Thursday, September 9, 2010

The Budgetary Gargoyles of ECUSA: Intricate, Detailed, but Ultimately Useless

[N.B.: This is the fifth of a multi-part series entitled: "ECUSA and its Attorneys: a Runaway Train". The previous posts are the Introduction, Part I, Part II and Part III.]

In order to accomplish one of its major purposes for existing, the General Convention of the Protestant Episcopal Church in the United States of America passes a triennial budget at each of its sessions. The budget so enacted (by both the House of Deputies and the House of Bishops) supposedly sets the financial framework of the Church for the next three years.

However, due to its ephemeral existence, General Convention is physically incapable of doing anything other than taking certain numbers which have been assigned to certain line items, either adjusting them or leaving them as presented, and then approving the whole shebang in a single vote. Having thus given birth to the Church's budget, General Convention adjourns and forever passes out of existence. It leaves the implementation and monitoring of the budget to the management at 815, and to the Executive Council, who have zero accountability to the now defunct body that passed the budget. Executive Council revisits the budget each year, and rewrites it freely as it deems fit, providing the Treasurer assures it of a source of funds.

Meanwhile, the Presiding Bishop and her staff evince a certain schizophrenic attitude toward the budget. On the one hand, they make a sincere attempt to live within its means, and in recent years have made draconian cuts in staff and mission in order to deal with steadily declining revenues. But when it comes to funding the Church's litigation, all bets are off. Litigation expenses are allowed freely to mushroom, and the preferred method of covering them has been to have the Treasurer "find" the resources in unspent appreciation and accumulated income sitting around in the Church's thousands of donated trust funds, most of which were designated by their donors to fund the "mission work" of the Church.

The Church's budget may thus be likened to a gargoyle on a Gothic cathedral -- intricately carved and executed, intended to ward off bad consequences, but wholly symbolic and utterly ineffective in the final analysis. Nevertheless, a lot of work goes into the crafting and placing of a gargoyle, and no less is true of the Church's budget: it does not, like Athena, spring fully formed and functional out of the deputies' heads gathered at General Convention. It requires lengthy preparation beforehand, in which soundings are taken from each agency and department of the Church to determine what they need to function over the next three years, and also what contingencies the Church might face if it is to meet the challenges so identified.

The three-year budget adopted at General Convention becomes the nominal starting point for the ensuing triennium (starting with the January 1 which next occurs after the close of General Convention). This means that work on preparing the budget gargoyle -- that is, proposal -- needs to start at least two years before it will go into effect.

The Canons of the Episcopal Church, however, are frankly contradictory when it comes to specifying who proposes the Church's triennial budget. Canon I.1.11 states unreservedly:
The Treasurer shall submit to the General Convention at each regular meeting thereof a detailed budget in which the Treasurer proposes to request appropriations for the ensuing budgetary period and shall have power to expend all sums of money covered by this budget, subject to such provisions of the Canons as shall be applicable.
But Canon I.4.6 states:
The Executive Council shall submit to the General Convention at each regular session thereof the Budget for the Episcopal Church for the ensuing budgetary period, which budgetary period shall be equal to the interval between regular meetings of the General Convention.
And, also contrary to the latter part of Canon I.1.11 (the first quote above), Canon I.4.2 (f) says it is the Executive Council which decides on how the money budgeted shall be disbursed:
In its capacity as the Board of Directors of The Domestic and Foreign Missionary Society, the Council shall have the power to direct the disposition of the moneys and other property of said Society in accordance with the provisions of this Canon and the orders and budgets adopted or approved by the General Convention.
The Canons also provide that once a budget is presented to General Convention, it shall be considered and approved in "joint sessions" of the two Houses (Canon I.4.6[f]). In practice, the two Houses have delegated all of their responsibility except for final passage of the budget to a 27-member Joint Standing Committee on Program, Budget and Finance created under their Joint Rules (JR II). As a Standing Committee, this group has the ability to meet in between sessions, in order to act "in an advisory capacity to the officers of the General Convention and to the Executive Council . . .".

