Second presbytery meeting scheduled to vote on repaying misallocated special offering funds
By Paula R. Kincaid, Staff Writer, February 22, 2007
The Presbytery of New Covenant has scheduled a special meeting Feb. 27 to take final votes on a plan to repay approximately $1.5 million in special offerings and restricted funds that were misallocated by its former director of business affairs to cover the presbytery’s increasing cash flow problem.
At its Feb 10 meeting, the presbytery voted to repay the funds by drawing from a presbytery endowment fund over a five-year period. Two votes are needed – both by a two-thirds majority at subsequent presbytery meetings – to withdraw the money from the Cris Miller Fund.
The five-year payout was recommended instead of a lump sum payment so that the presbytery could still fund its Vision Initiative Grants – created to increase membership and disciples in the presbytery.
Presbytery officials discovered in early November 2006 that special offering funds received by the presbytery from its member churches had not been forwarded to the General Assembly since late 2002 or early 2003.
The discovery came after the Board of Pensions contacted the presbytery Oct. 31 about the small amount of money the presbytery had given to the Christmas Joy Offering over the past three years.
General Presbyter Mike Cole said he immediately called the director of business affairs who admitted the presbytery was “behind on remitting special offerings because of our cash flow problems,” according to his “State of our Finances” report dated Nov. 18.
On Nov. 3, the presbytery relieved the director of his duties, placed him on administrative leave and terminated his employment as of Nov. 15. The former director’s name was removed from all presbytery accounts, locks and key codes were changed to all presbytery buildings and the presbytery’s computer network access was restricted.
Cole said the presbytery’s auditors have “found no evidence to suggest that either the director of business affairs or anyone else benefited from the misapplication of funds.”
Cole said the former director of business affairs “controlled access to the information on the restricted accounts, dispensing specific information only as it was requested and never sharing the detailed summary report of the restricted accounts.”
Auditors did not catch the problem, he said, because they “did not understand that these were not for our use and were to be passed through our accounts to the General Assembly.”
The only person who knew what was occurring, Cole said, was the director of business affairs.
Money problems
The presbytery owes the General Assembly $1,003,912.56 from special offerings that were collected by member churches and forwarded to the presbytery. Those funds were supposed to have been sent to General Assembly accounts, but “without the authorization or knowledge of anyone,” the director of business affairs withheld the money to cover serious overspending.
The special offerings and the funds misallocated include:
- Joy Christmas Offering: $256,557.04
- Peacemaking Offering: $48,572.19
- Pentecost Offering: $38,334.56
- One Great Hour of Sharing: $557,912.57
- Theological Institute Fund Offering: $96,145.67
- Witness Offering: $6,390.53
Restricted funds held by the presbytery for related groups, entities and ministries also have been misallocated. As of Oct. 31, 2006, the presbytery owed $372,459.55 to third-party restricted accounts and $160,790.00 to balance its own restricted account. The debt totals $533,249.55.
And accounts for 14 new church development accounts were overspent. The accounts were mostly for NCD pastor salaries, but also for rent and other expenses.
“We have an ethical commitment to support eight new church development pastors in the immediate future at a cost of $40,000 per month. These pastors have been relying on us in good faith to pay their salary, housing and benefits,” Cole said.
The former director of business affairs also leased 11 copiers – four of which are in storage – for $179,000 in rebates. Total potential liability of the presbytery between 2007-2011 is $716,057. An attorney who reviewed the leases advised the presbytery that it would be difficult and expensive to try to void the leases, and offers for an early buyout with five of the copier companies were more expensive than letting the leases run their full term.
In summary, Cole said, “Our obligations fall into two categories: cumulative and ongoing. Cumulative obligations total $1.5 million – that is the amount of the special offerings owed to General Assembly, plus the amount of restricted funds not backed by cash on hand. Ongoing obligations total $163,000 per year for copiers and $40,000 per month for new church development pastor salaries.”
Other ways to repay
The presbytery has three parcels of land in the Houston area for sale, and those proceeds would be used to pay the debt. Any extra money from the sales would be used to repay the endowment fund.
Little interest has been shown in two of the parcels, which have a combined asking price of $1,060,600. The presbytery has been told by its Realtor that the third parcel has a high probability of selling in the near future. Its asking price is $3,147,000.
A special offering debt repayment fund has been established by the presbytery for those wishing to help repay its debt to the General Assembly. A special account has been set up by the G.A. for the presbytery to make its payments, to keep those funds separate from current offerings.
Other ideas from its Dec. 19 financial update include:
- 1. “Make sure that the 2006 per capita ($5.57 per member) is paid in full by the end of this year. As of October 31, 2006, we had received only $128,729 of $223,000 in per capita which we are required to remit to the General Assembly.
- 2. “Help retire the debt to General Assembly and our restricted accounts by contributing $37.50 per member to the ‘Special Offering Debt Retirement Fund.’
- 3. “Establish a partnership with one of our new church developments for full or partial salary support. Salaries for NCD pastors range from $2,000 to $7,800 (inclusive of housing and pension) per month. A partnership could also include $9 per member support for New Church Development in 2007.
- 4. “Pay the 2007 per capita ($5.79 per member) as early in 2007 as possible.”
In his Nov. 18, 2006, report, Cole said Presbyterians will respond to the presbytery’s financial crisis because of a sense of obligation, guilt, fear and/or devotion, but these were not reasons to “step up to the kind of support this presbytery needs.”
“This presbytery, all 107 churches, 18 new church developments and 40,000 Presbyterians have received a vision from God to be partners in transforming Southeast Texas – the WORLD – for the sake of the gospel. It’s not the presbytery that we are supporting, it is the vision God has planted within this presbytery that we are supporting. If we fail to support this vision, then we will miss the challenge that God has set before us,” he said.
New Covenant Presbytery includes 107 congregations and 11 new church developments spanning Southeast Texas.
Paula R. Kincaid is a staff writer for The Layman and The Layman Online. She can be reached at prk@www.layman.org.