1993 – the Financial Scandal

In 1993, Charles Sydnor, St. George’s rector completed his 17th year as rector.  Sydnor and his predecessor Thomas Faulkner served the church collectively 57 years from 1946-2003.  1993 would perhaps be Sydnor’s most challenging year.

The church would going through a growth spurt according to Parochial Report figures.  Baptized members rose from 1007-1071 from 1993-1995 and communicants   735 to 790. Amount pledged would also be rising from $201,039 to $276,563.

Despite these figures more were not attending St. George’s on a weekly basis. The average Sunday attendance declined from 350 to 261 which is approximately a decline of 25%. 

The church had been in a financial bind. At the Congregational meeting in 1992, Senior Warden George Van Sant spoke about church expansion – instituting commissions, establishing 2 new choirs, “building a vigorous Youth Group and Youth Ministry Commission.” The recession of the early 1990’s was also a factor. The were questions whether the church could fund the Assistant ministry and Director of Music until $16,000 in additional cash donations and a $5,000 pledge was received. Compounding the problems was the practice of carrying over expenses not paid until the next year.

Not helping these numbers was the loss of the assistant rector.  Jack Sutor was leaving to a new church in Martinsburg in February. St. George’s had 3 services on Sunday’s morning. Charles Sydnor realized it was not possible for 1 clergy to do 3 on a consistent basis.   The 9:15am service, the middle one, was cut.  Worship and Music‘s report to the Vestry expressed “disappointment at the lack of discussion between the Rector and the commission and the apparent hurried, unilateral manner in which the decision to eliminate the 9:15am service was made”.  The early service and 11:15 would remain.  The changes would not be made until after the program year.   

In February, 1993 the Vestry directed the wardens to appoint a Personnel and Operations committee.  The first goal of this committee was a mutual ministry review expectations between Rector and Vestry. It “serves as an instrument for promoting growth, rather than as a tool for measuring success or failure.” No such review had taken place during Sydnor’s years.

Another issue mentioned by the Vestry that was a concern was mission discernment.  The Parish meeting of March, 1993 identified concerns raised by parishioners – “communications between and among parishioners, leadership in the parish, the expanding needs of the active youth group, and pastoral care.”

Finances were came to the forefront at the opening of 2003. In January, Tom Embrey, the finance chair, estimated the shortfall at “no less than $20,000 and no more than $23,000.”In a close vote, the Vestry voted to borrow $21,000 from internal funds (church trust funds) or from an outside source over a period of 3 years.   The church had used the practice of borrowing from future year’s revenues to pay those of the current years.   A budget resolution was drawn up in February to borrow from Fredericksburg Savings and Loan

There were other obligations – $40,000 was due to the Rectory Fund (to be paid from capital drive), $10,000 A. W. Wallace, and finally $34,000 Quenzel bequest

The Vestry had an “Action Plan Accountability Outline” for the rector, wardens, vestry, commissions and committees with dates for completion as a well as parish plan.    The church was beefing up its performance manual and one of Charles goal was to select a performance evaluation form and to complete evaluations.   In addition a bylaws committee was formed since the church did not have bylaws.

The Vestry has to elect officials for the church’s work to include a wardens, a parish treasurer, and a registrar for its meetings. In a key vote Frank ‘Mason treasurer since 1988 was not elected. Joe Sers took his place. This would have repercussions. The operating fund would go through brief audit to clear the books with the transfer of duties.

Finances would dominate their meetings.  Discussion began over the inconsistency over budget numbers.  The church had not undergone an audit in past years.  They agreed Joe Sers would reconcile the Bank statements and begin with those numbers.  The Vestry moved Finance Committee meet with Treasurer and report to the vestry at April meeting analysis of the current financial situation. Apparently there was a problem with the 1992 records in requiring a possible reconstruction of bank records.  

April 14 took up issue of an audit. Dave Adams suggested check random various checks and only 2 month recreation. Tom Embrey reported NBF charge $3 a check and $15 per hour to research. Statements received from July to Dec at no cost.

They could get the second half statements. Tom Embrey reported NBF charge $3 a check and $15 per hour to research.   The decision was made to recreate 2 months of records with a maximum cost of $250.  In May, Embrey reported Rector, Parish Sec, parish financial assistant and Director of Music asked to go through checks to determine items recognized as expense. 87 items were reduced 45 with checks under $50 removed.

