An internal investigation has found that four employees of the Presbyterian Church (U.S.A.)’s national staff were involved in an unauthorized plan in which funds were channeled from the denomination to an outside entity.
The four – all connected with the PC(USA)’s evangelism efforts at the top levels – have not been fired and have not been identified by the denomination.
But they have been involved in a much-promoted program through which the denomination has pledged to start 1001 New Worshiping Communities over 10 years, starting in 2012. At last summer’s General Assembly, for example, the denomination’s national staff threw 248 red beach balls into the air at the close of one of the business sessions, to celebrate the creation of that many new worshiping communities.
When that happened, however, the audit committee of the Presbyterian Mission Agency Board had already launched an internal investigation that apparently centers on work done by the Evangelism and Church Growth ministry area, led by director Eric Hoey, and the Church Growth office, then led by coordinator Philip Lotspeich. Both those ministries lie within the mission program area overseen by Roger Dermody, the PC(USA)’s deputy executive director for mission.
In interviews, both Dermody and Lotspeich – who is now coordinator of the 1001 program – confirmed that they are two of the four employees involved and that mistakes were made. The two said none of those involved had any intent of embezzling from or diverting funds from the denomination – although one grant had already been made to the new entity and a second was in process before the plan was discovered and stopped.
The internal investigation determined that, on Dec. 3, 2013, PC(USA) employees formed an independent corporation in California, without authorization from the Presbyterian Mission Agency, under the name Presbyterian Centers for New Church Development Inc. That name is almost identical to the name the PC(USA) uses for its regional centers for evangelistic work, and the audit committee report refers to “explicit misrepresentation (on the website and elsewhere)” and “potential harmful confusion” involving donors and vendors.
The audit committee report says there were unauthorized plans to transfer PC(USA) employees as well as more grant funding to the independent corporation. It said that, if carried out, these plans would have removed a major mission agency program from denominational oversight.
“A grant was made to the corporation for the purpose of funding the corporation,” wrote Linda Valentine, executive director of the Presbyterian Mission Agency, in an Oct. 8 report to the Presbyterian Mission Agency Board. (That report was made outside of the board’s regular announced meeting schedule, with no notice to the news media.)
Valentine’s report said that the grant was given outside the normal review process of the Mission Development Resources Committee, and that “a second grant was initiated but not approved.” It does not state the amount of the grants, nor the source of the funds involved.
In the interview, Dermody said the first grant made was for $100,000, that all of it has been repaid and that the money came from the Church Loan Program, which the Presbyterian Investment and Loan Program administers. “It’s money that faithful Presbyterians have set aside for new church development,” he said.
A report made to the board in September stated that “the Presbyterian Mission Agency took action in February 2012 to make over $24 million of these funds available for grants as well as loans. The Presbyterian Mission Agency and the Presbyterian Foundation are planning to use some of these funds to finance the ‘1001 New Worshiping Communities Initiative.’ ”
The audit committee report states that “two staff members approved the transfer of restricted funds to this unauthorized separate corporation not under the control of the PC(USA), without PC(USA) Board approval or PMA Board approval.” Valentine’s report says “the grant amount was returned in full” to the PC(USA) after the internal investigation began.
The new corporation
According to records filed with the California Secretary of State, Presbyterian Centers for New Church Innovation Inc. was incorporated on Dec. 3, 2013, using an address in San Clemente, California. Tod Bolsinger, a PC(USA) minister who was then pastor of San Clemente Presbyterian Church and who in March 2014 became vice president for vocation and formation at Fuller Theological Seminary, was listed as the corporation’s chief executive officer. Fuller Seminary is based in Pasadena, California, and has several regional campuses in western states.
The San Clemente address given in the corporate filing matches the home address in California property records for Craig S. Williams, who is mission catalyst for the West for Presbyinnovate – part of the 1001 New Worshiping Communities initiative – and who staffs the western regional office of the Presbyterian Centers for New Church Development.
The filing with the California Secretary of State lists Williams as the corporation’s secretary and Shannon Kiser, the Presbyinnovate mission catalyst for the East, as the chief financial officer.
Valentine’s report says “the employee who formed the corporation also applied to the Internal Revenue Service for 501(c)(3) status.” Her report does not name the employee who filed for this federal nonprofit status on behalf of the corporation, but it says “this was done with knowledge of the supervisor and the supervisor’s supervisor.”
Why did the staff members think it was better to set up a new separate corporation as a channel to fund initiatives in the 1001 program?
