LCMS Convention Workbook St. Louis, Missouri — 2004, Page 215

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PROGRAM AND FINANCE 215

or hold other important offices in, the supporting organizations; or

2. the officers, directors or trustees of the supporting organization
maintain a close and continuous working relationship with the
officers, directors or trustees of the publicly supported organiza-
tions; and

3. by reason of (1) or (2) above, the officers, directors or trustees of
the publicly supported organizations have a significant voice in
the investment policies or the supporting organization, the timing
of grants, the manner of making them, and the selection of re-
cipients of such grants and in otherwise directing the use of the
income or assets of such supporting organization”; and

WHEREAS, According to the Schwan Foundation “the identity
of the trustees shall always be such that the ‘responsiveness test’
defined in Treasury Regulations section 1.509(a)-4(i) (2) be satis-
fied, either by there being at least one Trustee who is a member of
the governing body of one or more of the designated organizations,
or by the Trustees being persons who maintain a close and contin-
uous working relationship with the officers, directors or trustees of
the designated organizations”; and

WHEREAS, The Schwan Foundation has written, “each of said
Trustees is a person who for a considerable time has maintained a
close and continuous working relationship with the officers, direc-
tors or trustees of one or more of the seven (7) designated organi-
zations”; and

WHEREAS, The Foundation’s founding document signed Nov.
20, 1992, by Marvin M. Schwan, Grantor and Trustee, and by Al-
fred Paul Schwan and Rev. Lawrence Burgdorf, Trustees, states:
“It is intended that the Trustees of the Foundation manage the
Foundation in such way as to exert a substantial and independent
influence upon the policies and practices of the beneficiary organi-
zations in furtherance of a conservative and traditional position”;
and

Whereas, The founding document also states: “Accordingly,
the identity of the Trustees shall always be such that the ‘respon-
siveness test’ ... will be satisfied, either by there being at least one
Trustee who is a member of the governing body of one or more of
the publicly supported organizations designated in said Article Sec-
ond, or by the Trustees being persons who maintain the aforesaid
close and continuous working relationship”; therefore be it

Resolved, That the Synod in convention order the Board of Di-
rectors of the Synod to disclose fully all Schwan Foundation gifts
received and disbursed by the Synod and any of its entities or re-
lated organizations; and be it further

Resolved, That the Board of Directors fully disclose the
amounts received and disbursed each year as well as the cumulative
amount received and disbursed from the beginning of the Founda-
tion’s grants, gifts, or loans for/by each of the recipients that is in
any way connected to the Synod; and be it further

Resolved, That the Board of Directors be prohibited from ac-
cepting any gift made with conditions not fully disclosed in the
minutes of the Board; and be it further

Resolved, That the Board of Directors identify the Trustee(s)
who is a member of the governing body of one or more of the pub-
licly supported organizations in the Synod or who maintains the
close and continuous working relationship with any of the sup-
ported organizations in the Synod and to identify who within the
Synod maintains the “close and continuous working relationship”
with said Trustee(s); and be it finally

Resolved, That the Board of Directors fully disclose the nature
of the “close and continuous working relationship” with the Foun-
dation through the Trustee(s) and fully disclose the nature, the com-
munication, the content, and the effect of the “substantial and in-
dependent influence upon the policies and practices” of the Synod
by the Foundation through its Trustee(s).

Board of Directors, Northwest District; St. Peter,
Brooklyn, NY; Bethany, Menlo Park, CA; Circuits 20 and
21, South Wisconsin District; St. Luke, Dix Hills, NY;
Christ Our Savior, Coppell, TX

4-30

To Require Full Disclosure of All Funding
from Schwan Foundation

Wuereas, The Lutheran Church—Missouri Synod is facing se-
rious financial concerns, which have developed as a result of many
factors; and

WHEREAS, A major factor has been that nearly one-fifth of the
Synod’s income during recent years has come through contribu-
tions from the Marvin M. Schwan Charitable Foundation, as may
be seen from the fact that during the final five years of the presi-
dency of Dr. Alvin L. Barry the Foundation’s contributions to the
Synod averaged $14.2 million, and during the first two years of Dr.
Gerald Kieschnick’s presidency the Foundation’s contributions
dropped to $6.5 million; and

Wuereas, The document that established the Foundation states:
“It is intended that the Trustees of the Foundation manage the
Foundation in such a way as to exert a substantial and independent
influence upon the policies and practices of the beneficiary organi-
zations in furtherance of a conservative and traditional position”;
and

WuereaS, While large gifts can be a blessing, dependence upon
them can be devastating, especially when the donor has a goal of
changing the organization’s policies and practice; and

WHEREAS, Dependence upon such funding can lead to serious
problems, especially when the largess dries up; and

WHEREAS, The board of directors of any organization has the
fiduciary obligation to understand the financial situation of the or-
ganization and to be aware of any risky factors that might affect
that situation; and

WHEREAS, Having nearly 20 percent of the Synod’s income de-
rive from a single source that has a clearly stated objective of ex-
erting influence upon the recipients of its contributions; and

WHEREAS, For a period of time the Schwan Foundation had re-
quired secrecy concerning its contributions to certain areas of syn-
odical activity; and

WHEREAS, The Synod’s Board of Directors had until only re-
cently kept the source of these contributions secret and has failed to
address the potential impact upon the Synod if the contributions
were to be drastically reduced, as has occurred, or even potentially
cut off; and

WHEREAS, In agreeing to keep the Foundation’s donations se-
cret the Board of Directors has failed to operate in the sunshine, a
practice that should be expected of any church organization, and
has failed in a core governance responsibility; therefore be it

Resolved, That the Synod in convention express its thanks to
the Schwan Foundation for its generosity in past years, but at the
same time declare that in the interest of full and complete openness
and responsibility to the Synod’s membership, it will under no cir-
cumstances serve as a conduit of funding that has as its purpose to
“exert a substantial and independent influence upon the policies
and practices of the beneficiary organizations”; and be it further

Resolved, That the Board of Directors and any other responsible
officials be directed to provide full documentation concerning any
relationship between the Synod and the Schwan Foundation; and
be it further

Resolved, That the Office of the Treasurer be directed to pro-
vide a full report on the amount and disbursement of any funds that
have come to the Synod from the Schwan Foundation over the
years that they have been given; and be it further

Resolved, That the Synod reprimand the Board of Directors for
its failure over the years to recognize and address the potential of
what has now taken place with our Synod finances; and be it fi-
nally

Resolved, That the Synod in convention also reprimand the
Board of Directors for its failure to keep the Synod advised of the
actual financial situation until it had become critical.

Christ Our Savior, Coppell, TX; Prince of Peace, Orlando, FL