And in yet a further contradiction of the Canons quoted earlier, the Joint Rules provide (JR II.10 [c]) that the Joint Standing Committee receives the proposed budget from the Executive Council at least four months before General Convention begins, and then may make adjustments and additions before reporting the proposed budget at General Convention. So forget what you just read in the Canons: neither the Treasurer nor the Executive Council, but the Joint Standing Committee on Program Budget and Finance is the body that determines what budget General Convention will approve when it meets.

It has been the practice of the Joint Standing Committee on Program, Budget and Finance ("PB&F" from now on in this post) to meet in the fall of the year preceding a General Convention, to meet again in the spring, and then to convene at least a full day before General Convention opens. PB&F works with the Treasurer, who also works with the Executive Council, who works with its Audit Committee and its other committees. Together, they manage to come up with a draft budget: Executive Council sets certain priorities, and fashions a preliminary draft -- which PB&F and the General Convention can change as they each see fit; the Treasurer tries to find the money to meet the priorities so determined, and tries at the same time to be responsive to the needs of the administration at 815 Second Avenue, who is under the direction of the Presiding Bishop. In addition, during the sessions of General Convention, PB&F hears presentations from all the agencies, boards, commissions and departments of the Church with regard to their budgetary needs, and does the final marking up of the proposed budget.

It is a very complex process, and it is little wonder that an item such as litigation expenses has thus far been able to sneak in under the radar, as it were. To say so is not, however, to excuse the breaches of fiduciary duty which thereby occurred.

For the triennial 2010-2012 budget adopted at Anaheim in 2009, the Executive Council had been gathering input from its various committees throughout 2008. At its meeting in Albuquerque, New Mexico, in June 2008, John Vanderstar, chair of the Standing Committee on National Concerns, reported that his committee had "spent a considerable amount of time on budget priorities." They offered a resolution which identified the major priorities as "Doing Justice & Alleviating Poverty", "Claiming Our Identity", "Growing Congregations", "Strengthening Governance and Foundations for Mission", and "Promoting Anglican Partnerships", with some forty-eight subcategories, including "Legal services" and "Legal and operational support for transitional dioceses" (emphasis added).

"Transitional dioceses"? What, pray tell were they transitioning from, and into what were they "transitioning", if they were not already full-fledged dioceses? We shall have occasion to return to this point, as we look at ECUSA's plans for these remnant minorities -- the dissidents in San Joaquin, Fort Worth, Pittsburgh and Quincy who refused to abide in each case by the majority's vote to realign their diocese with a different province of the Anglican Communion. For the time being, the concern was how to keep them propped up long enough for them to serve their immediate purpose -- to provide the requisite "plaintiffs" for lawsuits against the realigning dioceses.

And with this identification of the underlying purpose of providing aid to "transitional" dioceses, we come to the real conflict at issue. Anyone who takes care to review the minutes of Executive Council, PB&F, and the Audit Committee cannot escape the conclusion that in setting and reviewing budget amounts for legal expenses, these bodies were not acting of their own accord, or independently. They were using pro forma amounts only, with absolutely no idea of how much would really be needed for what, or why. They knew only that they had to make some provision in the budget for ongoing legal expenses, but no one was filling them in on the whole picture.

Moreover, there was not just one, but two, operational fronts in the legal wars, and the Episcopal Church (USA) needed to fund both fronts at the same time. There was the "regular" line item for "Title IV expenses and legal assistance to dioceses", which as we have seen, included both expenses for ECUSA's own attorneys (the law firm of Goodwin Procter), and grants for "clergy salaries" handed out to the remnant groups so that they could devote their plate collections to paying their own local attorneys. But as time went on, and the litigation bogged down in myriad lawsuits, it became clear that this was not enough: local pledges were going down, not up, all the while that local legal expenses were mounting. If the ersatz dioceses were to be able to keep up their lawsuits, they would need additional funding from 815, over and above what it could grant to them out of its budget for "mission work."

