Committee proposes solution to designated funds dispute
Parker T. Williamson, The Layman, June 25, 2008
SAN JOSE, Calif. — The General Assembly Committee on Mission Coordination and Budgets has proposed a peace treaty in a multimillion-dollar contest between the General Assembly Council (GAC) and the Presbyterian Church (USA) Foundation.
The two agencies squared off before the committee over contesting claims of fiduciary authority. Each fielded a lineup of luminaries to argue its case during Tuesday’s hearings.
At issue was a recommendation issued by Stated Clerk Clifton Kirkpatrick and seconded by his Advisory Committee on the Constitution. They proposed that, if a dispute arises between the GAC and the foundation regarding the proper use of a donor-designated fund, the GAC should have the final word.
The recommendation, if approved by the General Assembly, would reverse a long-standing General Assembly policy that recognizes the foundation as fiduciary of long-term and donor-designated funds.
Foundation officials disputed the recommendation, citing legal documents, trust law and generally recognized accounting principles. They said the proposal to allow a fund beneficiary — in this case, the GAC — to interpret donor intent was unwise, imprudent and dangerous.
Stated clerk’s testimony
Kirkpatrick led the charge on behalf of the GAC. He argued that all funds given to the denomination are under the authority and control of the General Assembly, and not beholden to secondary agencies like the foundation.
The stated clerk reminded commissioners that this is not the first time a dispute has arisen between the foundation and the GAC. He referred to a standoff that occurred at the 1996 General Assembly, during which he was elected clerk. “For the current situation to be allowed to continue is untenable for the life of the church,” he said.
Civil law
In an informational DVD distributed by the foundation two weeks before the General Assembly convened, foundation officials insisted that when a donor or a fundraising campaign places restrictions on the use of a gift, and when denominational officials accept the gift with those restrictions, a contract is created. Contracts are legal instruments that are enforceable by civil law, and the fiduciary is responsible to the courts for ensuring contract compliance.
But Kirkpatrick has argued that the church is exempt from civil court enforcement of these restrictions. He says that agreements made by church officials reside within an ecclesiastical orbit which is protected from state intervention by the First Amendment.
Foundation supporters respond that, if a church agency violates donor restrictions, it is as culpable under civil law as a minister who sexually abuses a parishioner and claims First Amendment protection because he committed the act while serving as a minister. According to the foundation, church/state separation principles do not exempt church agencies from obeying the law.
Timothy Clark, chairman of the foundation’s trustees and a veteran bank trust officer, brought that argument to the fore when he reminded committee members that the foundation had a commitment to honor General Assembly directives only to the extent that they were lawful.
That raised the hackles of some committee members, who said the foundation appeared to be positioning itself above the General Assembly. It also angered a handful of presbytery executives whose presbyteries have been beneficiaries of GAC funds. In a stinging letter to foundation President and CEO Robert Leech, they accused the foundation of acting “more like the board of directors of a corporation in the middle of a proxy fight” than like Jesus who took a bowl and towel to the Upper Room.
Claiming General Assembly authority
John Matta, a representative of the Advisory Committee on the Constitution, commended Kirkpatrick’s interpretation of Presbyterian polity and civil trust law. “The final authority on these issues rests with the General Assembly,” he said. “That is the important thing for you to keep in mind.”
Throughout the day-long committee meeting, Matta, who had been designated by General Assembly managers as “an official resource person,” frequently went to the microphone, hammering home his contention that the General Assembly has sole authority over funds given to the denomination and that the GAC is empowered to act on behalf of the General Assembly when it is not in session.
The General Assembly meets biennially for a period of one week, so in essence, Matta was arguing that except for one week every two years, the GAC holds ultimate fiduciary authority.
Allison Seed, chair of the GAC, testified that the mission of the church had been impeded by the foundation’s sometimes-unreasonable restrictions on donor-designated funds. She said that funds had been frozen by the foundation, placing the GAC in the untenable position of having paid for programs that in its judgment were appropriate without being reimbursed by the foundation for those expenditures.
