INTERVIEW

Accountability in God's Treasury

LRE: How did you get started in

auditing? Is this something you always dreamed about doing?

PHD: When I was growing up in

Jamaica I had an interest in becoming a chartered accountant. Although I

studied sciences in high school with the intent to attend medical school, when

I enrolled in college there was some level of indecision. A

teacher friend of mine suggested I try bookkeeping. I tried it, got an

A-grade in the class and have stayed with accounting ever since. I am now a certified public accountant

and also hold a graduate degree in accounting. Upon graduation from college, the General Conference

extended an invitation for me to join its auditing service (GCAS), and I have

been serving now for 29 years in various professional capacities.



LRE: What does GCAS do?

PHD: The purpose of GCAS is to

conduct structurally independent financial audits, financial reviews, financial

inspections and compliance tests of the highest quality for church

organizations. Let me define what

I mean by structurally independent – All the auditors are employees of the General

Conference and are not employees of any of the church organizations to which we

provide our services. So though we are a part of the Seventh-day Adventist

Church family, the auditors perform their work in an independent manner.



The purpose of GCAS is to conduct structurally independent financial audits, financial reviews, financial inspections and compliance tests of the highest quality for church organizations.

LRE: How many auditors are there in

GCAS?

PHD: There are approximately

275 professionals around the world.

These professionals are grouped into five geographic areas and operate

from 45 regional offices.

Sixty-four percent of these auditors hold a professional designation

such as CPA, CA or ACCA, while the rest are in the process of working on their

designation.



LRE: How does auditing help the

evangelism or the mission of the church?

PHD: When the tithe is

returned and offerings are given, the auditor implements certain procedures to

ensure that the resources that have been received have been used for their

intended purpose and the reports produced appropriately reflect the financial

activities and financial position of the organization. This presence of an

auditing function enhances the confidence of constituents that translates in

their willingness to make continued contributions in support of evangelism or

other mission based activities.



LRE: Do you see any link between what

the auditors do and stewardship?

PHD: Yes, I do! There are

different aspects of stewardship. From a financial perspective, a person’s

obedience to what God requires of them regarding tithe and offerings is

complemented by the confidence that what they have given to the church will be

used for the intended purpose.

Stewardship does include a principle that at some point the steward will

be held accountable for what has been entrusted to him or her. The work that auditors perform is

consistent with that principle. It holds church leaders accountable for the financial

resources with which they have been entrusted.

LRE: Are audits really necessary for a

church organization?

PHD: I do believe audits are

not only necessary but also beneficial for a church organization. Just because we are a religious

organization we are not immune from human error that can be either accidental

or intentional. Audits of our

church organizations provide confidence to management and governing boards as

they make decisions based on independently verified financial information; and

confidence to constituents and other stakeholders in their economic decision to

make financial contributions.

Although auditing comes at a cost, it is best viewed as an investment so

that church leaders can have the best available information to make decisions.

By its very presence auditing can also serve as a deterrent to nefarious

financial activities.



A natural human instinct is to reject somebody looking over his or her shoulder. Although this natural human instinct could lead to tension, I believe for the most part the audit process is a collaborative effort with its purpose understood.

LRE: You mentioned the word

“accountable.” Doesn’t that create

a bit of tension and apprehensiveness when an auditor shows up?

PHD: A natural human instinct is to reject somebody looking over

his or her shoulder. Although this natural human instinct could lead to

tension, I believe for the most part the audit process is a collaborative

effort with its purpose understood. Most view the auditing process as

participation in God’s expectation of us being faithful stewards for the

resources entrusted to us to carry out His work. We are all part of a work to

which God has called us—some to preach, some to teach, some to evangelize, some

to prepare financial statements and some to audit financial statements. When we

respect each other’s role as part of our shared purpose, whatever tensions may

exist because of our natural instincts fade away. We consider the auditing

service as a ministry of the church that shares the common purpose of reaching

the unreached for Christ. At the same time we are being faithful in our

stewardship of the resources entrusted to us to pursue this purpose.



LRE: What authority does an auditor

have?

PHD: The auditor has no

authority to compel any action. The auditor only reports the findings and

provides an opinion. This report

is provided to management, their governing board and constituents who have the

responsibility to ensure that any reported findings are addressed.



LRE: Does the General Conference

itself have to go through an auditing process?

PHD: Yes, the General

Conference receives an annual financial audit that is performed by an external

accounting firm. It is not

appropriate for GCAS to perform the audit of the General Conference because we

are its employees.



LRE: In an audit, do you address the issue of possible

conflicts of interest?

PHD: A conflict of interest

occurs when there is a collision between the business interests of the

organization and the business interests of an individual. As part of the audit

engagement, we do examine whether or not individuals have signed a conflict of

interest statement, declaring the presence or absence of any conflicts of

interests. It is then the

responsibility of the church organization to determine its response regarding

any conflict declared. A conflict of interest does not mean that somebody has

done something wrong. However, the

church expects conflicts of interests to be declared and that persons having

declared a conflict would remove themselves from any action in response or in

relationship to any conflict that exists.



There are approximately 2500 church organizations within our portfolio. Based on our latest annual report, we are attending to 69 percent of this portfolio.

LRE: How many audits does GCAS do each

year and what percentage of these audits receive a “clean” report?

PHD: There are approximately

2500 church organizations within our portfolio. Based on our latest annual report, we are attending to 69

percent of this portfolio. Of

those organizations to which we provided auditing services, 58 percent received

an unqualified opinion (“clean report”) on their financial statements. Most of

the remaining financial statements received a qualified opinion, indicating

they were fairly stated, except for a specific misstatement or a lack of

evidence to verify a specific amount. We

recently concluded financial arrangements so that there will be

sufficient resources available to hire the staff needed to address all the

organizations in our portfolio.

Our goal within the next three to four years is to have 100 percent of

church organizations in our portfolio audited each year.



LRE: In recent years, some financial

organizations in the corporate world have been devastated by unethical actions

of some leaders within their own organization. Do you have any counsel for

operating boards within our own organization to help us avoid those kinds of

accusations?

PHD: My counsel to operating

boards would be for them to set and expect a tone of transparency and

accountability throughout their organization. To complement this tone, the operating board should first

design, document, implement, communicate and monitor internal controls that are

appropriate to the size and complexity of the organization; and second,

establish an audit committee comprised of persons who are not employed by that

particular organization, who have a good grasp on financial reporting matters,

and are not afraid to ask probing questions. With this tone and these governance mechanisms in place, I

believe operating boards are better able to insulate against accusations born

out of the absence of information and to prevent or detect unethical actions by

any leaders.



LRE: As you review the financial systems of the church,

with its checks and balances, do you feel it should be an encouragement to our

members?

PHD: I believe it should. I

believe the Seventh-day Adventist Church sits in a premium position compared to

other church denominations, based on the systems that are in place for checks

and balances. GCAS is part of that

system and we are proud to serve the church in the capacity we do. I do not

know of any other church denomination that has such a robust global audit

function as our Seventh-day Adventist Church does. So, yes, I think every

church member, should take delight and pride in the fact that their denomination

has systems in place to safeguard the resources God provides and to ensure they

are applied to their authorized and intended uses.

Paul H Douglas (PHD)
Paul H Douglas, MBA CPA CA

CGMA, serves as the chief audit executive for the Seventh-day Adventist Church

World Headquarters in his capacity as Director of the General Conference

Auditing Service (GCAS), and brings to this responsibility more than 25 years

of responsibilities and results in the Americas, Africa, Asia, Europe and

Australia.  

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