deal with a group with general accountability concerns? It is easy for members to wonder if it isn’t because officers believe they can more easily brush off questions from single individuals.

I do not comprehend why many conference officers do not understand the common church member’s need to have some verifiable means of assurance that the conferences are being run in an ethical manner. Most SDA’s won’t join a labor union because they do not have confidence that it is run in an ethical manner. One would surely hope the prospects are radically better in the case of a church. However, the need to know and verify is equally present or even greater in the case of the church. I can’t understand why the brethren at the union conferences and North American Division do not see this notion of fairly wide open accountability, as a winning situation. (Unless they do indeed have things to hide.) I wish that they would adopt the issue as their own, to become champions of accountability rather than be detractors. I wish they would put on the white hats and mount the white horses and become the heroes in the church members’ eyes rather than letting themselves be seen as the men in black. If and when they do, I hope that they support a real solution to accountability problems rather than some pretended solution they might hope will appease the members but which in reality doesn’t address the core questions.

Again, I appreciate your letter. I appreciate your offer to keep communication open. I have printed the letter I wrote to the treasurers in the last MCA newsletter. Yours was one of the more thoughtful responses to my letter. As such I am going to print your letter to me in the next newsletter along with this letter. I would invite you to write a further letter to the MCA membership in response to this letter, which I would also print. I am preparing the next newsletter in the near future. If your response is not in time to be printed in this newsletter, I could print it in the next.

George Grames passes on three news releases, the first is an article from Adventist Review: News:
(We have not seen a need to included the names of the persons accused.)

College Takes Over Station Finances Following Accounting Irregularities

Results of an investigation into accounting irregularities at WGTS — FM 91.9, affiliated with Columbia Union College (CUC), indicate misappropriation of funds and fraudulent accounting, according to CUC’s administration. The administration launched an immediate investigation by an outside auditing firm in October of 2002 after discrepancies in year-end financial statements and altered financial information suggested accounting fraud.

The audit and investigation, handled by Cline, Brandt, Kochenower & Co., P.A., revealed a series of accounting irregularities, including falsification of financial statements, false reports to the WGTS Board, overstatements of assets, and misappropriation of funds into personal accounts. The audit covered a three-year period from July 1999 through August 2002. During that time, $197,135 in checks were written to ..., WGTS’s accountant, and deposited into her personal bank account.

Immediate steps to remedy the situation were taken by the College administration and the WGTS Board when the probability of accounting irregularities surfaced.

"The WGTS Board has been stunned by these developments," said Edward D. Motschiedler, Chairman of the Board. "We are now reviewing our internal policies and control procedures to fix whatever was broken. We are looking at our bylaws and evaluating the structure of our board in order to improve governance. We are grateful that the College’s financial leadership discovered this fraud."

The second is an article detailing a situation at Loma Linda:

A network manager for the Loma Linda University Foundation, arrested Wednesday in connection with a money-laundering scheme, may have carried on the alleged crime for more than a year, authorities said Thursday.

Loma Linda Foundation officials worked with sheriff’s deputies for three months after they discovered account irregularities, spokesman Augustus Cheatham said.

"We’re talking about large sums of money," Cheatham said, but he declined to say how much money the foundation handles.

The money taken came from an account the foundation uses to purchase mostly computer equipment, Cheatham said. No money was taken from any of the trust accounts, he said.

The third relates a treasurer’s arrest in the eastern USA:

Washington, D.C. - United States Attorney Roscoe C. Howard, Jr. and Van A. Harp, Assistant Director in Charge of the FBI’s Washington Field Office, announced that ..., age 66, of Upper Marlboro, Maryland, pleaded guilty today before the Honorable Reggie Walton, United States District Judge, to Wire Fraud in connection with a scheme to defraud the Dupont Park 7th Day Adventist Church, ... of $1.6 million. ... faces a term of imprisonment of 36 to 46 months under the federal sentencing guidelines, a fine of $250,000.00, a 3-year term of supervised release, and an order of restitution. ... According to the government’s evidence, for twenty-five years, ... served as the Treasurer for Dupont Park, in a volunteer, unpaid position. During this time, ... also had a career in the United States Government and served in Senior Executive Service. From 1993 through his retirement in January 1998, ... was the Assistant Inspector General for Inspections and Evaluations, Office of Inspector General (OIG), U.S. Department of Transportation (DOT). During this time period, ... also served as Deputy Assistant Inspector General for Auditing, OIG DOT. ... is also a Certified Fraud Examiner.

