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Information Regarding the Archdiocesan Financial Status

Information Regarding the Archdiocesan Financial Status

(Note: The following update was sent via email to the groups identified in the salutation, and is long, but the issues at hand are important.  We urge you to consider this in its entirety, not piecemeal or out of context.)
 
Good afternoon reverend Fathers and Presvyteres, esteemed Metropolis, Philoptochos, and Parish Council Members, dedicated parish Secretaries, and devout faithful of the Holy and God-Protected Metropolis of Pittsburgh.
 
As we recently shared with you (and continue to share on our Social Media pages), the Archdiocesan Council and faithful were updated on the financial situation.  The Archdiocesan release, including the full report offered by Archon Michael Psaros (Treasurer, originally from Weirton, WV) are available here:
 
Archon Michael goes into some detail about what was discovered and what is being done to address the situation.  He and the others on the Executive Committee bring decades of successful corporate experience to bear in advising the Archbishop, Eparchial Synod, Council, and staff on the ways to improve and rectify what's happened.
 
We continue to receive questions regarding the full extent of the situation.  While the investigation into certain issues continues, certain things are known.  There has been no indication of any theft of funds, or misdirection of funds to outside entities.  The core questions at hand revolve around the borrowing of restricted funds to pay payroll, the accumulation of certain payables, and the elements of the fiscal control structure.  
 
Regarding audits: the Archdiocese has been audited since 2007 by Grant Thornton, a major world-wide accounting and consulting firm.  A firm of this size and importance conducts thorough work.  For more information about the firm you can visit https://www.grantthornton.com/ or https://en.wikipedia.org/wiki/Grant_Thornton_International
 
The Archdiocesan Audited Financial Statements going back to 2007 can be found here: https://www.goarch.org/-/financial-statements?inheritRedirect=true&redirect=%2Fdepartments%2Ffinance
 
{Side Note: His Eminence Metropolitan Savas has also insisted that the Metropolis be audited by a CPA firm with experience in nonprofit auditing.  Our audited financial statements (along with our budgets) are available online at: https://pittsburgh.goarch.org/en/finance    The accompanying Management Letters (which identify challenges or places for improvement with regards to internal control, reporting, disaster and fraud contingencies, etc.) have also been shared with the Finance Committee (with lay representatives from around the Metropolis) to help improve our core operation.}
 
 
Over the last month we've received very good follow-up questions to the released information.  Below are a selection with their relevant answers.
 
Q1: The budget cut was $6.5 million, 30 employees, is this correct? What services are lost based on these cuts?
 
A1: The reduction in operational costs was between $6.5-6.7 million (on an annualized basis).  To achieve those cost reductions, one step was the reduction in staff by approximately 30 persons (some full-time, some part-time).  Each department saw a reduction of between 25%-50% in operational costs, partially through personnel reduction and partially through other means (end of service agreements, reduction in supply, travel, and other operational expenditures, etc.).
 
Service reductions will be department-specific and based on the nature and extent of the cuts to that particular department.  Some reduction in what is offered can be anticipated, but in most cases it will only result in delays in offering the same types of services.
 
Many of the department heads spoke at the Archdiocesan Council Meeting this past October, and each one provided the reassurance that they are committed to serving our Holy Archdiocese and its parishes despite the sometimes severe cuts made to reduce the core operating budget of the Archdiocese.
 
 
Q2: Are we making up the deficit? How much does the Archdiocese owe?
 
A2: The annual operating deficit was approximately $4-5 million before the reductions, and the cuts were approximately $6.5-6.7 million, to bring the operational spending down to the level of the Allocation income.  The goal is to use any operating surplus (if one arises) to repay the restricted funds and pay down the accounts payable.
 
Approximately $4.75 million was borrowed from restricted accounts to make payroll, and there are another approx. $5.5 million in payables.  These are the monies which must be raised (through surplus, donations, grants, etc.) to bring everything back to even ground.
 
 
Q3: When do we expect to see results of the audit and the next steps?
 
A3:  The 2016 Audit is being finalized now.  The auditing firm is Grant Thornton, a major accounting firm who has also conducted the audits from 2007-2015, which can be found here: https://www.goarch.org/-/financial-statements?inheritRedirect=true&redirect=%2Fdepartments%2Ffinance
 
The Audit Committee who will now oversee the work is almost entirely comprised of CPAs: 
 
What is at issue in the recent reports from the Archdiocese is not the Financial Statements, but the internal control environment.  Those issues are being addressed in a few ways:
 
a) A reform of the internal control system has taken place according to the recommendations of the Auditing Firm contained in the management letters from the last few years.
 
b) A thorough management review and recommendation is being conducted by Grant Thornton, with the goal of reforming the core operational environment at the Archdiocese to match that of other major not-for-profit organizations.  This review is being funded by a private donor.
 
c) The review moving forward of the Archdiocesan Audits by an independent Audit committee.  For the past few years, the audits have been reviewed only by a small internal committee, and changes based on the recommendations of the management letters have been implemented very slowly.  Besides the independent Audit Committee, the Finance and Executive Committees will have full access to the management letters moving forward.  But most of the recent changes enacted are in line with the prior recommendations of the auditors.
 