But what could be the source of such funds? Previously, ECUSA's in-house lawyers had compliantly delivered their opinions that by using trust-fund moneys for clergy salaries in the affected areas, the trusts' purposes that their income be spent for "domestic mission work" could ostensibly be satisfied. The same reasoning, however, could not be adapted to spend such trust-fund moneys directly for attorneys' fees, even if the fees were being incurred in the chase after "property devoted to the mission of the Episcopal Church."

The solution devised by the financial heads at 815 was simple. Toward the end of 2007, ECUSA -- or rather, its corporate alter ego, the DFMS -- had taken out a $50 million line of credit with the Bank of New York, secured by appreciated securities given in bequests by long-ago donors. The money had been used in part to acquire land in Austin, Texas for the building of a new facility to house the ECUSA archives, at a cost of $9.5 million. Why not allow the "transitioning dioceses" similarly to borrow funds from TEC (DFMS) as a "line of credit"?

If done as a loan, the amounts so lent would not have to be included in the line item for legal expenses in ECUSA's budget -- they would simply show up on the books as a "note receivable." And thus came about the wherewithal to finance what I shall call "the Gambol (sc. Gamble) of the Lamb", which grew out of a meeting of Executive Council with Bishop Jerry A. Lamb and "invited guests of the Diocese of San Joaquin" held in Stockton, California at the end of January 2009. Essentially, the idea they concocted together was to finance a whole new series of lawsuits against the individual parishes in the Diocese of San Joaquin who held title to their own real property. (To date as I write this, the Gambol/Gamble is well on its way: with the funding assured by the Executive Council, no less than nine such lawsuits have now been filed by the attorneys for Bishop Lamb.)

The expectation was that with such an onslaught of new litigation, the dissident remnant would take heart that victory was within their grasp, while the individual parishes sued would simply fold, rather than raise the money required to fight. And once the pseudo-diocese regained the parishes' assets, it would convert them all to ready cash, which could be used to pay back the loan from ECUSA. Then, having fulfilled its function, the pseudo-diocese would pass out of existence, and be merged into one or more neighboring dioceses which could accommodate the remnant from that point on.

The Lamb Gambol represents a watershed in the budgetary history of the Episcopal Church (USA). With its inauguration, the full cost of Episcopal property litigation was divorced from the books of the DFMS, and eliminated from the usual oversight (such as it was) of the Audit Committee, PB&F and General Convention. It is so important that I shall devote a separate post later in this series to laying out its details. For now, suffice it to make note of its birth at the very time a new triennial budget was being prepared in both Executive Council and in PB&F for submission to General Convention, meeting at Anaheim in July 2009.

The budget thus prepared and submitted proceeded on independent and parallel tracks. Executive Council could propose, but only PB&F could dispose, and what it eventually sent to the floor of General Convention would be determinative of what was finally adopted. But the show was only that: a show, decked out for appearances' sake, for all the deputies and clergy gathered at Anaheim. For as noted above, and as the Executive Council confirmed in the minutes of its January 2009 meeting in Stockton, "General Convention will approve a triennial budget, but Executive Council will revisit it each year." Whatever General Convention adopted meant nothing, because each year Executive Council had the ability to change it as it deemed necessary, to meet changing circumstances.