Responding to Seed’s complaint, Clark reminded commissioners that as fiduciary, the foundation is responsible for ensuring compliance with donor instructions. For that reason, he said, the foundation asks GAC personnel to identify grant recipients and provide other certifying information that enables the foundation to compare the GAC’s action with donor intent. He said funds are released when the foundation receives documentation. On occasion, the GAC has not complied with this requirement and the foundation has frozen those funds, Clark said.
Silver bullet misfires
Veeda Javaid The GAC’s silver bullet appeared in the form of a traditionally dressed Pakistani woman who appeared at the committee’s hearings. Veeda Javaid introduced herself as the executive director of the Presbyterian Education Board of Pakistan. She said many years ago, donor-designated gifts endowed Christian education work in India. Income from the fund originally underwrote the Pakistani schools that she administers because at that time, the country that is now Pakistan was part of India.
Javaid complained that the foundation had declined to forward funds to her program now because the trust instrument named India, not Pakistan, as its recipient country. She pleaded with the committee to override the foundation and release this money for her schools.
April Davenport, legal counsel to the GAC, showcased Javaid’s complaint as an example of the problems the GAC has experienced with foundation restrictions. She said that in this case, she had urged foundation personnel to take the issue to court in order to obtain a ruling that would release the funds for the Pakistani schools. She said the foundation had refused to honor her request.
Laura Plumley That accusation brought Laura Plumley, the foundation’s attorney, to her feet. Plumley produced a written memo that she had sent to Davenport on July 21, 2007. The memo stated, “April, unfortunately, given the fact that the donor specified specific countries rather than a geographical location, we are bound to spend it in those countries regardless of the fact that the geographical boundaries may have changed. If you feel that the traditional geographical boundaries should be the area for spending the money, I would be glad to take this to the court if you can produce a basis for the argument and documentation of the prior boundaries and today’s
boundaries. Otherwise, these funds should only be spent in current day India and Egypt.”
“We never received an answer from the GAC,” said Plumley, “so we kept the restriction in place.”
Plumley said that in cases like this where conditions change and a ruling is appropriate, the foundation has obtained documentation from the GAC, filed the motion and paid the associated court costs. What the foundation is not willing to do, she said, is unilaterally alter the donor’s restriction in lieu of obtaining a court order authorizing it.
In the hush that followed Plumley’s rebuttal, Melissa Sevier, vice chair of the committee, announced a recess. When the committee reconvened, she said, “What we’ve seen here is the impasse. Let’s don’t have any more case studies.”
Solution suggested
Bob Davis and Joanne Hull During committee recesses, committee members Bob Davis and Joanne Hull drafted a proposal to help the committee overcome its impasse. Their document recognized the value of each agency and the particular gifts that they bring to the table. It identified the foundation as fiduciary “under civil law,” with special focus on managing funds and the GAC as a mission body whose expertise is in program implementation. In cases where the two bodies cannot agree, the resolution called for the formation of a restricted funds resolution committee comprised of two representatives from each agency and three unrelated people with expertise in trust law and theology.
In the ensuing discussion, Seed asked that Kirkpatrick’s office name the three non-entity representatives and that the decision of this committee be considered final. Leech objected to Seed’s suggestions, noting that Kirkpatrick’s office had proven itself not to be a neutral party in this matter and that the foundation, by law, could not delegate its fiduciary responsibility to another entity.
Committee members agreed that the General Assembly moderator, not the stated clerk’s office, should appoint resolution committee members, and they struggled to find a way to solve the fiduciary issue. Finally, they concluded that the restricted funds resolution committee would hear both parties and then render its judgment as to the donor’s intent. If the foundation and GAC do not concur with the committee’s decision, the parties may seek resolution from a civil court.
Representatives of the foundation and the GAC signed off on the compromise document, and after several hours of wordsmithing by committee members, it was approved for transmittal to the General Assembly later this week.