 
Q4: It was publicized that there would not be a forensic audit taking place, this this correct? If so, what type of audit is being carried out?
 
A4: A forensic audit will be taking place of the St. Nicholas National Shrine at the World Trade Center, but not of the Archdiocese.  St. Nicholas is having the forensic audit in order to (a) reassure the donors and faithful that funds were not stolen, and (b) track how and why the costs of the project have increased over the past 4-5 years.  This forensic audit is being funded by a private donor (i.e. will not cost St. Nicholas anything).
 
The Archdiocese is not having a forensic audit performed because it has a complete trail of audits by a major certified accounting firm going back to 2007.  Auditing professionals recommended against the forensic audit as a "waste of money" because of the recent thorough history of certified audits.  Each year the audited financial statements were offered without any reservations (i.e. "In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Greek Orthodox Archdiocese of America as of December 31, 20XX and 20XY, and the changes in its net assets and its cash flows for the years then ended in accordance with accounting principles generally accepted in the United States of America.")
 
 
Q5: How do we gain the confidence of our people in the workings of the Archdiocese, so that they feel confident to continue supporting financially the work of the Archdiocese?
 
A5: The best way to re-gain confidence is to re-establish the track record of sound fiscal management and accountability.  Thankfully, the people spearheading the efforts at the Archdiocese (on the Executive Committee especially) have decades of corporate management experience and the will to see the Archdiocese succeed under firmer foundations.  The Archbishop has full confidence that the people advising him (and who are leading the charge with him) will bring the Archdiocesan operational management to a high level of efficiency and transparency, involving more fully the talents of the Finance Committee, Archdiocesan Council, and the Congress.
 
Thanks to their efforts, the Archdiocesan fiscal management is being brought into line with other major not-for-profit organizations (like the very successful Archbishop Iakovos Leadership 100 Endowment).  I believe we will see the fruit of this in the coming years.
 
 
Q6: When will we see a revised 2018 Archdiocese budget, just as we need to prepare our local budgets?
 
A6: I do not believe a revised budget for the Archdiocese will be released.  The overall budget reduction was to bring the total operating costs down to the level of the 2017 Allocation (i.e. approx. $21.6 million), so that (a) possible surpluses could go to reducing the payables and borrowings, and (b) unrestricted donations can also be sent to help reduce these outstanding liabilities.
 
 
However, at the 2018 Archdiocesan Clergy-Laity Congress (1st week of July, 2018 in Boston, MA), we will be presented with a 2019 & 2020 budget for the Archdiocese.  Those parishes represented at the Congress will have the opportunity to review and vote on said budget.  
 
 
Q7: Related Questions Re: Allocation
 
Q7A: Help us understand how we are assessed as a parish for our assessment. 
 
A7A: There are a few parts of the Allocation Process.
 
1) The Archdiocesan Clergy-Laity Congress passes the budget for the coming two years, including the National Ministries Allocation numbers.  (For the 2017-2018 budget, see the link in Question 6 above.)
 
-- The 2017-2018 numbers were set by the 2016 Congress.  For 2017, this was $21,600,916.  For 2018, this was $23,272,114 but the Eparchial Synod and Executive Committee reduced it to the 2017 level of $21,600,916 as a show of good faith (that the operational spending budget not go up during this period).
 
2) The Parishes Submit Data (Income, Total Expenses, Deductions, Net Expenses, along with Income & Expense Reports, Balance Sheets, and supporting schedules).  Data collection typically starts in March, and is due by May 15 (per the Regulations).
 
-- For the 2018 Allocation we collected parish data in Spring 2017.  The data was from the completed years of 2015 and 2016.
 
3) The data is collected by Metropolis, then by the Archdiocese.  We add together the Net Expneses of each individual parish to come up with a Metropolis total, and then total each Metropolis to create an Archdiocesan Total.
 
-- This is conducted at a meeting in July attended by representatives from all the Metropolises, who conduct peer review of other Metropolis submissions to ensure fairness in the process across the Archdiocese.
 
4) Each Metropolis's total Net Parish Expenses is then divided by the Archdiocesan Total Net Parish Expenses to ascertain what percentage of the total belongs to each Metropolis.  This percentage is then used to determine how much of the total National Ministries Allocation ($21,600,916) belongs to each Metropolis.
 
-- The Metropolis of Pittsburgh's total for 2017 and 2018 is $1,827,009.  This is 8.46% of the total.
 
5) This Metropolis Allocation total ($1,827,009 for Pittsburgh) is then supplemented by 10% (to make it $2,009,710).  Why?  Because the Archdiocese needs to count on the income to remain on budget, but we need to plan for the inevitable challenges that arise in parish life that may necessitate a reduction for a few parishes in need.  This is called the "cushion."  The cushion was voted on by the Metropolis at the start of the present Allocation System (a decade ago) and has remained in effect since then.
 