The result was to give the motions of going through the budget a surreal quality that wholly belied the amount of energy devoted to its formulation and adoption. When one adds to the process the overlay of how, at the same time it was proposing a new triennial budget beginning in 2010, Executive Council was failing to deal with the adjustments required to fund the enormous cost overruns in legal expenses just for calendar 2009, the picture becomes not only surreal, but downright bizarre. Just look at the following milestones, each of which is documented in the various minutes referenced:

1. At its fall meeting in 2008, PB&F asked DFMS's Treasurer, Kurt Barnes, to explain why only $450,000 had been allocated in 2008 by the Executive Council to the line item for legal expenses, when by that time the amounts actually spent exceeded $ 1.1 million. Look how the minutes fail to record any real explanation, while acknowledging the problem of using low-ball numbers (emphasis added):
Request was made that Barnes address the legal fees line item. He explained current expenditures on legal fees and the reasoning behind the $450K used and EC’s approval of the amount. Barnes added that good decisions about budgeting might better be made using a more realistic number in the line. The decision to put it in canonical section of the budget? Kurt responded that until 2003, Title IV represented the bulk of our legal expenses and it was positioned in the canonical section and, by default, the other expenses were included as well. Discussion in depth explored this particular line item, how to forecast it, how to report it and how to fund it. Real concerns about transparency were raised with regard to the appearance of a low number in the budget. Additional concerns were raised specific to expenditures of princip[al] from endowments to support dioceses and the reporting mechanisms around that.
Once again, please note that all the right questions are being raised. Then note that nothing changed as a result -- the Church's litigation, using its Chancellor's own law firm, proceeded exactly as before, without any oversight or controls in place.

2. Now enter the Chancellor himself, to address (at the Chair's request, and with the approval of the Presiding Bishop) a memorandum from a previous Chancellor "about responsibilities and oversight." Oversight of legal expenses? Not in your lifetime -- we are talking only about the hiring and firing of staff -- but note still the Chancellor's off-the-cuff opinions about the Canons and his role in interpreting them (emphasis again added):
Beers Presentation

[Chair] Adams-McCaslin introduced David Beers, Chancellor to the PB, who had been asked by the PB to address the memo from Robert Royce about responsibilities and oversight. After some discussion about interpretation of the canons (and the ambiguity with E[xecutive] C[ouncil] by-laws) and applying them to the system, Beers essentially concluded that there is a good deal of work to be done between the PB and EC to clarify the executive role with regard to staff hiring and firing.

Q&A that followed yielded the following:

Beers is not a great fan of amending the canons to “fix” things until it is impossible to work from them. It is often better to sit down in good faith and work ambiguities out.

• In Beers’ opinion EC sets out a detailed framework about how program is to be carried out and the PB carries it out. There is a murky area about where EC leaves off and the PB picks up.
Got that? Executive Council supposedly sets out "a detailed framework about how program is to be carried out", and the Presiding Bishop does the carrying out, except that the boundary between their roles is "murky" -- and Mr. Beers likes it that way, until it becomes "impossible" to continue. Note also that Executive Council has never established any framework for litigation on ECUSA's behalf -- because the Presiding Bishop (apparently on her Chancellor's advice) regards that area as none of the Council's business.

3. Now PB&F returned once more to those pesky and uncontrollable legal fees. The discussion is again enlightening for highlighting the total abdication of all responsibility after the various views have been aired (emphasis again added):
There was a question from [Treasurer] Barnes’ memo on canonical spending as to whether spending in the last couple of years during the reorganization has been reduced. The memo illustrates that spending has increased by about $2 million in the first 2 years of this triennium due to legal fees.

[Jerry] Keucher raised the appropriateness of citing legal fees in the canonical section, thinking that since Title IV is a canon, it is probably appropriate but not necessarily in cases involving property. Given what was experienced in 2007, maybe putting in $450K in for 2008 was not appropriate. Discussion at length ensued about how the line item was created and how expenses are paid. It was learned that the issue of legal fees and the transparency around them will be dealt with in a small subcommittee. [Treasurer Kurt] Barnes suggest[s] for the sake of clarity, whether it’s the PB&F budget or EC budget, that it be written in that anything over $1.4 million show that the income will be covered with trust fund income. [Committee member Tess] Judge advocated for accurate estimates within the realm of probability.

