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
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
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
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
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
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
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
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
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.