6) This cushioned number ($2,009,710) is then apportioned between the parishes based on what percentage of the Metropolis total they represent.  This is, again, based on the submissions by the parishes.
 
-- FYI: Columbus is the highest at 7.862% of the total expenses (and therefore 7.862% of the Allocation), and Altoona is the lowest (at 0.082%).
 
The Allocation is thus based mathematically on the submissions of the parishes and how they fit together into the whole picture of the Metropolis and Archdiocese.  Two parishes of the same expense level should pay approximately the same allocation in the same year regardless of their location in our Country (and the Bahamas, which is also part of GOARCH).  While not perfect, it is the fairest system that the Archdiocese has ever used.  It was approved at the 2006 Congress in Nashville.
 
 
Q7B: Is there an appeal process for 2018? Is there a new process? What is the deadline for this appeal process for the 2018 budget?
 
A7B: As always, there is an appeal process.  The appeal form will be posted on the Metropolis website before December, and is due by the end of January 2018; the document contains the full instructions of what needs to be included in the filing.  Appeals are considered on a merit basis (i.e. what unforseen circumstances will prevent you from being able to pay your allocation in 2018) by the Finance Committee, who then forward their recommendations to His Eminence for his final determination.  Decisions are usually reached by the end of March and communicated to the Parish Priest and Archdiocese via email (for expedited implementation).
 
While appealing, please pay the full amount of the Allocation.  Parishes who decided to skip payments may be removed from consideration for appeal reductions.  If the appeal is accepted, you will be billed a reduced amount by the Archdiocese but with full credit for payments already made.
 
 
Q7C: Who can we contact to discuss? 
 
A7C: 
 
Finance Committee Co-Chairs
Archon Steve Sellas*, Metropolis Finance Committee Co-Chair: ssellas47@gmail.com
Fr. George Livanos*, Metropolis Finance Committee Co-Chair: frgeorge@allsaintscbg.org
Regional Finance Reps:
 
Finance Committee Regional Representatives
Central: Michael Passodelis (HT Pittsburgh) & Archon Philip Yamalis (HC Pittsburgh)
Eastern: George Mouhlas (Bethlehem) 
Northwest: Archon Steve Poulos* (Canton), Elizabeth Bartz (Akron), & Nikolaos Petousis (Rocky River)
Southwest: Peter Alex (Clarksburg) & Harry Ruska (Columbus)
 
* Denotes individuals who are also on the Archdiocesan Finance Committee
 
 
Q8: How can we help?
 
A8: The best ways to help:
 
Pray for us: Patriarchate (& the Orthodox around the world), Archdiocese, Metropolis, other Parishes, your Parish; Clergy, Laity, Visitor, and Stranger.
 
 
Continue to send your questions to us or to the Finance Committee.  Contact our staff for assistance in your parish work.  We are here to help in any way we can; and if we cannot help, chances are we know who can.
 
 
Be represented at the Archdiocesan Congress (even-numbered years in July) and Metropolis Assembly (every year in September).  These are the vehicles to have your voice heard and your vote counted.  As in Civil Elections, if you are not represented the community is still bound by the decisions made by others (for the good or the bad).
 
** 2018 Archdiocesan Congress: 1st week of July, 2018, Boston, MA
** 2018 Metropolis Assembly: September 29, 2018, Holy Cross, Pittsburgh, PA
** 2019 Metropolis Assembly: September 26-28, 2019, Holy Trinity, Camp Hill, PA
** 2020 Metropolis Assembly: September 26, 2020, Location TBA (Pittsburgh area)
 
 
Send your Priest, Parish Council President, and Treasurer to the annual meeting taking place Sat, January 20, 2018 at Holy Trinity GOC in Ambridge, PA (2930 Beaver Rd, Ambridge, PA 15003)
 
Continue to send the Allocation.  Some in the press want to paint the Archdiocese as pure overhead, staffed by people living luxurious lifestyles, with no help to the Metropolises or Parishes.  This is plainly false.  While an exception may be found to any principle, the Ministries and personnel of the Archdiocese & Metropolis are here to serve you in the parishes, with Ministries for Stewardship, Outreach, Evangelism, Family, Youth, Young Adult, Religious Ed, Communication / Internet / Websites / Social Media, Greek Ed & Culture, Development, Fundraising, Prison, Sick, Elderly, and others.  
 
 
Remember that those who work for the Archdiocese, Metropolis, the Finance Committee, etc. are people like you, members of parishes, stewards, people with families, etc. who are committed to Christ's Church and to bringing us ever closer to Him.
 
 
As always, we are committed to serving the communities of this Holy and God-Protected Metropolis.  If you have questions or concerns, please send them our way.  Wishing you a blessed day,

Your servant in His vineyard,

+ Fr. George S. Callos
Chancellor