NEW YORK – Photos: Dimitrios Panagos
The Archdiocesan Council of the Greek Orthodox Archdiocese of America, under the chairmanship of Archbishop Demetrios of America, convened at New York’s Marriott Marquis Hotel for its regularly scheduled fall meeting Oct. 19-20. During the meeting the Archdiocesan Council was updated on the financial situation of the Archdiocese. The Council reaffirmed its strong commitment to implement appropriate controls and procedures at the Archdiocese; and also reaffirmed its dedication to accountability and transparency.
His Eminence Archbishop Demetrios of America in his opening remarks first conveyed the blessing and love of His All-Holiness Ecumenical Patriarch Bartholomew who, as the Archbishop said, “is very aware of our meeting here and has expressed his love and care.” The Archbishop quickly enumerated some of the important events since the last meeting of the Archdiocesan Council, including the falling asleep in the Lord of Metropolitan Iakovos of Chicago and Metropolitan Philotheos of Meloa, the beginning of the work for the new Saint Michael’s Home in Long Island, NY and the convening of the Eighth Assembly of Canonical Orthodox Bishops of the United States.
The Archbishop spoke of “the discovery of serious financial issues which have been at the center of our concern and discussion.” His Eminence publicly acknowledged the very hard work for these issues of the Vice President of the Council George Tsandikos, the Secretary Cathy Walsh, the Treasurer Michael Psaros and the Chancellor of the Archdiocese, His Grace Bishop Andonios of Phasiane. “They are very much engaged,” said the Archbishop, “in the very intensive work to establish the means and ways of overcoming this difficulty.” Archbishop Demetrios also said that the Holy Eparchial Synod dealt with these matters in a very sincere and open way. Expressing his resolve for transparency and accountability in all matters relating to the Archdiocese, His Eminence said, “For us there is something more than transparency and accountability. For us the ultimate criterion is a divine criterion, a criterion in the Gospel and from the Gospel and that is the truth. We have to be truthful to ourselves individually and we have to be truthful among ourselves as a community and we have to make truth a central issue in a world of falsehoods, distortion, a world of the post-truth era. The truth is not negotiable.”
Mr. George S. Tsandikos, the Vice President of the Archdiocesan Council in his address to the Council urged unity and truth. “It has been a challenging and trying year for all of us and, most especially, for our beloved Archbishop,” he said, and explained that “we have been confronted with some serious financial issues which have affected the daily functions of our Archdiocese. It has been painful for all of us when we are forced to reduce staff and make necessary budget cuts.” At another point of his remarks Mr. Tsandikos said to the members: “My commitment to you and all the faithful is that with your cooperation, we will leave no stone unturned and we will use our full abilities and resources to continue our path to address both the structure and procedures of the Greek Orthodox Archdiocese.”
Further, Mr. Tsandikos said that the Greek Orthodox Archdiocese of America has stood the tests of time and has had a profound and lasting impact in transforming lives and institutions at all levels of society. “Our accomplishments have been exceptional due to the committed men and women, families and youth who comprise our omogenia. We cannot discount these achievements in the face of financial and administrative issues. In fact, it is during these times that our role becomes ever more relevant and significant. We have the talent, ability, will and spirit, to find creative solutions to address these difficulties, always speaking truth in love, as His Eminence has reminded us.”
Mr. Tsandikos concluded as follows: “… this is a time for unity. Not fragmentation. For the good of the Archdiocese – our National Church – do not let those who wish for weakness lessen our resolve to strengthen the Greek Orthodox Archdiocese of America. We have accomplished so so much. Let us resolve to unite to continue the good work for the years ahead.”
Mr. Michael Psaros, Treasurer of the Archdiocesan Council, offered a detailed and comprehensive report about the findings to date and pledged that going forward there would be accountability and transparency. (See the full text of his address below)
Present at the meeting were Metropolitans Methodios of Boston, Alexios of Atlanta, Nicholas of Detroit, Savas of Pittsburgh, Gerasimos of San Fransisco and Evangelos of New Jersey.
