To: Members of the Metropolitan Council and Auditors
CC: METROPOLITAN HERMAN
From: Fr. Paul Kucynda
Date: January 27. 2006
Re: Report to the Lesser Synod of Bishops
January 20 2006
Enclosed in this mailing is a copy of my report presented to the Lesser Synod of Bishops when they met at the Chancery in Syosset, New York on Friday. January 20, 2006.
Included in my report is information regarding the Independent Audit of our Financial Records for the years 2004 and 2005. This work will be done by the firm of Lambrides, Lames and Moulthrop, LLP. The year 2004 audit commenced on January 24.2006 and is scheduled for completion on or before March 31, 2006. The year 200S audit will immediately follow.
Also included in my report are the fundamental "best practices" which Metropolitan HERMAN, at the November 9, 2005 meeting of the Metropolitan Council, affirmed as the basis for the financial management activities of the Church. A document that takes into consideration the responsibilities of the Metropolitan Council particularly in financial matters, and the Holy Synod of Bishops as the overseers of all activities in the Church must be incorporated into this document. Preliminary investigation has taken place- A draft will be developed for presentation to the Metropolitan Council and Holy Synod of Bishops for discussion at their respective year 2006 spring sessions. Finally, my report includes the progress made in regard to securing a loan in order to rectify cur current indebtedness.
If it is found that we are considered eligible for a loan, the proposed amount of the loan, the terms, the specifics of our indebtedness (vendors, staff, etc.) will be sent to you. This will be followed by a conference call where all members of the Metropolitan Council will have the opportunity to ask for any clarification that may be needed in order !o make an informed decision. This will be followed by a roll call vole.
The support documents for my report are also enclosed. They are the Financial Guidelines previously sent to you with my letter of December 15, 2005. and Proposals for Major Events, Meetings and Travel which have been recently approved by Metropolitan HERMAN for distribution to all Church Ministry chairpersons.
Report of the Acting Treasurer of the Orthodox Church in America To the Lesser Synod of Bishops
Meeting in Syosset, NY
January 20, 2006
Development of Financial Guidelines
At the conclusion of the All-American Council held in Toronto, Canada from July 17-22, 2005, I was appointed to serve as the Acting Treasurer of the Orthodox Church in America.
During the months of August and September, I familiarized myself with the structure and practices related to the Office of Treasurer. I interviewed the Comptroller and the two other staff members involved in the financial activities of the Church, From these meetings, I was better able to understand the financial management strengths and weaknesses of our Church Administration.
This ultimately resulted in a series of Financial Guidelines (attached) submitted to and approved by Metropolitan Herman, to whom 1 am directly responsible. Subsequently, a copy of the Financial Guidelines was distributed in December1 to all members of the Metropolitan Council as well as the internal Auditors of the Church elected at The 14lh Metropolitan Council Meeting Decisions
At the Fall 2005 Session of the Metropolitan Council, Metropolitan Herman announced that arrangements would be made to have an Independent Audit of the financial records of the Church for years 2004 and 2005. Also, he made a commitment to use the Best Practice Principles for Non-Profit Financial Accountability as the standard for our work beginning on January 1. 2006.
Independent Audits (of Years 2004 and 2005)
At the direction of Metropolitan Herman, Gregory D. Hostelley, CPA, a partner of the firm of Konsen and Hostelley LLP, who has conducted the audits of the Church for several years, was contacted to assist us in arranging for the Independent Audit of The financial records of the Church for years 2004 and 2005. He researched and then recommended a number of accounting firms in the New York-Tong Island area who might be interested in conducting Independent Audits of our financial records for the past two years.
After making initial contacts with the firms recommended by Mr. Hostelley, il was determined that no final decision would be made without considering The firm of Lambrides, Lamos and Moulthrop LLP who had been engaged 10 conduct the annual Independent Audits during the early to mid-1990's.
After a meeting with Stephen D. Lamos one of the partners in the firm of Lambrides, Lamos and Moulthrop LLP, a follow up letter of engagement was received from Mr. Lamos related to the proposed Independent Audits for the years 2004 and 2005. The terms of engagement (attached) from partner Stephen D. Lamos, was accepted by Metropolitan Herman. At his direction, I signed the proposal and returned it to Mr. Lamos earlier this month.