[Committee member Tom] O’Brien hypothesized: suppose legal fees were to be estimated at $4.5 million for the triennium. What would the recommendation be to pay them if they run higher than the amount estimated? Would it make sense to drastically reduce expenditures elsewhere to cover the expense?

Subsequent discussion explored ways to fund these expenses along with providing assistance to dioceses in distress. The finance office looked at some of the trusts with legal review to see if accumulated appreciation from these funds could be used to fund “mission” in areas such as San Joaquin. The conclusion: because they are board directed trusts, AF-058 was passed in February at E[xecutive] C[ouncil] to support San Joaquin and other similarly distressed dioceses. The Audit committee has asked that these trusts be revisited and the opinion [be] rechecked to make sure the expenditure(s) is appropriate. Barnes pointed out that every time there is a draw from the trust it [a]ffects income.

[Committee member Jerry] Keucher noted that the invested funds are under the umbrella of the DFMS, not the GC. If the EC’s budget has an authorized overdraw of invested funds, PB&F can accept that or say that those funds shouldn’t be used and decide to spend less. He inquired whether PB&F has the authority to use invested funds and recalled that the decision was made at GC to take a 5.5% draw against the TF income in 1993 with the understanding that this would not be a regular practice. Issues around indefinite support to San Joaquin were raised specific to the lack of challenge to them for becoming innovative in funding their continuance.
So the unmanageable and unpredictable legal expenses were to be handed off to an unspecified "small subcommittee." The minutes are laconic: there is no mention of who decided this would be done, and there is no mention of the members of the "small subcommittee" -- just a notation that this is what would take place. (This is ECUSA, remember?) And note the concerns being raised about the open-ended ("indefinite") support for San Joaquin.

4. But when Executive Council met in Stockton in January 2009, as we have seen, it went ahead with its decisions as though no questions had ever been raised, let alone had troubled any of its members. It not only laid the foundation for the "Lamb Gambol", as noted earlier, but it approved a proposed triennial budget that pegged total legal expenses at only $600,000 for each year of the three-year period. This allocated a total of $1,800,000.00 for the period 2010-2012, while acknowledging in the same document that amounts expended for 2007-2009 were forecast to come in at more than twice that amount, or $4,704,138. Could a greater irresponsibility be shown than by this budget forecast? And yet the introductory statements from the Presiding Bishop and the President of the House of Deputies are notable for their paragraphs of platitudes about mission, Ubuntu, and Millennium Development Goals -- with not one word about the ongoing litigation in which the Church was embroiled because of unilateral decisions by its Presiding Bishop.

5. Executive Council met one more time before General Convention, in Portland, Maine in April 2009. The minutes of the meeting reflect that it did not concern itself further with the new triennial budget, which it had handed off to PB&F. Nor did it take up the gap between the forecast and actual expenditures on legal fees for the ongoing year -- even though the year was only one-quarter finished, the results were already relegated to past history: que será, será. But the Council did manage to find $110,000 to aid the pseudo-diocese of Quincy in its struggle for survival, and in the process of adopting a resolution to that effect, the minutes observe (emphasis added):
The Executive Council previously authorized draws of up to $500,000 in 2008 and up to $700,000 in 2009 to fund similar work in the dioceses of Fort Worth, Pittsburgh and San Joaquin. These disbursements were reviewed and approved by legal counsel, who confirmed that the disbursements complied with the terms and conditions of the trusts.

The undistributed appreciation in the above named trust funds totaled an estimated $1.2 million as of 03/31/09. The undistributed appreciation has been depleted by nearly $3.0 million since 12/31/07 as a result of withdrawals to support dioceses in reorganization and market declines.
This is the first acknowledgment I can find in the minutes that "market declines" also deplete "undistributed appreciation' in the value of the Church's trust funds. But there is no logical follow-through: the Church takes the view that any undistributed appreciation may be freely spent to support "dioceses in reorganization", but it acknowledges no corresponding obligation to make up the shortfall when market declines eat into that same appreciated value. The result is a one-way ratchet: if the market drives up the value of the trust funds, you may spend the amounts so appreciated on "support for reorganizing dioceses," until they are exhausted. But when market values decline, there is no corresponding obligation to put money back into the trusts to restore the lost value. So under this policy, the value of the designated trust funds can never appreciate for more than twelve months, after which the Treasurer grabs the accumulated appreciation; and if the market value declines, the principal shrinks and is never replaced. The result is a trust fund which is never allowed to grow any larger in booming markets, and which can only get smaller in declining markets. And the minutes claim that ECUSA's in-house counsel has reviewed and approved this practice!