Also in attendance were His Grace Bishop Demetrios of Mokissos, Chancellor of the Metropolis of Chicago; His Grace Bishop Sevastianos of Zela, Chief Secretary of the Holy Eparchial Synod and His Grace Bishop Apostolos of Medeia, Chancellor of the Metropolis of San Fransisco.
The Council, following the discussion on the finances, heard and deliberated on several presentations of reports from the departments, ministries and organizations of the Archdiocese. The Archdiocesan Council Committees had met the previous day and advanced the work of the Church. These reports included: Stewardship, Outreach and Evangelism, Archons, Administration, Development, Youth &Young Adult Ministries, Ionian Village, Communications, Ecumenical Office, Internet Technologies, Internet Ministries and Center for Family Care.
The Council confirmed that the next Clergy Laity Congress will take place in Boston, on the 4th of July weekend. A proposal by George Behrakis to postpone it until 2019 was rejected. As Metropolitan Methodios of Boston said, a cancelation will cost the Archdiocese the $500,000 deposit. According to sources, Archbishop Demetrios suggested to cut on the days and many of the festivities and use the time for more discussions on the issues of our Church and Archdiocese.
Statement of Michael Psaros,
Treasurer of the Archdiocesan Council
One year ago at this meeting, Vice Chairman Archon George Tsandikos, Secretary Ms. Cathy Walsh and I were elected by this Archdiocese Council to serve as Officers. We serve only with the blessing of, and under the direction of, His Eminence, Archbishop Demetrios, Geron of America.
INTRODUCTION: GOALS AND OBJECTIVES
We agreed to the following goals:
- The GOA had to fully realize, that it is by its nature and mission, an institution that must have accountability and transparency.
- From an accountability standpoint, the GOA must create a culture where every single dollar donated by every single member of the Faithful is treated with respect and humility. We understand that thousands of people donate hundreds of thousands of hours volunteering for our Parishes, often on their feet for days at Church festivals in order to satisfy their assessment to the GOA. We recognize that there is a general feeling of disappointment at the local Parish level with what has been interpreted as “broken trust” with the GOA as a result of its current financial position and circumstance. The GOA’s response must be both practical and cultural in order to rebuild the sacred trust between the GOA, the Metropolises and the Parishes. This specific healing process has started already.
- From a transparency standpoint, the GOA is willing and must provide the Faithful with comprehensive knowledge of its finances with total transparency. While the GOA has made verifiable progress towards this critical objective, please understand that a material amount of time and resources will be required to achieve true transparency. In the future, the GOA’s Annual Audit must be completed in a timely manner, then reviewed by a newly created independent audit committee that will brief the Executive Committee. Thereafter, the GOA’s Annual Audit will be posted online on the GOA’s website and published in the Orthodox Observer. A copy will be mailed to every Metropolis and Parish.
- Further, we recognize that Parishes have been asked to increase their GOA assessments for the next two years. The Parishes will not be asked to increase their assessments any more specifically as a result of the GOA’s current financial situation.
The foundation for proper financial management in any organization is clear internal controls, practices and procedures. Every Government, every Church, every business and every not-for-profit institution is governed by rules, processes and procedures. This is the only way to ensure proper order, accountability and control. Further, these internal controls, practices and procedures must be documented, transparent, actively monitored and enforced.
The reason for the GOA’s structural operating deficit, accumulated financial obligations and the current acute cash funding issues it is experiencing today is very simple: a deficiency in proper internal controls.
