Canadian MC Report Offers Robust Defense of Syosset
Dr. Richard Schneider, lay delegate from the Archdiocese of Canada to the Metropolitan Council, submitted the following report to the Canadian Assembly, which met in Ottawa, Canada, in early July. Schneider, an Associate Professor of History at York University (Toronto), and a past President of the Canadian Council of Churches, offers a very different perspective on the Council and the ongoing scandal
from that given by Fr. Vladimir Berzonsky in his recent report to the Archdiocese of the Midwest. (Read that report here.) Schneider's report follows:
"Archdiocese of Canada,
Ottawa Assembly, July 2, 2007
From: Richard Schneider
Metropolitan Council Report, 2004-7
Rationale of this report:
Normally, a report from the Metropolitan Council is a simple list of accomplishments and activities. However, as all know, during the last three years widespread turmoil and emotional opinion -- partly fueled by the increasingly hostile rhetoric of a website intending to be critical -- about management by the OCA and the Metropolitan Council have spread. Therefore, the present report needs to be both more detailed and more explanatory than usual, to provide a clear and open record of the present situation of the OCA, and an informed and balanced view of the situation.
Overall theme of this report:
For a number of years – especially from around 1998 –2003 – financial and administrative scrupulosity in the O.C.A. were both carelessly and selfishly handled, and responsible oversight (by all parties) was either lazy or over-trusting. However, during the last triennium, through very hard work on the part of the Metropolitan Council and good co-operation from the Syosset offices, the OCA central governance has undergone a serious project of restoration of “due-diligence” control, of administrative restructuring and re-organization, of proper, open and appropriate financial management, and of a “high-ethical” culture through the adoption of a Best Practices Policy designed for not-for-profit organizations. It can be said (with some relief and with thanks to God) that, as an outcome of all this work, the present on-going running of the O.C.A. has been placed on a sound and reliable basis and that the “communal-responsibility” mentality of our uniquely conciliar church has been restored (at least among members of the Metropolitan Council, Holy Synod, and Syosset officers). The approach and style used at present by these three bodies for running the day-to-day central management can be trusted; if it is maintained and furthered in its present spirit, the future looks promising.
The question of what went wrong in the past is still not entirely clear, and not all is known; the process of untangling the mess is laborious and slow, and will require a great deal of patience from everyone. It is, however, very important that we keep firmly in mind that the sole useful purpose of unveiling the past is to learn from our mistakes, to know how things went wrong so that it cannot happen again, and to make restitution of any harms that may have been done, so that the O.C.A. can play its role of responsible steward and guardian with full clarity. Our efforts in regard to the past must never be carried on in a “prosecutorial” spirit of seeking revenge, or even worse, of just “digging up the dirt.” To do so would be un-Christian, un-Scriptural, and absolutely counter-productive.
For nearly a decade before the past triennium, but most intensely in the years leading up to 2004, an atmosphere of loose management – both administrative and fiscal -- and lack of ethics (again both administrative and fiscal) prevailed in Syosset. This was made possible by several causes: an undeclared administrative structure which caused all business to run through the office of the Chancellor, terrible accountancy practices (made worse by an antiquated and idiosyncratic financial software) which made scrupulous record-keeping and tracking of funds impossible – one of the consequences was lack of clean external audits during these years – and little detailed oversight by the Metropolitan Council (which for several of those years was not called to meet, and when it did meet acted in an over-trusting acquiescent spirit). To add to the difficulty, those in the Syosset offices who tried to bring this chaos to attention and scrutiny were silenced; an over-cautious and timid ethic of protection of the good name of the church and avoidance of scandal motivated much that was said and done, which – as always happens in matters of truth – made the latter scandal even worse when it did become public knowledge.
During the past triennium, a strong and awakened Metropolitan Council has worked long and hard in cooperation with the central offices and officers to restore regularity, scrupulosity, and order to the working of the O.C.A. central governance. A lot of this establishment of order has in fact required “re-ordering,” not only of structures and jobs, but also of policies and guidelines. The following report identifies in detail these accomplishments during the three years and their present outcome.