6. PB&F met extensively in July 2009, and its minutes reflect what happened at General Convention. The meeting opened with a review of comments on the budget and the process which the subcommittees and their members had garnered from across the Church thus far. These included the following:
• Malaise that continues from 2003
• Revenue side of the budget – make sure it is a reasonable projection of what is possible (concern for the deterioration of diocesan receipts).
• MDGs* and how to fund them.
• Is the proposed budget sustainable?
• Establishing and identifying who The Episcopal Church is in relation to the Anglican Communion.
. . .
• What happens to staff engaged in mission work?
. . .
• Concern that [the] Corporate & Canonical [section of the budget -- the part that funds 815 and the lawsuits] is going to swallow up the whole budget and there will be no funding left for mission – things will get collapsed and lost.
• What is God calling the church to do? What are our priorities?
. . .
• We have never been realistic about our income – we will have no credibility if we are not sensitive to what the parishes are experiencing.
• We will undergo some pruning and creative dying that needs to happen.
. . .
• Anger that we removed the MDGs from the budget – put the line item back (repeated by several speakers).
. . .
• Recovering dioceses.
• Understand the Episcopal Church as a missionary organization.
. . .
• Transparency (where are we really spending the money? Legal fees in support of dioceses?)
. . .
• Is it good stewardship not to pay down some of our debt?
. . .
• It isn’t business as usual.
• The cost of the General Convention.
• A new way of being the church – hierarchy is not the order of things – there is fresh air, a new way of organizing.
. . .
• Young people sense that they are no longer a priority.
• Disconnect with what we spend in Anaheim and those for whom $1 is a day’s wages.
Bonnie Anderson, President of the House of Deputies, put in her own two cents' worth (I have added the emphasis to her most striking contribution):
• Transparent budget process has been longed for (President of the HOD speaking).
• 0.7% not in the Executive Council budget has created a great deal of “energy.”
• Pitting things against each other – pitting MDGs against domestic poverty (poverty is poverty); pitting the HOB/against the HOD (we are the church – we are meant to work together); pitting the C[orporate]/C[anonical] against the mission portion of the budget (we have a theme – Ubuntu – "we are the people of God"). Let’s say it’s not an either/or – it’s a both/and – find God’s abundance. Call on the Holy Spirit to make her presence known. We set the mindset of the GC.
• PB&F can set an example – we know where our power comes from.
Not an "either/or", but a "both/and" -- with the help of the (female) "Holy Spirit", who presumably knows how to balance a budget with so much litigation expenses in it. (Then please note how the very next sentence -- "We set the mindset of the GC" -- is a contradiction of what had just been said about invoking the Holy Spirit's guidance.)

These are the concerns of social activists who come together for just ten days out of every three years, wring their hands over all manner of causes and concerns, pass their resolutions, pat themselves on the back, and go home to wait until they can gather again for the next triennial session. The concept of accountability -- running in either direction -- is foreign to such a body, because it has no continuing existence. Like the silversword plant that grows in the crater of Haleakala, on the Island of Maui, it blooms just once in its multi-year lifespan, fades, and is never heard from again.