The scandal broke in June, 1993.  AIM 2000 has just approved on June 6 in a special Vestry meeting.  Junior Warden Bullock was  to enter into contract with Quinn-Evans for the “development of a detailed plan to renovate, remodel and update the facilities of St. George’s Church as presented in “A.I.M. 20000”. Finance committee was authorized to work on establishing plan for a line of credit based on pledges for the special fund drive

On that same day, Tom Embrey and Lana Digges approached Rector and Senior Warden Ed Jones with a number of checks found that the treasurer had made out to himself in the process to recreate 1992’s records.

A meeting was held June 10 Tom Embrey, Lana Digges Senior Warden Ed Jones and Junior Warden Pam Jewett-Bullock met with former treasurer Frank  Mason. Frank confessed over last 2-3 year had written checks to himself “to an amount of perhaps as great as $20,000.”

Charles had been in contact the Diocese. They recommended an 8 step process:

  • advise the Vestry
  • line up audit and process quickly
  • Advice on contacting a lawyer
  • determine entire amount of loss
  • notify the bonding insurance carrier – not required to file a claim as this point \
  • Vestry does not have a legal or ethical obligation to prosecute
  • inform congregation as soon as facts known
  • Do not accept installment payments – accept only the amount taken in full 

Senior Warden said Vestry needs to assure Parish this not happen again. Above all they had to main maintain strict confidentiality. A task force of the rector and wardens would direct the process

An emergency Vestry meeting was held on June 17. National Bank of Fredericksburg will recover records from 1990-1992. The Church received $43,000 check from Mason June 18, 2003 based on funds received from his parents. $40,000 plus $3,000 interest.  He left with the understanding that the matter was not closed.   The 43,000 was eventually used for $18,633.34 debt retirement from a loan taken out at Fredericksburg Savings and Loan

Mason arrived with his employer Mr. Richard Miller, Vice President for Business and Finance.  Mason revealed that he took funds from an affiliated foundation. Mason was terminated immediately according to procedures. Charges had to be filed with Commonwealth Attorney.

The Vestry directed a letter to the Parish on the recent events and the calling of a Parish Meeting on Sunday at 9am. A press release would go out on Monday.  The dialogue would continue at a brunch scheduled for June 27.

The task forced decided that full restitution would be defined as return of all money plus interest, the cost of the recovery of all records and a request that Frank would go into counseling.

At the congregational meeting, Ed Jones reviewed the chronology and specified 4 objectives that would guide the Vestry

  1. Reach out to his family spiritually
  2. Determine the amount of the loss, to define restitution, and to secure restitution
  3. Inform the parish, Mary Washington officials , legal authorities and the community in a timely manner
  4. To formulate policies that this situation would not happen again.

The Finance Committee was asked to contact an accountant to review the events and propose suggestions.   This was seen a step in the audit though the records had not been reconstructed

Another special Vestry meeting was held on August 5.  The Rector had spoken to Mason on July 30 with a new amount. Frank presented Church additional $32,000 postdated to August 5.

The Senior Warden talked to Frank on Sun 8/1. Finance Chair Tom Embrey in investigating checks found an additional $7,500 in checks written to Central Fidelity were uncovered.

The Vestry had reviewed check data and reconstructed from 1989 until 1993 when Mason ended his term as Treasurer.  On the 1988 records were incomplete and the Vestry proposed those records be recovered.

Vestry also mandated a certified letter be sent to Mason on August 6  saying Frank still owes  the Church $8,686.52 and requested lump sum be presented before the regular Vestry meeting of August 11. An updated letter would also be sent to the Parish.

The August meeting reviewed the new financial procedures

Pam Bullock moved and seconded no accounts can be setup for church groups without prior approval of vestry.  Passed. Bobby Lee moved no fund raisers without prior approval of vestry. 

Finance committee report new procedures in written report. Pam Bullock motion to require all checks drawn on the operating fund subject to 2 signatures regardless of amount. 

Summary of the procedures

  1. Continue dual control procedures of bank deposits of Sunday collections. Expand current cash verification procedures to incorporate bill count verification.
  2. Institute procedure for receipt of non-collection plate cash. Receipt only by church staff member but not reassure. Receipts of cash in amount of $100 or over issued receipt and dual control. Dual control is notification to clergy, wardens or Finance Committee person if second staff not available. No cash overnight
  3. Monthly cash receipt report reviewed by Finance Committee and Treasurer. Review for accuracy, review for dual control compliance of both Sunday collection receipts and non-collection
  4. Disbursements – only by Check. Authorized signatures Treasurer, Senor, Junior Warden, Church signature.