After more than a year’s hard work by an Organization Task Force, with the careful scrutiny and approval step-by-step of the Metropolitan Council, the flaws in the unregulated old administrative practice (in which the Chancellor’s office had nearly sole control over decisions and actions) were finally explicitly clarified, and it has been replaced by a new explicit and accountable system of mutual group responsibility among the directors of four new offices: Chancellor, Treasurer, Secretary, and Director of Ministries and Communications. Once this structure was approved an open job search was made for each office – again, with oversight by both the Metropolitan Council and the Holy Synod – and the directorships are gradually being filled: the new Chancellor is Very Rev. Alexander Garklavs, and the new Director of Ministries is Fr. Andrew Jarmus (from our Canadian Archdiocese); applications for Secretary were slower in coming, but at the time of reporting a good candidate is far advanced in the approval process. Treasurer has unexpectedly been hard to fill, because an outstanding candidate who was approved couldn’t move to Syosset for personal reasons; the position is still open and applications are welcome. (One important point that has emerged from the process is that while the Treasurer needs to have a good degree of C.F.O. grasp of the “big picture,” he/she must also – and for the most part – be able to manage the day-to-day accounting like a CPA, because the office of comptroller has been declared redundant in the plan. By Statute, the Treasurer must be an Orthodox Christian).
During all of this transition to the new system and search for candidates has been preceding, the Metropolitan Council appointed Deacon John Zarras as interim manager; he has done an outstanding job. The structure of permanent staffing at Syosset has been reworked for greater efficiency, with redundant (duplication of responsibility) jobs eliminated and other jobs outsourced, both changes resulting in considerable annual savings (about $65,000).
Committee management of Metropolitan Council oversight
To assist in the very hard work of re-asserting and maintaining its statutory responsibility of oversight of legal and financial management of the OCA – and to assure the directorial responsibility of “due diligence” to which all governing boards are bound by law – the Metropolitan Council has established a number of standing committees to ensure that all needed information is publicly known, that policy is being adhered to, and that management, budgeting, and every other aspect of operation, expenditure, and planning are under control. The new standing committees have been effectively at work for the past year: (a) finance committee oversees budgeting and validity of expenditures, and checks on accounting (b) investments committee keeps track of investment funds (c) charity committee oversees proper use of dedicated donations and also, in cooperation with finance, encourages ongoing expenditure on charity, (d) Metropolitan Council audit committee oversees the work of the OCA audit committee (elected at All-American Councils) and also works in liaison with the independent auditor to obtain quarterly reports and, eventually, clean audits (see below). Finally, at the June 2007 meeting we added (e) ethics committee as a resource to ensure proper functioning of Best Practice (see next).
The creation of these committees – staffed entirely by hard-working volunteers from among the Councilors – not only keeps the supervisory work of the Council functioning at an ongoing level of detail, but also guarantees that the Metropolitan Council is fully meeting the legal requirements expected of a Board of Governors (about which we have had considerable professional instruction during the past year): “due diligence” in oversight, loyalty to the best interests of the “corporation” rather than personal interests, obedience to charter (i.e., to the Statute of the OCA) and bylaws, and prompt and thorough correction when anything goes awry. (Note: the Holy Synod is equally accountable for these legal responsibilities of governors)
“Best practice” principle as the universal guideline for governance
One of the key elements in the establishment of a “new style” of governance in the OCA has been the writing, editing, and adoption of a set of “Best Practices” Guidelines. After legal review to be sure that these guidelines conform to all legal requirements of New York State not-for-profit corporations, followed by yet more word-by-word scrutiny for absolute clarity, these Guidelines have been adopted as the normative principles by which all governing bodies in the OCA – including Metropolitan Council, Syosset officers and staff, and the Holy Synod – will be ruled from now on. (The process took two years of very hard work, begun by an excellent drafting committee under the experienced guidance of Protodeacon Peter Danilchick, and continued by the Metropolitan Council).
The full text is an 18-page document available on the OCA website; it bears careful reading. In summary, the topics covered apply to financial governance, controls on expenditure, accountability and audits, transparency and mutually shared responsibility, good practice with documentation, and protection of “whistleblowers.” Included in the principles and practices which support these aims are an ethics policy, a document retention policy, a “donor bill of rights,” and a conflict of interest policy.