So what did they decide to do with the line item for legal expenses? After deliberations, a dose of reality appears to have suffused the subcommittee on the Corporate & Canonical ("C/C") section of the budget. The minutes for July 10 reflect the following (emphasis added):
The Sections, having completed their line item reviews, were ready to begin moving forward with the recommendations.
[Tim] O’Brien reported for C/C. One of the concepts that drove his group was transparency, disclosing to GC and including in the budget two large items: legal fees in aid to dioceses (litigation support - in this triennium the sum will be $5 Million and the next triennium is likely to see the same) and stewardship – is it responsible to make no principal payment on the $37 Million debt? C/C suggests an increase the principal and interest payment of $700K each year in the triennium.
The Executive Council's line item of $1.8 million for legal expenses during the triennium has been almost tripled. (However, the subcommittee's eyes were bigger than General Convention's stomach. The $5 million was slashed by $1 million in the final, approved budget.) Immediately after this note, the Corporate & Canonical section reported on some "cost savings" at 815 itself, which had been identified with the help of CAO Linda Watt (emphasis again added):
They identified some savings as a result of conversations with Linda Watt and Bill O’Connell. Over the triennium i[t] will be possible to save $1.25 Million by going to a fair wage from a union structure for building maintenance.
And thus we see that the plans for the December Debacle -- in which management at 815 terminated its long-standing contract for unionized maintenance workers, and turned out on the street people who had been working there for upwards of thirty years -- were laid in July, at Anaheim. (Remember: this is the same pious General Convention who enacted a resolution supporting workers' collective bargaining rights, as I wrote about in this earlier post.)

There were some complaints registered about how the increase for legal fees was causing cuts across the board, which the Chair answered in this manner (emphasis added):
Cuts by C/C have been recommended in the CCAB line items by about 25% by recommending electronic meetings. It was observed that the money being spent on legal matters is wiping out the ability to do mission. Adams-McCaslin pointed out that litigation expense in the millions has been spent to preserve Church property worth hundreds of millions.
This is the perspective of a person who derives all her information about the justification for what the Church is spending on legal fees from those who are the beneficiaries of the money so spent, i.e., the attorneys -- and in particular, the Chancellor's own law firm. The extensive minutes of the meetings held on the budget in July 2009 reflect no independent or objective views on the matter whatsoever.

Even as they were increasing the budgeted line item for legal expenses in the coming triennium (and forecasting that the level would continue undiminished for a further triennium after that), PB&F was failing to note how current legal expenses for 2009 were far outstripping the budget for the previous triennium. In January, as we saw, the actual legal expenses for 2009 had been forecast to bring the total three-year cost for 2007-2009 to over $4.7 million. At the time they adopted their budget for 2010-2012, in which they allocated $4.0 million for legal expenses in that period, the same budget document shows that the total for the previous triennium (with 2009 halfway over) was now being forecast at nearly $4.9 million. But by the time Executive Council reviewed the budget for 2010 at its meeting in Omaha earlier this year, the amount spent for the previous triennium had suddenly grown "preliminarily" to nearly $7 million! With the final, audited numbers still not in, the amount spent on "legal assistance to dioceses" in calendar 2009 alone stood at $2,346,347 -- or twenty-three times the amount originally budgeted.

The first half of 2010 was relatively kind to ECUSA's litigation costs, as a number of the larger cases -- in San Joaquin, Virginia, Fort Worth and Pittsburgh -- were on appeal, and awaiting oral arguments and decisions before they could proceed further. But now some of those cases are back in the trial court, and expenses again will begin to mount. You can keep track of them by following the Monthly Statements of Operations from the Finance Office. Watch in particular how the amounts budgeted by General Convention will once more need to be adjusted by Executive Council in the interim, due to such things as the "piling on" which I described in this post.