No check restricted amount paid to parishioners. Such disbursements cleared through operating acct

  1. Disbursements records and audit
  2. Hire financial secretary/assistant on part time that should include pledge recording, accounting, staff payroll, physical plan disbursements.
  3. Expenditure of commission controlled budget d funds should be by written request signed by Vestry Commission liaison. Request include budget line. Need signature of Financial Assistant here and in 3A.
  4. Monthly reconciliation. Finance committee make a cash disbursement review
  5. Special fund – all treasurers and custodians of restricted funds account to Vestry via the Finance Committee annually
  6. Lock records current and historic in office.
  7. Finance Committee arrange for audit church accounts. . Recommended audit of current Operating Fund completed after implementation of procedures.
  8. Finance committee should maintain a bonding ledger or register

A special Vestry Meeting was  held on August 22. “Special committee on Financial loss” met with Russ Roberts regarding options and then met with Frank August 18. Frank looked at his pension plan and could  get $8,686.52 funds from that. Rector recommended not charging Frank for  the recreation of the 1988 records unless irregularities were found.  No irregularities were eventually found.

The proposed financial  controls required more study based on recommendation of Bill Schwarz and the wardens. In the interim they would  require Treasurer and one other signature on checks > $250 between October 1 and end of calendar

By September, the special task force said that $83,686.23 was recovered less $18,633.34 debt to Fredericksburg Savings and Loan or a net of $65,052.89. There was still $40,000 borrowed from the Rectory Fund which they had only been paying interest.

At the October, 1993 Vestry meeting, Treasurer Joe Sers reported

  • Financial records now located Church office
  • No Virginia tax papers was filed 1992 . Sers take care of it
  • A new computer up and running

Frank Mason provided a check for the final $8,686.52 as of Sept 25. He wrote that “I need to express my sincerest apologies to each of you for the pain I have caused…“I would like the people to think of Frank Mason as the person they knew before. .. I don’t know what made me act as I did over the past several  years.”

Ad Hoc Committee in November reported 100% restitution. Committee then presented the unanimous recommendation Vestry not press criminal charges. Vestry moved on this recommendation and to send their own letter to Parish along with Frank’s original and letter sent to Frank informing him of their decision.

 They ended the letter this way “We are assured in Holy Scripture that when anyone is in Christ, they are a new creation; the old has passed away, the new has come. In this gift of new relationship created by our reconciliation, we again extend our hand to you and your family to worship with us in this community of faith.”

Allocation of recovered loss.

  1. Decided pension plan for Director of Music with 2 years – Commitment had been made by the Rector to DOM that pension plan opened on hiring. Personal policy manual states pension plan opened after 1 year of employment and thus 11/91 she would be entitled to pension plan.
  2. Motion annuity purchased under 803(B) through the DOM immediately vested. Amount will be 5% of 1991 and 1992 wages or $2200. This was moved an adopted [Later changed to $2300 in 12/8/93 Vestry]
  3. Recommendation of joint Finance and PPO that recovered funds not be used this year for staff comp but consideration for increased comp be deferred until 1994 with “high priority” given to consideration of staff increased in 94 budget process.

This was divided into two motions and passed.

Then they  voted on recommendations of Finance Plan on how to use recovered funds.

Cash in

 

75,000.00

Retrieved as of 9/9/93

8,686.23

Owed

1,000.00

Donation recover records

 

 

$84,686.23

TOTAL CASH IN

Cash Out

 

18,633.34

Repay FSL

8652.75

National Bank fee

7,130.00

1993 pledges received in 1992 to pay operating fund and pay pas due bills

10,000.00

Working capital

2,975.97

Purchase computer and software

27,000.00

Partial Rectory fund repayment

8,094.17

Second Partial payment to rectory fund

 

 

$84,686.23

 TOTAL CASH OUT

 

 

Conclusion – Changes to finance a result of the scandal

  1. Records kept in the church office
  2. Work on getting an audit which was done for the period Feb., 20, 1993 through Dec., 31, 1993. This was a continued problem of maintaining an audit in the 1990’s.
  3. New computer system to handle financial records
  4. Receipts of cash in amount of$100 or over issued receipt and dual control. Dual control is notification to clergy, wardens or Finance Committee person if second staff not available. No cash overnight
  5. Monthly cash receipt report reviewed by Finance Committee and Treasurer. Review for accuracy, review for dual control compliance of both Sunday collection receipts and non-collection
  6. Disbursements – only by Check. Authorized signatures Treasurer, Senor, Junior Warden, Church signature.  Two signatures required
  7. Disbursements records and audit
  8. hire financial secretary/assistant on part time that should include pledge recording, accounting, staff payroll, physical plan disbursements.
  9. Expenditure of commission controlled budget d funds should be by written request signed by Vestry Commission liaison. Request include budget line. Need signature of Financial Assistant here and in 3A.
  10. Monthly reconciliation. Finance committee make a cash disbursement review
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