In the all-important – for a non-profit organization -- area of auditing considerable regularization has been necessary; independent audits were not made from 1999-2005, and while our independent auditing firm (Lambrides, Lamos, Moulthrop, who have special experience in not-for-profit auditing) has been making Herculean efforts with the past, the paper records are in a real mess and the computer software has proven to be both antiquated and idiosyncratic, and incapable of delivering the kind of records an auditor needs (see below re: new hardware and software).
However, progress in catching-up is proceeding, and the present is in very sound shape. We have a full draft audit for 2006 and for the first quarter of 2007. Note: these are not what auditors call “clean audits” because of two long-standing issues which must be resolved clearly before that is possible, viz., the ownership of the lands in Alaska, and the “carry-forward” of restricted donated funds which have not yet been distributed (in the latter case, the audit problem is created by the confusion of the old paperwork).
We now have triple oversight to assure the accuracy of audits: the OCA AAC-elected audit committee, the Metropolitan Council’s own audit committee, and the external auditors. On this basis, we expect in future to be able to obtain regular quarterly reports, monthly balance sheets, and an annual independent audit. As the external auditor put it in his most recent report: “Financial normalcy has returned to the church; good steps forward have been made, but there are many to go.” It is the auditor’s recommendation that the Treasurer must have excellent accountancy skills and see accounting as a major part of the job (see above).
Apart from the accounting difficulties just described, financial regularity in regard to both budgeting and income-expenditure coordination needed to be firmly established; this is now largely in place. For the present and future, we are operating with a soundly-based balanced budget under the supervision of the Finance Committee. For restoration of the past mess, a year ago the OCA secured a $1.7million “open” loan which was used to restore all internal accounts – departmental, restricted funds, etc. etc. – to exactly the levels corresponding to budgeted expenses and received donations, to pay all outstanding bills, and to provide monies for vitally necessary (but expensive) improvements such as the upgrade of the computer systems and financial software (see below).
Since then, finances have been going well and the loan is being reduced. The most substantial reduction came from the sale of a redundant house, which netted $540,000.
We are for a brief while in a period of extraordinary expenses -- heavy legal costs associated with correcting the problems of the past, extra meeting and travel expenses because both the Metropolitan Council and Holy Synod are meeting much more frequently (4 times a year in the case of the Council) and the committees are incurring ongoing expenses in the conduct of their work; the re-organization process has had its costs (travel for interviewees, etc.), and the purchase of a new computer system and software has been very expensive (see below). But the general picture is very good and can be expected to become better, as extraordinary costs diminish and as confidence returns in regard to stewardship institutions like FOS.
A very good press release summarizing the details of financial management by the OCA was recently posted by Fr. Paul Kucynda on the official OCA website, q.v.
Using the monies from the loan, every effort is being made to assure that every “dedicated” fund is fully restored to the levels represented by donations for the purpose; this work – made very difficult by the accountancy mess -- is not yet fully complete, but is very well-advanced, and is regarded as the highest priority. At the same time, the Charity committee is overseeing restricted expenditure of these funds for their intended purpose, and is facilitating – under the guidance of the Council – the distribution of the funds; good works are finally happening. As well, the committee works with Finance to establish “Charity” as a normal line in the operating budget.
Upgrade of computer and financial software; other IT matters
One of the most hampering factors in dealing with the past was that Syosset not only had ancient and rather feeble computers, but was using an idiosyncratic accountancy software incapable even of the simplest bookbalancing. We have invested in the installation of a modern hardware system, with a new server capable of handling an important accountancy software (from Blackbaud) designed for not-for-profits. It is expected that all the new administrators will become trained and competent in the use of this information technology, which will make possible regular financial management and audits. Web-site management is being reworked as well, and other IT matters are bring brought into the 21st century.
Joint meetings with the Holy Synod
One of the most exciting developments of the past triennium has been the decision to hold annual meetings of the joint Metropolitan Council and Holy Synod, to share mutual concerns, balance governmental decision-making to promote the spirit of conciliarism, and maximize direct communication. The first of these, in Dec. 2006, was a major success even though it had to deal with “hard” material; the next will be in October 2007. The joint meeting was as important for its positive spirit and dialogue as for deeds.
