A Summary of the Funds

 

The Churchyard Endowment Fund

This fund has a century old history, with the fund balance mainly attributable to donations made by the Melville family. In the mid 1970's, 100% of the balance of the securities in the Churchyard Endowment Fund was Melville Corporation stock. The purpose of the fund is to maintain the churchyard, i.e., the cemetery, into perpetuity. This fund had a balance of 1.2 million dollars in 2000. Although dividends and interest did not always match maintenance expenses, appreciation of the securities generally more than offset expenses--and in fact often increased the balance of the fund sufficiently to allow for occasional capital projects such as replacing the fence.

Other than the Melville donations, parishioners pay into this fund when (historically) purchasing plots or (in recent years) reserving a plot for a family burial. Some of that money goes to the expense of opening the grave site, the balance to the perpetual care of the plot. Most parishioners have family and/or friends buried the our Churchyard and expect those plots to be cared for over the coming decades & centuries. However, in mid 2016 the entire balance of the account (nearly $836,000) was moved to the new "consolidated" account in violation of the New York Cemetery Act, which requires these fund to be held separately. Do not believe the line that "the Cemetery Act does not apply to churches." While some of the provisions of the Cemetery Act don't apply to our church, section 1507(c)(1) specifically does:

 

The Vestry has stated that it's intention is to use the new combined account to, in part, pay for the future expenses of maintaining the cemetery. "The road to hell is paved with good intentions," an English proverb of murky origins, applies here . . ..

While a myth developed in the late 1990's that the Vestry could use this fund for other purposes, that myth is false. See this document to understand how this myth developed. The balance of the Churchyard Endowment Fund is now zero.

 

The Remembrance Fund

Another fund that has a century old history, this fund was our endowment. The interest & dividends were to be used for any purpose. The principal could be used for an occasional permanent memorial to a departed parishioner. During the last quarter of the 20th century income was annually transferred to the operating fund and the surplus reinvested. That allowed the operating reserve to build to 1.2 million dollars in 2000. Due to deficit spending, that operating reserve went down to zero in the first quarter of 2016. A few months later the mass transfer of the Churchyard, Remembrance, Building and Organ Funds to the new "combined" account took place. Coincidence? Certainly not. The income for the then 1.5 million dollar balance of the Remembrance Fund was not sufficient to cover the annual deficit, and the principal could be used only for permanent memorials--not to cover operating expenses. Now that money is in the combined account and is being used without restrictions at the whim of the Vestry. To see a document that covers the purpose of the Remembrance Fund, click here (last two pages of the linked document). The balance of the Remembrance Fund is now zero.

 

The Organ Fund

Established in the late 1990's, this fund is reserved for the maintenance and/or replacement of our organ. Two serious violations of trust have occurred with the Organ Fund. First, in 2010, nearly $279,000 was received from a parishioner's estate left specifically and exclusively to the Organ Fund. That money was deposited to the Organ Fund, then immediately transferred to the Clergy Compensation Account, which is an account within the Remembrance Fund. That transfer is illegal without the approval of the court, which is only obtained by filing a cy pres petition. No petition was ever filed.

Then, in May of 2016, the entire remaining balance of the Organ Fund (about $70,000) was moved in its entirety to the new "consolidated" account. Just like the other restricted accounts above, when people made donations to this fund a trust is created with the expectation that their donation will be used for the purposes outlined in the fund document/stated purpose.

Every week those attending services are given written announcements which include solicitations for these funds. Don't be misled by the fact that the word "fund" was removed from the weekly solicitations, replaced by the word "areas." If the church requests donations to the Churchyard/Remembrance/Organ/Building/etc., you have the right to expect your donation will be used for that specific purpose. The balance of the Organ Fund is now zero.

 

The Building Fund

As the name implies, the Building Fund is to be used for capital improvements to the structures at Caroline Church. Its balance has historically been erratic, sometimes in debt to other funds in order to complete other projects. Examples include in the 1980's when the Building Fund borrowed from Operating to complete improvements to the Marco C. Smith Building and in the early 2000's when the Building Fund borrowed from Remembrance Fund to complete the Rectory renovation. That 2000 debt was paid off (and the Building Fund put more that $900,000 in the black) when an unrestricted bequest of nearly one million dollars was put in the Building Fund. That bequest is the lone example of a temporarily restricted donation: an unrestricted donation is placed in one of the special funds by the managing board. In this case, the Vestry placed the money in the Building Fund and thus had the right to move it elsewhere at a later time.

That said, other parishioners have donated money to the Building Fund over the years. When the Vestry moved the entire balance (about $408,000) to the new "consolidated" account they were moving a mix of permanently restricted and temporarily restricted monies. Moving the restricted portion of the Building Fund was an unlawful breach of trust.

It is notable that only a year after this 2016 transfer, parishioners were solicited to donate money to replace the roof of the Marco C. Smith Building, a $36,000 project. Had the $408,000 Building Fund balance not been transferred the money for this project would have been available. It should further be noted that when that solicitation letter was sent (July 5, 2017) the money for the project had already been withdrawn from the "combined" account ($36,095 on June 27) and the books show that money used to pay for the project in three installments. Monies collected from donations for the project were simply deposited to the church's main checking account as "income."

The balance of the Building Fund is now zero.

 

Fr. Jim's Fund

Created in late 2000 by an anonymous donor and reinforced by later donations, Fr. Jim's Fund helps to pay for special occasion musical programs and children's Christian Education. This fund was not part of the "temporarily restricted" myth and thus thankfully was not moved to the new "consolidated" account. But for the last three years monthly statements go unreconciled and the set of books for the fund have not been updated to reflect earnings and expenses. Further, donations made to the fund during this period have been deposited to the main checking account and only once during the three year period have those donations been transferred to the fund. This is a dangerous breach of procedure and trust.

 

The new "Combined" Account

This new account had a balance at the beginning of 2019 of about 2.5 million dollars. The account is not listed in the church by laws and therefore there is no guidance on how this account is to be used. So there are no rules. That's a dangerous thing. What is more dangerous is that, even though the fund is now three years old, no set of books have been created. No balance sheet, no profit and loss statement, no journals and no ledgers. Like Fr. Jim's Fund, monthly statements go unreconciled. This a a major breach of the fiduciary duties of our Vestry to monitor and control the finances of the church.

 

Audits

Why have the above violations not been picked up by annual audits? For decades Caroline Church had been audited annually by certified public accountants. In the early 1990's those auditors stopped the first attempt to raid the Churchyard Endowment Fund (see this document). But effective with the 2016 fiscal year (the same year the mass transfer was made) this practice was replaced with an "internal" audit. When this change was approved in late 2015 as a cost saving measure, the understanding was that we would use a CPA for the audit every other year. That has not happened. Had the 2016 books been properly audited it is very likely that this litigation would never have occurred.

While an internal audit is an approved method of fiscal review by the diocese, it does not rise to the same standard as a true "audit" that is required of a CPA firm. The reports submitted by the audit committees for the 2016 and 2017 fiscal years were two pages and one page respectively, and contained no financial statements. It is notable that the 2016 audit pointed out that the church did not conform with the standard not-for-profit accounting and the MANUAL OF BUSINESS METHODS IN CHURRCH AFFAIRS ('Manual") because there was not a Statement of Financial Position (also referred to as a Balance Sheet), Statement of Cash Receipts and Statement of Cash Flows. Although nothing had changed in this regard for 2017, no mention was made of the deficiency for that year. The 2018 audit has not yet occurred as of the date of this writing.