Prior to even discovering the GOA’s financial difficulties, the Officers realized the GOA was deficient in internal controls, practices and procedures with respect to controlling expenditures. The discovery came in two forms. First, in the beginning of 2017, we reviewed the deficiency reports in the Grant Thornton audit reports from recent years. Second, we asked basic questions of management and staff. A logical question is why were the deficiency reports not addressed before? We do not have a concrete answer because this period predates our work, but we do have an observation: The reason is a problem of weak internal controls and processes. It is our understanding that the primary contact with Grant Thornton was the former Director of Administration and an audit committee that included the Chair of the Finance Committee, a breach of basic financial practices. The auditor should have met with an independent committee, or with the Finance Committee as a group, not staff or insiders. That is not done and will not happen again. This practice will be corrected promptly. Specifically, a new audit committee comprised of qualified Archdiocesan Council members will be appointed to serve through the end of July 2018. Improvements to the Regulations to establish a completely independent committee will be proposed to the 2018 Clergy-Laity Congress.
With the blessing of His Eminence, Archbishop Demetrios, we started the process of implementing internal controls beginning in April 2017. Concurrently in May 2017, the GOA engaged Grant Thornton to conduct a thorough operations review intended to provide recommendations on how to create a world-class ecclesiastical not-for-profit institution from an internal controls perspective. This report cost $150,000, and was paid for by a private donor. The final report is expected to be received next month and will be shared with the Executive Committee.
Creating and implementing internal controls is a complex process that must be implemented with care. External resources will be required. Each process and procedure will need to be documented, implemented, communicated and enforced. This difficult and complex process will require time and resources, but is essential for order, structure and integrity in the operations of the Archdiocese.
In furtherance of establishing proper governance and internal controls, processes and procedures, with the blessing of his Eminence, Archbishop Demetrios, the following actions were taken:
- His Grace, Bishop Andonios, the GOA’s Chancellor, assumed key administrative responsibilities after the resignation of the former Director of Administration in September 2017.
- The Chairman of the Finance Committee was relieved of his duties in October 2017. Mr. Louis Kircos was named as the new Chair of the Archdiocesan Council’s Finance Committee.
- The Director of Finance of the GOA was relieved of his duties in September 2017.
- His Eminence, Archbishop Demetrios, appointed Fr. Soterios Baroody as Chief Financial Officer (CFO) of the Archdiocese in April 2017. Prior to his appointment, the GOA did not have the position of CFO. Father Baroody holds a Bachelor in Business Administration, a Master of Divinity Degree and a Master of Accounting Degree.
- Prior to the creation of the CFO office, the former Director of Administration had control of Administration and Finance. There has now been a clear separation of these functions.
- The Archbishop will appoint new members, with appropriate backgrounds in accounting and finance, to serve on the Archdiocesan Council Audit Committee through the end of July 2018. Thereafter, with the approval of the next Clergy-Laity Congress, a new Independent Audit Committee will be appointed. Members of the new committee will be required to have a professional background as CPAs and auditors. A vote of the Clergy-Laity Congress and the approval of the Ecumenical Patriarchate will be required to amend our GOA regulations to create this new Independent Audit Committee. Until the regulations can be amended, we will attempt to include as many independent and qualified members as possible on the standing Audit Committee. No longer will the auditor present its findings to GOA staff and insiders, but rather to this committee. This is similar to the conduct of publicly traded companies in the U.S. in respect of these matters.
- The GOA will engage an accounting firm to perform a consulting study of the GOA when practicable. Precatory accounting and booking work is required prior to beginning this process. The accounting firm will be asked, among other things, to verify the size of the GOA’s operating deficit and the current total obligations of the Archdiocese. This study will be funded by a private donor.
- PWC and Baker Hostetler have been retained to conduct an independent forensic audit of St. Nicholas. PWC will perform this service at a greatly reduced amount, and Baker Hostetler’s services are pro-bono. We thank both firms. This audit will also be funded by a private donor. These firms will report to an Independent Committee. Please understand that the Officers had no knowledge of, or participation in, the process involving the construction of St. Nicholas. The GOA will not have a comment, beyond the statement in its recent press release, regarding St. Nicholas until the forensic audit is completed. I can assure you, most personally, as the first $1 million cash donor to this project, that His Eminence, Archbishop Demetrios, and the GOA remain committed to the construction of this National Shrine.
