Audit of Episcopal Church Trust Funds Under Way as Group Files Complaint
Episcopal News Service. April 3, 1997 [97-1725]
(ENS) An attorney representing a small group calling itself the Trust Group has filed a complaint with the New York state attorney general claiming possible mishandling of trust funds held by the Episcopal Church.
James H. Crosby of Mobile, Alabama, a member of the standing committee of the Diocese of the Central Gulf Coast, stated in a March 11 press release that his clients -- three retired bishops, one priest and five lay people -- were not satisfied that treasurer Stephen Duggan was providing sufficient information about the management of the nearly 1,000 trust funds totaling about $200 million. Crosby said that his clients were particularly concerned about the funds' management during the tenure of the previous treasurer, Ellen Cooke, who is now serving a five-year prison sentence for the embezzlement of $2.2 million from the church.
Crosby had demanded that the Trust Group be permitted to conduct its own review of the fund's accounts, and when that demand was refused, said, "we have no choice now but to seek the support of Attorney General (Dennis) Vacco."
In letters to Crosby, however, both Presiding Bishop Edmond Browning and Duggan explained that the Executive Council had already authorized an independent audit of the trust funds, which is under way, and that the audit's results will be made public. "I am therefore not willing to permit further private investigations to be conducted in the midst of what I have concluded to be a proper, official investigation of the same matter," Browning wrote.
As of the first week of April, there was no indication whether the attorney general's office would consider the Trust Group's complaint.
Duggan said that the audit is being conducted by Arthur Andersen & Co., the firm chosen to conduct the church's regular annual audits after the Cooke embezzlement, and should be completed by June. The trust funds have been reviewed annually as part of the church's regular audits, Duggan stressed, but said that this special audit will focus specifically on the funds starting with the year 1991, the year Cooke apparently began her embezzling. Specifically, the audit will seek to determine that "the ending balances in each fund are correct and that during the years under examination the income from each fund was used for the purposes the donor intended," Browning wrote.
At the time that Cooke's embezzlement was discovered, the accounting firm of Coopers and Lybrand "carefully examined all cash transactions of church accounts that appeared also to involve the personal accounts of the former treasurer," Browning wrote. "That exhaustive review revealed no basis for concluding that any income or principal of the trust funds had been diverted."
Even so, Browning noted, because the review discovered that "the operating description of a small number of the trust funds with restricted uses had been changed," Duggan recommended a separate audit "to make sure that no errors had been made in the annual management of the funds." The changes, Browning wrote, "appeared to relate, not to the uses to which income was to be put, but rather to the level of supervision or approval required for the distribution of the income."
While Duggan promised that "any necessary corrective actions" will be taken should the audit reveal any problems with the funds, he denied that he had ever said that "as many as 20 percent of our endowment funds had had their income misused or misdirected," as Crosby claimed. "That is inaccurate," he said in a letter to diocesan administrators.
Following the initial audit this year, Duggan said, a third of the trust funds will be audited separately each year on a rotating basis to ensure that each account is examined regularly.
At its March meeting, the Joint Standing Committee on Program, Budget and Finance responded to Crosby's allegations by expressing "confidence in the processes initiated by the presiding bishop and treasurer of the Episcopal Church." The committee also noted that "this audit was begun long before any questions were raised by Mr. Crosby and his clients."
The committee echoed Browning's explanation that "it is impractical and inappropriate for small groups of 'concerned' church members to be given untrammelled access to all the records" of the trust funds, "especially when a thorough audit of those same records by an independent, dispassionate firm of highly professional auditors has been under way for some months."
Approximately half of the trust funds managed by the church are designated to support various aspects of the church's ministry, according to Catherine Lynch, assistant treasurer. The other half include funds that are designated for other purposes but managed by the church on behalf of individuals or groups.
According to Crosby, the Trust Group includes Bishops Maurice Benitez, retired bishop of Texas; Gordon T. Charlton, retired suffragan bishop of Texas; and Alex Dickson, retired bishop of West Tennessee. Also belonging to the group are the Rev. Tim Smith of Mobile, Alabama; Stewart Broad of Chevy Chase, Maryland; Lee Buck of Atlanta, Georgia; Raymond J. Dague of Syracuse, New York; and James McGehee, Jr. of Memphis, Tennessee.