OCA: Q&A -- "Lack of Internal Controls"
Monday, September 25, 2006
Lack of Internal Controls
I read the statements issued by the Lesser Synod of Bishops regarding OCA finances and find them very disturbing. The fact that no audit can even be attempted for 2004 and 2005 shows a complete lack of internal control over these matters and I cannot see any postings addressing these internal control issues. Have the lack of controls been identified and have adequate and cost effective controls put into place? Best practices are nice goal to shoot for but internal controls can and should have put into place in months....not years. It appears that there is some reluctance by the leaders in the church to quickly fix this issue and communicate on findings and changes.
There is no question that the reported lack of documentation and resultant loss of internal control is extremely distressing and is completely unacceptable. Until the auditors report for 2004 is made public, we cannot know the extent of the lack of controls that existed at that time. However, since November 27, 2005, various new procedures to improve internal control have been put into place. These were published on the OCA website in the report of the Acting Treasurer to the June 2006 Metropolitan Council meeting [CLICK HERE FOR THE DOCUMENT]. Some sample provisions are as follows:
On a day to day basis, the Metropolitan, as Primate of the Orthodox Church in America, will review and approve all expenditures of the church.
All proposals for major events, meetings and travel, must be submitted in writing well in advance.
All travel should be substantiated with receipts and relevant documents.
Reimbursements related to major events, meetings and travel shall be rendered by the Comptroller on behalf of the Treasurer only after receiving proper receipts or documents substantiating the expense are received.
All checks shall be issued to a payee. No checks will be made payable to a third party for conversion into cash.
Charitable gifts destined for foreign institutions or dignitaries on behalf of the Orthodox Church in America shall be transferred from our Operating Account to their respective banking institution.
The use of personal credit cards for Church-related activities without pre-approval may result in non-payment of the expense.
The draft Best Practice Principles call for accounting to be performed according to Generally Accepted Accounting Principles (GAAP) for Not-for-Profit Organizations. They state further that internal controls should be documented in a procedures manual, including handling of incoming money or other assets and deposits thereof to the appropriate unrestricted / restricted / endowment / reserve fund, investment of assets, approval of all disbursements including petty cash and payroll, monitoring of expense accounts, etc., with adequate segregation of duties and corresponding checks and balances.
In addition, the draft Best Practice Principles and Policies call for the establishment of an Audit Committee within the Metropolitan Council which would be responsible for supervising the annual audit of the financial statements of the OCA central administration (including, as appropriate, internal controls, operations and accounting policies) by an independent certified public accountant or accounting firm experienced in such audits. The Audit Committee also provides to the Metropolitan Council an independent insight into the internal controls, operations, accounting policies, and financial reporting of the OCA administration.
The administration would be responsible for implementing the proper system of internal controls and documentation. The Audit Committee of the Metropolitan Council would be responsible for overseeing that system and satisfying itself that the internal controls are being properly executed. Thus, this proposed check-and-balance will hopefully ensure that the problem identified in the audits does not re-occur.
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