Memorandum from the Audit Committee

Moderators' Note: The following Memorandum from the Audit Committee was sent out to the community by the Parish Council on August 12, 2013 via e-mail. The original may be viewed here.

Memorandum To: The Parish Council of The Greek Orthodox Church of Greater Salt Lake

From: The Audit Committee of The Greek Orthodox Church of Greater Salt Lake

Date: August 11, 2013

Subject: Preliminary Report - Audit of Church Related Accounts - Benevolent Funds

This report summarizes the findings that were presented to the Parish Council at the Audit Committee's meeting of July 15, 2013. The information herein is provided to the Parish Council for use at its discretion.

Summary of Findings

Benevolent fund accounts are established to give our priests the ability to help those in need,through acts of charity/benevolence. It is the priests' responsibility to ensure that parishioner funds donated to these accounts are used appropriately and with discretion. The preliminary conclusions of this audit are that the parish's benevolent accounts are being used in ways that are questionable and appear to be inappropriate. The findings thus far are disturbing and complicated, and could result in a number of issues for the parish including, but not limited to tax reporting and tax payment problems.

It is important to note that neither of the benevolent funds accounts that we reviewed still exists. The Holy Trinity account was closed in May of 2013 and re-established at a different financial institution, with the account statements redirected to the priest's residence. The Prophet Elias account was closed in November 2012 and re-established under the tax identification number of the Philoptochos Society of Prophet Elias Church. Transactions in the new accounts are not part of the findings for this audit. However, thus far, the clergy has been uncooperative in the audit process making it difficult to perform the audit appropriately.

Concerning the Holy Trinity benevolent fund account, we have been able to review only a small sample of over one hundred checks written in less than one year. We have already seen where over $4,600.00 of benevolent fund contributions were directed to the priest's family members. More review and attention must be invested to analyze the activity of this account.

The Prophet Elias benevolent account activity was reviewed for a three year period. Approximately 48% (over $12,000.00) of the total contributions to the account during this time were paid to benefit only one person, an employee of the church. Most often the payments were made payable to a third party such as a landlord or utility company for the benefit of the employee. However, there were instances in which the payments were not directed to third parties but were written to "cash", with notes indicating that the payments were for the benefit of the employee. Additionally, we observed that the administrative secretary's name is listed on the account statement which generally indicates that in addition to the priest, she is a signor on the account. We further noted that although the priest prepared and signed most check payments, the administrative secretary also prepared some checks for the priest's signature,and she periodically prepared and signed the checks herself without the priest's signature.

Findings from the audit have raised a number of possible tax reporting issues. We suggest that a tax expert be consulted to help determine if reports need to be made and if payments need to be made to the IRS and Utah State Tax Commission. Because so much is still unidentified, we recommend that the parish commence a review process to determine if additional issues are discovered. It would be most helpful to everyone concerned for the parish priests to assist in gathering the needed information for accurate reporting.

Some potential church tax issues may now also become tax issues of the Philoptochos Society of Prophet Elias Church. The Philoptochos Society might want to commence its own review process to ensure that its tax exempt status is not in jeopardy from similar issues. Furthermore, it is not clear if the donations to the benevolent funds account over the previous years were receipted as donations to the Philoptochos Society of Prophet Elias Church or if these were reported back to parishioners as donations to the church. Additional donor-related issues may arise if the donations were not accurately receipted. We suggest that a tax expert be consulted.

Background Information

The Audit Committee feels it appropriate to provide some information related to the basis on which it was determined that the Audit Committee should look into accounts related to the church. Although it is known by some that a number of organizations are using the church's Federal Tax I.D. number, the extent to which the Tax I.D. number was being used and the various purposes behind the usage were not clear. The Parish Council set about a process to identify all accounts using the Tax I.D. number and as this process matured the Parish Council determined that it was in the best interest of the parish that an officer of the Parish Council be assigned to each church related account to provide some degree of supervision over the account. [This does not apply to accounts of organizations which have their own Tax I.D. numbers and are distinctively apart from the church such as the Philoptochos organizations.] The Parish Council also determined that accounts under the church Tax I.D. were properly auditable by the Audit Committee. That determination included the benevolent funds accounts.

Concurrent with these actions by the Parish Council,the Audit Committee began receiving information from parish members suggesting improprieties in the benevolent funds accounts. These reports started coming to the Audit Committee prior to the end of 2012. The Audit Committee communicated these reports to Parish Council executive officers,and communicated more limited information to the entire Parish Council prior to the end of 2012. The Audit Committee then commenced the reviews of the accounts in January of this year. As part of this process, we also communicated with His Eminence Metropolitan Isaiah. In a letter dated February 25,2013, we communicated the following:

"A number of members of the parish have indicated that they have knowledge of improper usage of benevolent funds. This information is rather widespread in the community and the list of parishioners with the knowledge grows as each week passes. The energy surrounding the issue reached such a level that a Parish Council member requested that the Audit Committee look into the matter. The Audit Committee then met with the three executive officers of the Parish Council and discussed the issue which concerns the use of benevolent funds for clergy personal purposes. It is noted that some of the information being spread contained facts and descriptions which gave the stories some amount of plausibility. With all of this it was determined that an appropriate and proper course of action was for the Audit Committee to look into the benevolent funds activities and try to dispel the harmful rumors. As I am sure you can understand the stories and rumors are becoming harmful and divisive in the community. "

The audit process experienced a number of difficulties. The closing of the accounts and movement of the Prophet Elias benevolent funds account under the Philoptochos tax I.D. number complicated the review process. Moreover, the clergy has repeatedly said that they refuse to provide information and will not discuss the issues with the auditors or the Parish Council. The clergy, including the Metropolitan, have stated a number of times that the Audit Committee should not review the benevolent funds' activities. His Eminence indicated in a February 4,2013 communication to our priest, copied to all clergy of the Holy Metropolis of Denver, "... you must not keep lasting records of the good deeds which are being done with the funds you receive for this purpose" suggesting that the records associated with these accounts should be destroyed. Then in His April 2,2013,response to the auditors' letter of February 25,His Eminence stated the following:

"Again I reiterate, a parish benevolent fund does not fall under any audit committee of a parish. However, if someone knows anything about misuse of benevolent funds, he or she must come forward and disclose the information. And, if the charges appear to be legitimate, then the clergyman would certainly wish to come forward to clarify the situation and allay any possible suspicions." 

During his most recent visit to our community, the Metropolitan met with an Audit Committee member and the Parish Council president and the Metropolitan was provided information on these audit findings. At that meeting he did not restate his objection. Rather, he directed that some audit related information be sent to him in Denver for his review, and that he would be responding after he has had an opportunity to review the information more completely. Beyond suggesting that we might want to close the benevolent fund accounts as a solution to the issues, the Metropolitan did not provide any further guidance. As of the date of this letter, no further response has been received.

There is more work to be accomplished as there are significant parts of the benevolent accounts that have not yet been reviewed. Even though the Parish Council has determined that it is best for church related accounts to have some degree of supervision by the Parish Council, the priests have tried to prevent that supervision. This problem needs to be resolved.

As noted previously,the information in this report was presented to the Parish Council on Monday, July 15th, prior to the Metropolitan's visit to the parish. At that meeting,the Parish Council received more details than are disclosed herein. A number of recommendations were included in the report to the Parish Council and the Metropolitan. The Parish Council is trying to deal with the many issues surrounding these findings,while dealing with the other issues of the parish.

Audit Committee members: Tom McGrath, Jim Sakellariou, Basil Chelemes, Lee Kapos