wfn.org | Audit of Episcopal Church trust fun

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April 3, 1997
Episcopal News Service
Jim Solheim, Director
212-922-5385
ens@ecunet.org

97-1725
Audit of Episcopal Church trust funds under way as group files
complaint

by James H. Thrall
      (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.

Audit focuses on trust funds
      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.

Program, Budget and Finance endorses audit process
      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.

--James H. Thrall is deputy director of the Office of News and
Information of the Episcopal Church.