Heeding the widespread request of the faithful – which, inter alia, included a resolution by the Archdiocesan Council of Canada – that the All-American Council should meet sooner than 2010 -- the long interval was planned as an attempt at cost-saving. The next AAC is now scheduled for Summer or Fall of 2008. This is the minimum amount of time possible to make the complex arrangements for such a large gathering. It will be a simpler affair, dedicated entirely to church business.
Investigation of what went wrong in the past
This process has been exceedingly difficult, and has been the source of considerable pain and soul-searching. Before reading the particulars which follow, everyone is urged to re-read the second paragraph under “overall theme of this report” above, and to approach this topic in the spirit outlined there.
It must also be emphasized that the work of investigation is still incomplete, that important actions with regard to individuals are in process and not yet complete – and in a Christian community like ours, such corrective action also entails striving to maximize repentance and healing, which is something more than mere justice – and that significant issues of potential liability are involved. Hence, much of the detail which has been discovered in the investigation cannot now be made public, and some of it probably shouldn’t ever become fodder for public tale-telling; we have all seen how OCANews has shifted tone throughout the process from earlier whistle-blowing fact-publishing to an unrelenting rhetoric of innuendo, attribution of motives, and universal suspicion. The one issue which should count when probing the past is to determine where our practice became faulty and why this happened, so that such incidents will not recur; as well, we seek to maximize the possibility of restitution of anything which has gone awry.
For almost two years, investigative fact-finding was placed with the specialized law firm of Proskauer, Rose; they uncovered evidence of considerable financial mismanagement and misdirection, some of it willful and deliberate. During the past year, the Metropolitan Council has had its own Special Commission, created at the direction of Metropolitan Herman, to act as liaison with Proskauer, Rose; recently, this Commission returned a comprehensive summary report outlining as much as was known at the time about wrongful practices and lack of sufficient controls. The Council has asked that the Commission continue its work, which is ongoing, to get to the bottom of certain as-yet unclear matters, and this work is in process; as Metropolitan Herman has promised, “this process is tedious and time-consuming, but we will be thorough.” The results will be announced as appropriate when the task is complete, and until then, patience is required, most particularly because the subjects are sensitive and contain the potential for much harm if used pruriently.
Attitudes and patience
Certainly, in these days of electronic communication, everyone in the OCA is aware of the level of angry judgments and demand for immediate sweeping changes, restorations, and also retributions. The theme of this report is that during the past three years of very hard work the demands for change and restoration are, in fact, almost completely met, but this required deliberation, planning, care, and caution, and a primary urge to be fair, and it is being accompanied by deep structural re-adjustment which should prevent such grave difficulties from ever happening again. To do such work well and faithfully and thoughtfully is a long and complex task; what is needed from all the faithful everywhere at this time, in order for the work to proceed, is patience and understanding, and even more, prayer: prayers for wisdom in discernment, fairness in judgment, compassion and mutual sympathy. If we can find such an attitude in all of our hearts, we will certainly see a restoration of trust taking the place of inflammatory rhetoric. And once the needed changes in management structure, working processes, and ethics are firmly established, and the investigation of the past is ended, we will be able to build on what is in our hearts to establish the next and most critical step, finding the true means for deep repentance and healing.
In all of this action, decision-making, and work the Metropolitan Council has experienced cooperation and support from Metropolitan Herman and all others working currently at Syosset, and the spirit at meetings has been one of lively debate, respectful acknowledgement and evaluation of all positions, and final decision-making on the basis of a common mind; we are all working together and all have the good of the church at heart. The faithful are urged to see two very full and excellent assessments of the process by Metropolitan Herman, which are posted on the official OCA website: (a) his interview on Sept. 8 2006 with Protodeacon Peter Danilchick (in the Q & A section, #5), and (b) his Address to the most recent Metropolitan Council, June 12-13 2008
Questions, Comments or responses:
Prof. Richard Schneider,