LCMS Convention Proceedings St. Louis, Missouri — 1995, Page 163

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RN EES ERE ENN EE ENE SEN

LATE REPORTS AND OVERTURES 163

The Board is pleased the Task Force reported “the In-
ternal Audit Department of the Synod appears to also func-
tion well, both in terms of audit control and coordination
with the external auditors.” The Board believes outsourc-
ing the work done by the Internal Audit Department would
materially increase costs without a commensurate increase
in the quality of audits. The Board in adopting the budget
for the 1992/93 fiscal year of LCMS, Inc., considered 10 op-
tions for external and internal audit services, including the
outsourcing of the Internal Audit function to the external
auditors. Quotes from Ernst & Young were obtained for
each of the 10 options. While the elimination of the depart-
ment would have reduced the budget of LCMS, Inc., it
would have increased the budgets for higher education, the
LCEF, Worker Benefit Plans, and Foundation and in-
creased costs for management services and special reviews
presently conducted by Internal Audit, thus resulting in an
overall increase in costs to the combined operations of
Synod. The Board also notes the Internal Audit Depart-
ment annually audits 13 Districts. The Board believes the
Internal Audit Department has a better understanding of
the Synod and is in a better position than the outside audi-
tors to detect fraud or breakdowns in internal controls and
to share with the various units and the Board operating
methods of one unit that might help in the operations of an-
other, thus adding value to the audit function. Due to the
above and the desire to provide some oversight and net-
working of District and higher education accounting and
auditing functions, the Board concluded Synod is best
served by retaining the department, but reducing its
staffing to some degree. This conclusion was implemented
in June 1992.

Task Force Recommendation 6

That the Synod, in convention, rescind those resolutions
which restrict financial disclosure and adopt a practice of
full disclosure (FINANCIAL DISCLOSURE, p. 5)

The Board concurs that the next convention should clar-
ify, preferably through Bylaws, what is considered as “full
financial disclosure” and to what degree a congregation’s
rights under Missouri not-for-profit corporate law to inspect
financial records is delegated to the synodical convention
process. The Board will provide leadership i in considering
this issue. The Board, however, questions the relevance of
this issue to most congregations, since 92% of the Pitts-
burgh Convention delegates voting on Resolution 4-06A af-
firmed the Board of Directors’ policy on the release of fi-
nancial disclosure, namely:

1. that it honor all requests for audited financial statements;

2. that it honor all requests for officer salaries and other salary
scales (Res: 4-07A, 1989 Proceedings);

3. that it honor all requests for the Program Budget Summary,
using discretion in releasing budget detail;

4. that it refrain from releasing information concerning
payments made to specific vendors, individuals, or where
prohibited by legal action or advice of counsel;

5. -that requests ordinarily be made i in writing through members
of the Synod.

Task Force Recommendation 7

That in addition to the usual functional classification,
natural classification be included whenever possible in pub-

lished budgets and in financial statements (BUDGET AND
FINANCIAL STATEMENT DISCLOSURES, p. 5)

The Board concurs with this’ recommendation and
LCMS, Inc., will implement it effective with the 1992/93 fis-
cal year financial statements and the 1994/95 fiscal year
budget summary. While the general ledger system in the
past provided this detail by program, it did not summarize
information necessary for financial statement presentation.
With refinements to the new general ledger system, it is
now possible to summarize this information for financial
statement reporting.

Task Force Recommendation 8

That everything possible be done to identify and explain
changes in budget category allocations and to disclose the
impact of reallocations on affected programs (BUDGET
AND FINANCIAL STATEMENT DISCLOSURES, p. 5)

The Board concurs with this recommendation. Major re-
classifications have long been disclosed in published finan-
cial statements and are now being disclosed in published
comparative composite budgets. However, the Board be-
lieves it is neither practical nor necessary to restate earlier
prior year budgets and internal management reports into
comparative format.

Task Force Recommendation 9

That consolidating financial statements be prepared to
include the financial activities of the LCMS, the LCEF, the
LCMS Foundation, Concordia Publishing House, and syn-
odical schools (CONSOLIDATING FINANCIAL STATE-
MENTS, p. 6) ;

The Board concurs with the need for combined (consoli-
dating) financial statements, including Districts. They have
been prepared annually since 1983, have been shared with
Board of Directors, Council of Administrators, Districts and
colleges, universities, and seminaries, and floor committees
and have been available to others upon request. A copy of
the 1991 combined Financial Statements was shared with
the Task Force.

Task Force Recommendation 10

That consolidating financial statements be included in
an annual report (CONSOLIDATING FINANCIAL
STATEMENTS, p. 6) ©

The Board concurs that summary consolidated informa-
tion should be reported annually. The Board has asked the
synodical Vice-President—Finance/Treasurer to work with
the Communications staff to include this summary infor-
mation, including Districts, in The Lutheran Witness or Re-
porter as early as possible in each calendar year. Since sur- _
veys of readers of the Synod’s official periodicals do not
indicate significant interest in this type of financial infor-
mation, the Board believes it would not be good steward-
ship to publish a lengthy and expensive consolidated an-
nual report similar to those published by many secular
corporations. The Board notes that annual reports for the
Lutheran Church Extension Fund, the Foundation, and the
Worker Benefit Plans are already provided to their partici-
pants and that the audited statements of other entities con-
tinue to be available upon request.