In approximately November 2001, the Dupont Park Pastor and Elders suspected ... was misappropriating church funds. This suspicion caused them to examine the church’s books and financial and banking records that were maintained by .... A cursory review of the records disclosed that funds had been diverted from the Church’s bank account.

In April 2002, church officials reported the case to law enforcement. The investigation revealed that between April 28, 2000 and November 26, 2001, ... wire transferred funds from the Dupont Park First Union National Bank account in the District of Columbia on thirty (30) separate occasions to bank accounts located almost entirely abroad, as well as to his personally owned bank accounts located in Maryland. In total, there were thirty (30) unauthorized wire transfers totaling approximately $1,627,555.00.

The investigation also revealed that on financial papers, ... stated the amount of funds that should have been in the bank account; not the amount that was actually in the account. He was able to balance the bank account by reconciling the amounts wired in and out with notations such as "amounts to be redeposited," which suggested the funds were in transit...

Among the items recovered during this search were detailed daily diaries and a chronology of electronic mail exchanges between ... and other individuals. These records document that ... was using the money that he embezzled from Dupont Park to fund what appeared to be illusory investments -offered to him by individuals of Nigerian descent in which he was promised a return in excess of 30 million dollars. Such schemes are commonly referred to as "Nigerian Advance Fee Schemes." Throughout the investigation, ... maintained that the money he had invested would be returned with appreciable dividends. However, no money was ever returned to ...

EDITORIAL COMMENT: Thanks to George for passing on this information. We must recognize that the SDA church has many thousands of employees many of whom have some part in dealing with financial matters, as well as thousands of volunteer officers who deal with finances. It is not greatly surprising that every now and then some such person will decide to follow a dishonest course. The point to be taken from these incidents is that yes they continue to occur and vigilance is essential. The question that church members would do well to ask themselves is whether the church has reasonable safeguards in place to do an adequate job of limiting such instances. One might admit that they can never be prevented altogether. In the case of the Dupont church and the radio station, a second person frequently viewing the records might have prevented the problem. That even this is not always enough is illustrated by the LLU case where three people were involved. One is especially troubled with cases like the radio station where the problem had evidently been going on for at least three years. The stated response of the radio station board does seem to be on the right track. We would hope that they follow through with these corrective measures. We would hope that they are diligent in informing their constituents of the changes they make.

I have mentioned before that my personal opinion is that the church has the mechanism in place to do a reasonable job of limiting the occurrence of dishonesty on the part of its lower level officers. This auditing mechanism can break down, of course, if it were to be generally felt that maintaining accountability were not a high priority of the higher leaders. Pardon my stating my own opinion again that the main accountability problem in the church is at the higher levels where auditors are supervised by the leaders who also need auditing. I am far more worried about possible conflict of interest and a tolerance for profiteering among leaders than I am about outright criminal embezzlement.

We include the following blank for use in recruiting new members:

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MEMBERS for CHURCH ACCOUNTABILITY, INC. (MCA) APPLICATION (nl3Q03)

Name:

Address:

Telephone (optional):

/_/ I wish to be a member of the Southern California Chapter

Signature:

You will receive the MCA newsletter.

Send to: Members for Church Accountability, Inc.
P0 Box 1072
Morrison, CO 80465

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The following is the blank for voting on the proposed new trustee for MCA for those of you who wish to cast a vote. Please address it to:

Trustee Vote
Members for Church Accountability, Inc.
P0 Box 1072
Morrison, CO 80465

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BALLOT FOR ELECTION OF TRUSTEE

Your Name:

[ ] I favor the election of Richard Sheldon as an MCA trustee

[ ] I do not favor the election of Richard Sheldon as an MCA trustee

Signature:

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