Comments by Alan J. Segal, CPA, MST, CSMC
Consultant on financial issues to the Concerned Pennsylvania Episcopalians
Alan J. Segal is a consultant to the CPE’s at a cost of $1.00 per year. His c.v. can found at www.alansegal.net.
MEMORANDUM
To The
Concerned Pennsylvania Episcopalians
with reference to:
Unrestricted Net Assets
To understand this discussion concerning unrestricted net assets two Diocesan Canons must first be understood. Canon 13, Section 13.3 is the canon “Regarding Certain Gifts” and 13.4 is the canon “Providing a Trustee for Corporations Unable to Function”. My understanding of these Canons, in non-legal language is as follows:
Canon 13.3 Regarding Certain Gifts: In plain English, any funds given to the Diocese can either be invested with the Church Foundation or directed to other uses for the benefit of the Diocese only with the approval of Standing Committee.
Canon 13.4 Providing a Trustee for Corporations Unable to Function In plain English: funds gained by the Diocese from any Church unable to function shall be invested in the Church Foundation or other trusts, only with the consent of The Standing Committee.
These Canons are set forth at the end of this article for your reading pleasure and study.
I am not an attorney, so my perspective on these two canons is simplistic. Canon 13.3 allows the use of funds in any way seen fit, as long as Standing Committee approves of the action. No action can be taken without the approval of the Standing Committee.
Canon 13.4 allows only two “uses” of funds gained from a Church unable to function in one form or another. Those monies must be invested in the The Church Foundation, not with the approval of Standing Committee, but with the consent of Standing Committee. Investment must be invested “under the same trust” or if none exists “then under such additional or different trusts…with the approval of Standing Committee”.
Both sections demand either consent or approval of Standing Committee to the Ecclesiastical Authority’s requests.
Why go into this exposition on Canons 13.3 and 13.4? Because in the listing of cash available for use in the Budget, Canon 13.3 has, as of December 31, 2005, $910,957 of assets assigned to it, and Canon 13.4 has $2,545,710 assigned to it. That listing of cash was supplied to a sub-committee of Concerned Pennsylvania Episcopalians by Chandler Joyner, with the consent of the Bishop and Bill Bullit. We, the sub-committee, have made no determination as to the correctness of the fund balances or of their assignation to Canons 13.3 and 13.4, respectively.
According to the explanation given us by Chandler Joiner and Bill Bullit, the assignment to Canons 13.3 and 13.4 came into being as follows. A law firm supplied a law student intern to the Diocese to read and write descriptions of the various trusts. Those explanations and certain original documents were then joined together to form the basis for the assignation. There was no legal opinion given as to the correctness of this work. Chandler Joyner and persons unknown (he used the pronoun “we” in his explanation) then made the decisions as to where the monies should be assigned. No work was done on any trust fund that was zero at the time of this work.
I suggest that an audit of those records is in order. Such audit should be not of the records presented to us but of the original trust documents and other filings.
Furthermore, until such time as we can ascertain the current balances of the unrestricted funds and reach a final determination as to the propriety of the characterization as either Section 13.3 or Section 13.4 funds, we simply do not know what funds are available to balance the budget .
In order to move the budget process forward I suggested that two funds in the listing of Canon 13.4 funds (St. Giles with a 12/31/05 balance of $256,879 and St. Peters with a 12/31/05 balance of $749,935) be “declared” available, still subject to the consent of The Standing Committee, after Spencer Franck, Esq. and I review the documents and fund balances. We believe that this work can be completed by the March 25th Special Convention. All other funds, with the exception of those which Bill Bullit was willing to give a legal and binding opinion, shall not be considered available for use in balancing the budget until such time as an audit of those funds is concluded. As of this writing no legal opinion has been forthcoming or access to the documents granted.
Canon 13.3 Regarding Certain Gifts
Whenever any property, real or personal, has heretofore been or shall hereafter be bequeathed, devised, conveyed or given to the Diocese of Pennsylvania, or to the Episcopal Church in the Diocese of Pennsylvania, or to any Bishop, Dean or other officer of the Diocese, or to any body thereof, for use in connection with the work of the Diocese, the Ecclesiastical Authority of the Diocese, with the approval of the Standing Committee of the Diocese, may grant, convey transfer and assign such property, real or personal, to The Church Foundation in trust. Absent specific direction to the contrary in any bequests, devises, conveyances, gifts or deeds of trust for use in connection with the work of the Diocese, and except for gifts specifically directed to the Bishop’s sole discretion, such gifts and the income earned on such gifts shall, consistent with the general directions of the donors, be expended for such particular purposes and uses as may be declared by the Ecclesiastical Authority of the Diocese with the approval of the Standing Committee. (emphasis added)
In plain English, any funds given to the Diocese can either be invested with the Church Foundation or directed to other uses for the benefit of the Diocese only with the approval of Standing Committee.
Canon 13.4 Providing a Trustee for Corporations Unable to Function
Whenever any property, real or personal, has heretofore been or shall hereafter be bequeathed, devised or conveyed to, or be in any manner in the lawful possession of any incorporated body, for use in connection with the work of the Episcopal Church in this Diocese, and such incorporated body
- through loss of membership or otherwise is, or shall become, incapable of corporate action, or
- in the determination of the Standing Committee has, in fact, discontinued normal exercise of corporate functions, or
- through its vestry or board of directors shall formally resolve it wishes to relinquish such trust,
- shall legally dissolve, or
- in the determination of the Bishop, with the advice and consent of the Standing Committee, has ceased to act in accordance with the Constitution, Canons, doctrine, discipline, and worship of The Episcopal Church and the Constitution and Canons of this Diocese,
then the Ecclesiastical Authority, anything in the articles of incorporation or by-laws of such incorporated body to the contrary notwithstanding, shall be trustee thereof, by and with the consent of the Standing Committee, to take such steps as may be legally necessary or proper to vest such property, real or personal, in The Church Foundation, under the same trusts under which it had been held by such incorporated body, or if there be no such trusts, or if the same, in the judgment of the Ecclesiastical Authority, have become impractical of execution, then under such additional or different trusts as may be declared by the Ecclesiastical Authority by and with the approval of the Standing Committee. In the event of the application of clause (e) of this Canon 13.4 nothing herein shall be construed to preclude the Ecclesiastical Authority from first seeking reconciliation. (emphasis added)
Again in plain English: funds gained by the Diocese from any Church unable to function shall be invested in the Church Foundation or other trusts, only with the consent of The Standing Committee.