ACTIONS TAKEN REGARDING
STRUCTURAL OPERATING DEFICIT
Upon becoming CFO in April 2017, Father Baroody conducted a ninety-day review of the GOA’s finances between April and the end of June. In July, less than four months ago, Father Baroody presented his initial report to His Eminence, Archbishop Demetrios, and the Officers. In July, we were extremely disappointed when Father Baroody informed us that the GOA had an estimated structural operating deficit of approximately $4 to $5 million for 2017. Historically, a portion of that structural deficit was funded by gracious benefactors, some of whom have fallen asleep in the Lord.
With the blessings of His Eminence, Archbishop Demetrios, and under the leadership of His Grace, Bishop Andonios, immediate and decisive actions were taken to reduce operating costs to bring revenues and expenditures into balance.
Beginning in August actions were taken to reduce the GOA’s operating cash costs by approximately $6.5 to $6.7 million. These actions included:
- Reducing staff across the board,
- Reducing general administrative costs, including staff cell phones, credit cards, travel and expense accounts which have been restricted and/or eliminated, and
- Implementing new vendor management protocols and controls
- Depending on the GOA’s receipt of assessments from the Parishes, additional cost reductions may be required in 2018.
I ask you, humbly and respectfully, to consider the magnitude of the cost and spending reductions that occurred within a month of discovering the scope of the structural operating deficit, and I ask you to reflect on how quickly and decisively we reacted to this discovery.
I can confirm that we are exceedingly disappointed that Father Baroody discovered transfers involving funds in restricted and custodial accounts of approximately $4.75 million. We believe that the funds in these accounts were transferred to fund the GOA’s legacy operating deficit. We are proceeding with an examination of all transfers, and will engage an accounting firm to confirm the specific nature of those transactions. We understand it is imperative that all avenues be explored to restore the proceeds to these accounts as soon as possible. We will pursue all options to do so. In the meantime, we believe that proper internal controls have been established to prevent this practice from occurring again.
FINANCE COMMITTEE AND THE BUDGET
The issue of the GOA’s “Official Budget” needs to be addressed. Every two years, the Clergy-Laity Congress approves the “Official Budget”. Speaking as the GOA’s Treasurer and as directly as I can, the facts demonstrate that this “Official Budget” does not reflect the actual financial status of the GOA. Anyone familiar with how organizations operate from a financial perspective, understands that budgets must be established from the ground up, and then monitored month-by-month, quarter by quarter and annually, for variances, in order to have any integrity. There is a strong recommendation that the Finance Committee meet with the CFO regularly to monitor variances in the new budget that is being developed relative to actual performance. Had that exercise occurred over the past two years, a more realistic and timely understanding of the GOA’s financial position would have been known 18-24 months ago.
The only way for the GOA’s operations and ministries to continue to operate is for the Parishes to fulfill their assessments. I pray that the combination of all the actions taken in the past few months, actions taken to ensure accountability and transparency will provide our Parishes with the level of trust and confidence required to fulfill their critical obligations to the GOA. These actions include new leadership, new people in critical senior management positions, a plan to implement new internal controls, practices and procedures, the establishment of new independent committees, the retention of accounting firms for various audits and reports, and very significant and immediate cost reductions. While we are working hard to transform the GOA, if the Parishes refrain from funding their assessments, the present and future of the Greek Orthodox Church of America will be impacted.
In a short period of time, by the Grace of God, the GOA has made strides to achieve its objectives of accountability and transparency necessary for its mission to proclaim the Gospel of Christ in the U.S.A and beyond.
The Officers, with the blessing of His Eminence, Archbishop Demetrios, and the most Revered Hierarchs of our Holy Eparchial Synod, are working hard to bring order, structure and integrity to the operations of the Archdiocese.
We are people of faith and hope.
While our efforts may take time, we are making great progress.
Now is the time for all of us to work together for our future and the future of our children.
I ask for your prayers as we proceed with our endeavors.
Everything I have said today is with respect and humility.
Michael Psaros, Treasurer