“I don’t know,” Dermody replied. “It’s not necessary. All of that could and should have been done through our processes and our own systems,” although he said the employees seemed to feel a separate corporation would give them flexibility to do church planting work in a “nimble, streamlined way.”
Dermody said he was not involved in setting up the corporation and did not know it had happened until March 2014.
“I take full responsibility for the fact that this happened on my watch,” he said in the interview. “I deeply regret that it did. There were a couple of places, two emails in particular, that if I had not been moving so fast on multiple other things and this thing, I should have caught some things that I didn’t.”
Lotspeich said he did not know it was against Presbyterian Mission Agency rules for employees to create a new corporation for doing their work without getting formal approval for that – even though discussion of possibly setting up Stony Point Center in New York (which was housed in Evangelism Ministries) as a separate corporation had been a hugely controversial and much-discussed issue before the Presbyterian Mission Agency Board in 2012 and 2013.
Most records relating to the investigation of the plan to channel 1001 program funds through the California corporation have not been made public. The five-page audit committee report refers to an 11-page investigative report plus 322 pages of exhibits, describing those documents as “privileged and confidential attorney-client communication and attorney work product dated August 11, 2014.”
The audit committee determined that four employees had violated the PC(USA)’s ethics policy, and recommended that copies of the 11-page investigative report be placed in their personnel files, the report states.
To create a separate corporation “was not necessary,” said Marilyn Gamm, a pastor from Wisconsin who is chair of the Presbyterian Mission Agency Board. “We have within the agency the ability to have done whatever was needed to be done. From our perspective, this was absolutely unnecessary.”
Gamm said the board, which discussed this matter in closed session, wanted to make certain the $100,000 was returned, and that “steps were being taken to ensure that this absolutely would not happen again . . . . At the same time, we’re also very concerned that 1001 continue and thrive. We feel like it’s been a tremendous breath of fresh air in the church. We’re very concerned to make sure that it’s a secure and appropriately run program, so the church has confidence in it.”
Many questions involving what happened – including the exact scope of the plan – remain unanswered.
There is reference, for example, in the audit committee report to the “potential diversion of PC(USA) resources and revenue streams to other denominations” – perhaps an indication of ecumenical collaborations or of working with Presbyterians who have left the PC(USA) for the newly established ECO: A Covenant Order of Evangelical Presbyterians.
In interviews, both Dermody and Lotspeich also spoke of sustainability – the idea that a program might generate enough fees and revenue to keep it going long-term despite potential PC(USA) budget cuts.
Lotspeich said the United Church of Christ, for example, has created the Center for Progressive Renewal through which “they have lots of creativity and freedom to try stuff and fail.” He said such a program could potentially be made sustainable if fees for services such as coaching or conducting conferences were provided on an ecumenical basis (for example, through the Fresh Expressions movement in the U.S.) and were paid directly to the corporation rather than to the PC(USA).
“We believe this movement is much longer than 10 years,” the life of the 1001 program, Lotspeich said. “It’s a generational movement” to plant new churches, which could take 20 or 30 years, he said.
Valentine’s report states that the bylaws of the independent corporation give its purpose as “to be a catalyzing agent for Presbyterian Church (USA) and its partners in the establishment and sustaining of new expressions of the church,” and its intent as “to achieve this through but not limited to coaching, mentoring, consulting, training events, printed resources, workshops, conferences, Internet presence, social media, internships and assessments.”
The audit committee report says the independent corporation used a “virtually identical program name and website,” transferred grant funding and was “planning transfer of PC(USA) employees and further grant funding to the unauthorized separate corporation.” It also says that “one staff member permitted PC(USA) employees to perform services for this unauthorized separate corporation.”
The audit committee’s report also states that the effect of the plan involving the new corporation, had it not been stopped, would have been to “remove a major PMA program from PMA and denominational oversight (in a partnership which PMA had not agreed to).” The audit committee also stated that “the claimed purpose was to ensure the future existence of the program without reliance on PMA budget constraints, without exposure to PMA budget cuts and without potential impact from any changes in PMA leadership.”
It also spoke of the need for Valentine and her management team to “reinforce an organizational culture” which “values, promotes and supports adherence to established internal controls of the PMA.”
Both Dermody and Lotspeich stressed that the employees involved were not trying to embezzle funds from the PC(USA).
“I believe there was no intent for personal gain in this at all,” Dermody said. “The audit report said there was the potential for that. But knowing the people who were involved, I absolutely don’t believe there was any intent for personal gain nor any intent to harm the church.