As noted in the letter of engagement, the Independent Audit of all accounts of the Orthodox Church in America for the year 2004 will begin on January 24, 2006. Also, The letter indicates that their independent Audit Report will be issued an March 31, 2006. This will be followed by The Independent Audit of all accounts of the Orthodox Church in America for the year 2005.
Best Practice Principles for Non-Profit Financial Accountability
Following the Fall 2005 Session of the Metropolitan Council, I received a recommended text concerning the Best Practice Principles from Protodeacon Peter Danilchick, a member of the Board of Trustees of St. Vladimir's Seminary has worked extensively on
In my capacity as Acting Treasurer and at the direction of Metropolitan Herman, 1 will continue consultation with Protodeacon Danilchick, Mr. Stephen P. Lamos and others yet to be determined, to develop a draft for consideration by the Metropolitan Council and Holy Synod of Bishops al their respective spring 2006 meetings.
The following best practice principles for financial accountability applicable to the Orthodox Church in America are:
* Ensure clear and decisive financial governance
* Adopt ethics and conflict or interest policies
* Implement appropriate financial controls
* Conduct regular independent financial audits
* Ensure transparency of financial data and
* Maintain knowledge on emerging non-profit issues
Expansion of Financial Guidelines
After using the initial Financial Guidelines as they relate to Procedures for Scheduling Events/Activities. They were found to be lacking. Additional directives have been prepared. After review by Metropolitan Herman, they will be forwarded to Michelle Jannokos, Coordinating Secretary for Church Ministries for distribution.
Resolving our Present indebtedness
The Metropolitan Council acknowledged that the current indebtedness of the Church to vendors and to certain accounts of the Church must be rectified. They authorized the Acting Treasurer to investigate the possibility of consolidating the indebtedness and securing a loan from a commercial bank.
The filing requirements for such an application includes audited financial reports for years 2002.2003 and 2004. Because of this, not further work can be done until we receive the audited report from Gregory D. Hostelley, CPA, for the year 2004 which is currently being completed. We anticipate receiving this report within the next two week If it is found that we are considered eligible for such a loan, our requirements and the bank's terms for such a loan will be presented to the Metropolitan Council for consideration.
I would like to conclude my report by expressing my deep appreciation to Metropolitan Herman for his wise counsel, encouragement, and confidence regarding the finances of the Church.
By your prayers, and with the help of God, it is my hope that we will soon sec a significantly improved order to the financial activities of the Church Administration of our Orthodox Church in America.
Archpriest Paul Kucynda,
On a day to day basis, the Metropolitan, as Primate of the Orthodox Church in America will review and approve at expenditures of the church.
All finance and expense requests arc to be submitted through the chancellor's office. The chancellor will discuss each item with the treasurer who will then forward them on to the Metropolitan for his review and approval.
As one of the Officers of the Church, the Treasurer shall be directly responsible to the Metropolitan.
The work of the Treasurer shall he conducted in a manner independent from any other Office or Officer of the Church other than the Metropolitan.
In his management of the financial affairs of the Church, the Treasurer shall also be responsible and accountable to the Holy Synod of Bishops, the Metropolitan Council and the Auditors elected by the All-American Council.
The Treasurer shall be responsible for insuring that all expenditures are properly pre-approved and comply with the limitations imposed by the Annual Budget established by the Holy Synod and Metropolitan Council.
All checks and transfers shall bare the signature of the Metropolitan and Treasurer, unless otherwise determined by the Metropolitan.
The Comptroller shall function directly under the authority of the Treasurer. At the direction of the Treasurer, he shall be responsible for executing the day to day financial activities of the Treasurer's Office,
He shall be assisted by all members of the chancery staff involved in any way in the area or finance who shall be responsible to him unless determined otherwise by the Treasurer. The Metropolitan shall reserve final authority in all financial matters managed by the Treasurer's Office.
Primary Policies and Procedures
Proposals for Major Events, Meetings and Travel
All proposals for major events, meetings and travel, must be submitted in writing to the Chancellor well in advance. The Chancellor will forward the request to the Treasurer, who will in turn present the request to the Metropolitan.
Lodging and travel expenses for members of our Church traveling on our behalf, and the lodging and Travel expenses for individuals or groups coming as guests of the Church, must be planned well in advance.