In sum, the history I have drawn in this and the earlier posts in the series, shows a legal budget for ECUSA which is under no one's objective control, and is being determined solely by the Presiding Bishop in consultation with her Chancellor and her Special Assistant for Church Litigation and Discipline, who is also a former member of Goodwin Procter, the Chancellor's own law firm. Here are the final numbers for 2007, 2008 and 2009:

2007 Title IV Expenses: $ 401,216
2007 Legal Assistance: $ 902,921

2007 Total Legal Exp.: $ 1,304,137

2008 Title IV Expenses: $ 894,674
2008 Legal Assistance: $ 2,060,211

2008 Total Legal Exp.: $ 2,954,885

2009 Title IV Expenses: $ 406,332
2009 Legal Assistance: $2,346,452

2009 Total Legal Exp.: $ 2,752,784

Triennium Totals

2007-2009 Title IV Expenses: $ 1,702,222

2007-2009 Legal Assistance: $ 5,309,584

2007-2009 Total Legal Exp.: $ 7,011,806

That represents spending of over $2 million per year, which is 500% over the previously established "budget" for each year. Is there any question that if ECUSA were being operated like a normal charitable organization, there would have been calls for significant changes in management by now? But the truth is that there is "management" in name only. The numbers are added up, and duly reported, but there is no accountability for what is being spent. The Holy Spirit is making "her" presence known in ECUSA, indeed.


  1. Excellent post. One humdinger popped out.

    1. • "We will undergo some pruning and creative dying that needs to happen."

    Creative dying! That sounds like Episcopathanasia. Drink the Kool Aid and "Bye bye tiny congos."

    You were spot on when you wrote,

    "These are the concerns of social activists who come together for just ten days out of every three years, wring their hands over all manner of causes and concerns, pass their resolutions, pat themselves on the back, and go home to wait until they can gather again for the next triennial session. The concept of accountability -- running in either direction -- is foreign to such a body, because it has no continuing existence."

    In addition, I have a sneaking suspicion that business management and business ethics are not of prime concern to people going into the priesthood and that the Church cannot raise up good management types from the current ranks of people who would rather be making pastoral visits than figuring out how to run a multimillion dollar operation. Such an outfit can get by as long as money flows in by the bucket load, but once money get tight, incompetence (a euphemism) will rise to the surface and the stench will become evident to all except for those who have been conditioned to the smell. (The Pewster principle).

    P.s. My word verification today was "swime."

  2. Wow, this is a great read, Mr. Haley. It's surprising that no one is raising the conflicts of interest in New York, with the state of New York.

    By the way, I'm now convinced of your view that a diocese is not bound to remain in allegiance with the national church, if the diocese properly votes to disaffiliate. However, if assets in the diocese are held "for the benefit of the Protestant Episcopal Church" without reference to the diocese, I think it still can be problematic.

  3. Good job Curmudgeon. The ECUSA has an incredible lose lose strategy (for everyone but the lawyers) in this depressed real estate market. If ECUSA loses, they are out the attorney fees. If they win they are saddled with a building that they must sell at a substantial loss (the demand for mosques is limited!) and they are out the attorney's fees. Can you say Pyrrhic victory? The Holy Spirit may be at work to leave only the ACNA solvent. However, when one thinks of all the Kingdom work that could be done with the wasted resources, it is tragic.

  4. Mr. Haley,

    I offer a simple observation, and a question, based on my assumption that many of your descriptions of items in the minutes are (essentially) quotations, despite the absence of quotation marks.

    For two years earlier in this decade I served on the Board of Directors of our condominium owners association (45 units). During the second year of my tenure I volunteered to take over duties as the Secretary of the Board. The level of detail indicated in the minutes cited in your post would not, IMHO as one who is not an attorney, have passed legal muster for our small homeowners association. I do not see how it could possibly pass muster for a charitable corporation were it to be brought before a court of law.

    This suggests to me that if someone were to sue, or file crminial charges against, TEC, that organization would face serious difficulties avoiding a finding of misfeasance, nonfeasance, malfeasance, or possibly some combination of more than one of those offenses.

    Is my thinking on this question substantially in error?

    Christus vincit, Christus regnat, Christus imperat.

    Pax et bonum,
    Keith Töpfer