“I think the net effect is obviously it has harmed, to some degree. So there’s deep regret by anyone who was involved in this even obliquely, that this has caused so much time and pain and anguish and in any way violated trust. We work so hard to have the trust of the denomination. That’s the thing that grieves me the most. The very thing the Lord has been blessing, the very thing that we ought to be celebrating, now has this potential negative power. But we remain totally committed to this work. We have put all sorts of new controls in place to make sure this never happens again.”
In an interview, Lotspeich said that “our passion for the work is to see new disciples made, see the church transformed,” and that “our sole goal” was to resource congregations and presbyteries in support of the 1001 program – recognizing that in places where regional offices have been established (the denomination now has four, with plans for two more), clusters of new worshiping communities have sprung up nearby. The team was focused on “how do we best begin to expand that network of regional offices,” to create local streams of funding and “bring some future stability to the work,” so that if the denominational resources are cut back, “the whole system doesn’t fail.”
Asked what his role was, Lotspeich said, “I was part of the coordinating team” planning the strategy, although “I didn’t have any direct role in signing papers.”
He also said “it was my misstep” that he wasn’t aware the PC(USA) has a policy on creating corporations. “I really did not know that we had an incorporation policy,” Lotspeich said. “If I had known we had an incorporation policy, I certainly would have been more than happy to go through that.”
In an email interview, Bolsinger acknowledged that his name is on the incorporation paperwork, but said his involvement was limited. According to Dermody, the Western office of the Presbyterian Centers for New Church Innovation, which Williams heads, is located at San Clemente Presbyterian, Bolsinger’s former church.
“For one meeting I was the president of the 501(c)(3),” Bolsinger wrote. “We had one email vote to create the corporation and then called one meeting and took one vote to ‘unwind’ – I think that’s the term – the corporation at that meeting. I don’t even know all of the details around it because it was something that never got off the ground.
“And frankly, I don’t understand it all myself. I thought it was a cool idea that would be very creative at bringing people together for church planting, but it got nixed before it got going.”
Lotspeich said the initial grants to the new corporation would have gone to support work being done at the regional Presbyterian Centers for New Church Innovation– work that in 2013 was being done at the first two regional training centers, based with Williams at San Clemente Presbyterian and with Kiser at Riverside Presbyterian Church in Sterling, Virginia.
The audit committee report says a statement will be added to vouchers involving grant payments “requiring employees to disclose known conflicts of interest.”
The PC(USA) communications office issued a press release on Oct. 31 describing “lessons learned” in the first two years of the 1001 New Worshiping Communities and “growing pains.” In it, Lotspeich is quoted as saying that “innovative work is messy sometimes,” and “we were unaware of things we should have known about.”
The press release acknowledges that errors were made in creating the independent corporation and says that, as a result, PMA has put in place stronger internal ethics measures and new training protocols, and made organizational changes. It states that that “the employees involved did not act for personal gain, but to benefit the program.”
Among other lessons learned, the release states that the denomination’s leadership “discovered a few fabricated communities” listed on the 1001 New Worshiping Communities website, and has removed them.
“There also have been occasions when a new worshiping community ended up within the bounds of a presbytery that did not initiate it,” the release says. “To avoid this from happening in the future, staff members are working with presbyteries to ensure more intentional collaboration and communication.”
PMA also recently changed the way it makes grants for the 1001 New Worshiping Communities – allowing for a “seed grant” of $7,500 (now for one year, instead of six months), followed by the possibility of a $25,000 “investment grant” for 18 months and a $25,000 “growth grant” after that. Both the investment and growth grants require “dollar matching from a mid council, congregation or in-kind support,” the protocol states.
In financial reports to the Presbyterian Mission Agency Board, detailed budget information for the 1001 New Worshiping Communities program has been scarce.
In the summer of 2014, the Presbyterian Mission Agency hired a full-time fundraiser for the 1001 program.
Dermody said that if all 1,001 new worshipping communities received all the maximum grants available – he said that’s unlikely to happen, and only about $4 million has been spent so far – the cost to the PC(USA) would be $57 million in grants over 10 years, plus costs for administration and running the training centers likely would push the budget to around $70 million.
“We don’t have $70 million available,” Dermody said. “It’s a faith matter.”
11/12/14: Click here to read a statement from Linda Valentine
11/15/14: Four employees placed on administrative leave
11/19/14: Statement from the executive committee of the Presbyterian Mission Agency Board
11/21/14: Memorandum from executive leaders of 13 presbyteries
12/23/14: New law firm hired to oversee independent investigation ethics violations