In both cases, such proposals should include (1) a proposed list of participants, (2) the cost of registration, airfare, lodging and meals (if not covered by hosting Church or organization), (3) what gifts, how many, and the cost.
Airfares should be booked as far in advance of an approved trip as possible to avoid higher fares for late bookings. Visas should also be obtained well in advance of trip. Air flights should be booted in coach class unless authorized otherwise by the Metropolitan.
Authorized travel should be arranged through the auspices of FOS Tours unless it is deemed in our best interest lo do otherwise.
The per diem allowance for food should not exceed $35 to $40.
All travel should be substantiated with receipts and relevant documents. Tips should be appropriately modest and recorded in a short summary. Materials should be submitted within one week of return lo the Treasurer s/Comptroller s of rice.
Gifts lo dignitaries, etc. in foreign countries or those visiting the Orthodox Church in America shall be determined by the Metropolitan.
All checks shall be issued to a payee. No checks will be made payable to a third party for conversion into cash.
Charitable gifts destined for foreign institutions or dignitaries on behalf of the Orthodox Church in America shall be transferred from our Operating Account to their respective
In very exceptional cases where it may be deemed appropriate to distribute charitable gifts in cash especially during travel abroad, the transfer of the gift from the United States must comply with US Government regulations concerning such matters. In this case the receipt of cash gifts must be verified in writing, by the recipient This verification shall become a part of the financial records of the Orthodox Church in America
Reimbursements related to major events meetings and travel shall be rendered by the Comptroller on behalf of the Treasurer only after receiving proper receipts or documents substantiating the expense are received
Checks shall be made payable to chancery personnel for such purposes only with the approval of the Metropolitan
The use of personal credit cards for Church related activities without pre approval may result in non payment of the expense
The Primary Policies and Procedures listed above is an initial attempt to apply some of the generally accepted standards used by other not for profit entities As determined by the Metropolitan Council "Best Practices for Financial Accountability" will serve as our standard for renewing our present Primary Policies and Procedures the future and in adjusting and expanding them as appropriate to our activity
Immediate Tasks for the Office of Treasurer
The FY 2004 audit should be conducted as soon as possible after all the expenses have been verified by receipt and reviewed by the Auditors elected by the Fourteenth All-American Council. This should be followed by an independent audit conducted by Kohsen & Hostelley who presently compile our annual financial statement or by another firm yet to be determined.
The FY 2005 audit should he conducted during the first quarter of 2006 in a similar manner.
Effective January 1, 2006 we will strive to spend well under the FY 2006 budgeted amount so as to avoid drastic cuts and fretting in the last third of the year if all the income anticipated in the FY 2006 Approved Budget does not materialize
The Orthodox Church in America Church Ministries
Procedures for Scheduling Events/Activities
The following procedures are being implemented to formalize and expand upon what had already existed for all Church Ministries during the previous triennium. By following these procedures, the work of each Church Ministry can be properly funded within (he current year's budget.
Goals and projects for each Church Ministry should be guided by the means of the Church, the abilities of the chairperson and members, while not exceeding the financial boundaries set by the current year's budget.
Funding to allow for new. expanded, or long-term projects in future years can be reviewed and considered if presented through Michelle Jannakos lo Father Kondratick in advance of [he Administrative Committee budget planning meetings held in September each year.
1. All Church Ministry chairpersons must present a detailed request (including proposed dates, proposed agenda/leaders, possible participants, etc.) to Michelle Jannakos, Church Ministries Coordinating Secretary via email at firstname.lastname@example.org who will forward the request lo Protopresbyter Robert S. Kondratick, OCA Chancellor. After Father Kondratick has reviewed the materials, he will make a decision on the approval to schedule the event/activity, pending authorization by the Treasurer. All church-wide conferences must be self-sustaining with a proposed budget designed lo meet and if possible exceed presumed expenses.
2. Upon obtaining Father Kondratick's approval, the church ministry chair will need to provide projected costs of the event including travel expenses to Michelle to be submitted to Fathers Kondratick and Kucynda. For this, the chairpersons have permission to contact Lucy Morrone at FOS Travel (email@example.com) and/or any other related vendors (hotels, etc).
3. When the Treasurer gives approval, based upon our present and projected cash flow, he will send notification lo the chairperson, with a copy lo Father Kondratick. Father Stavros Strikis, OCA Comptroller, Lucy Morrone, and Michelle Jannakos.