Wednesday, December 17, 2008

Who Is In Charge of the Store That Is Not Being Watched?

Last week, I wrote about who’s watching the store. This week, I’m wondering who’s in charge of the store.

News Items:
  • Madoff in house arrest, SEC under fire. “On Tuesday, SEC chairman Christopher Cox offered an embarrassing mea culpa for the agency's lack of oversight of Madoff's investment advisory firm, Bernard L. Madoff Investment Securities LLC. Cox said Wednesday there was no evidence that SEC staff did anything wrong amid accusations the regulator failed to act on tips of alleged fraud by Madoff in the past 10 years.” (Reuters)
  • Chrysler to Close All Plants for One Month. “Chrysler and larger rival General Motors Corp. have warned they could run out of cash within weeks without financial aid from Washington. Chrysler has said its cash will drop to $2.5 billion by Dec. 31, the minimum needed to meet payroll, pay suppliers and run the company. It would have trouble paying bills after the first of the year.” (Associated Press)
  • Lambuth University Crisis. "Lambuth leaders laid it on the line at a meeting called to answer questions about the financial crisis that threatens the university's future. To keep the doors open, Lambuth University needs an additional $800,000 to meet year-end obligations including the December 15 payroll. Of that amount, the Board of Trustees has already pledged $260,000 and those alumni contacted have offered another $100,000." (Memphis Conference, United Methodist Church)
  • Lambuth and United Methodist Church Unite for Common Cause. "Regarding the institution’s financial predicament, Koen explained that the current situation is a result of several events over time leading up to this point. Approximately four and a half years ago, an unacceptably high discount rate was reached under the direction of a former VP of enrollment. Due to misinterpretation of enrollment statistics and ineffective monitoring by senior leadership, there became a huge increase in Lambuth’s dependence on annual giving to balance the budget." (Press Release, Lambuth University)

All of these items are in the forefront of the news today, nationally and locally. All of them involve the failure of institutional oversight and leadership. And all of them seem to be willing to blame something instead of taking responsibility. While SEC Chairman Cox offered a mea culpa, he was also quick to say that his staff did nothing wrong.

This is the situation with Lambuth University, our conference’s small college. The school is in financial and institutional straits and is asking for contributions from alumni and churches, yet gives no assurances that safeguards are in place to prevent repeat occurrences. Legitimate questions that were asked were given vague and incomplete answers. Trustees said that they believed in the leadership and were given misleading information. Parents (to this date) have received no correspondence regarding the school’s struggles.

In short, we are being asked to bail out an institution while having vague information about the total indebtedness, how it got there, and who was (or is) ultimately responsible. These are questions that people have asked me that I cannot answer, as I have no information to give them a satisfactory answer:

  1. Why isn’t an independent, financial audit being done?
  2. What is the role of a trustee?
  3. Why should I contribute to the endowment when they’ve already been guilty of spending the principal once already?
  4. Is this a serious financial campaign, or just being done so we can say, “We tried.”?
  5. If the university goes under, is the Annual Conference financially liable?
  6. Who’s in charge, and who is ultimately responsible?

Regarding question 1: I am not an expert when it comes to finance and law. But I do know that the quickest way to engender trust after a financial crisis is to come clean, tell what happened, and print it out for all to see. Make changes and corrections and earn back trust.

Question 2: Being a trustee is more than a nice honor or being a yes man or woman to the president or CEO. It comes with responsibility and trust. It is both leadership and a check and balance of leadership. There is no one to “pass off” to or blame. It is their responsibility to know and ask the right questions.

Question 3: This is a very hard question to answer. I honestly don’t know how Lambuth will ever raise an endowment again. They violated the fundamental trust of a benefactor for an endowment – spending the principal. I don’t know if this is against the law, but I am fairly sure it is an unethical practice.

Question 4: This is an embarrassing question. I’ve gotten two emails about the urgent need for money. There has been a press release. But as far as a personal contact, or a letter to my church, I’ve yet to receive such. With such an imminent financial crisis, I would expect a whole lot more attention to detail and a “saturation” of sorts with publicity, data, reassurances, and personal contact. It seems to the casual observer that it’s not that big a deal.

Question 5: This is fuzzy too. This question was asked at the Lambuth informational meeting on Dec. 6th, and got an emphatic “no” in response. However, the trustees of Lambuth are nominated and appointed by our Annual Conference. And, were any of the buildings at Lambuth mortgaged (I don’t know if they are or not), I suspect the trust clause is in effect. If the school was to financially fail, who would creditors come after? Trustees? The annual conference? The trustees maintain that the conference is not liable. The logical question is, then, who is?

Question 6: This is really the question that needs answering. Who is in charge, and who is ultimately responsible? Are the trustees of Lambuth ultimately responsible, or is the Annual Conference who nominates and appoints the trustees the final authority? This is an important question, as it pertains to who is ultimately responsible for the debt. If the Annual Conference is not responsible, I will breathe a huge sigh of relief. However, if we are responsible, it really is in our best interests to bail out Lambuth – I suspect that would be far cheaper than enduring the endless litigation that could ensue regarding repayment of debt. Is anyone ever going to come clean and answer this question? The sooner, the better.

It all ultimately goes back to leadership – who is in charge of the store that no one is watching? It is fairly certain that in the Christian church, we are to take authority, not abdicate. To say “it’s not my job” or “we can’t do anything” is a cop out and abdication from discipleship.

It may be that in addition to being nearly insolvent financially, we may be spiritually bankrupt. Leadership in the church is not just administrative or financial - it is spiritual. Are we truly about making disciples, or just a social agency? How important is it to us? Do our hearts really burn to do the work of the Gospel?

Stephen Covey is quoted to say these words: "How different our lives are when we really know what is deeply important to us, and keeping that picture in mind, we manage ourselves each day to be and to do what really matters most."

So, who’s in charge of the store? I think Christ made it fairly clear that we are. He is the one who gave us the keys to the Kingdom.


1 comment:

Divers and Sundry said...

Has there really been no independent, financial audit?

You say: "The school ... gives no assurances that safeguards are in place to prevent repeat occurrences. Legitimate questions that were asked were given vague and incomplete answers."

Even when we try to find out information that will aid us in exercising better oversight, they stonewall us. They have the power to prevent us from finding out what we need to know, and they always have. Feel my frustration? I agree with your wish that they "come clean, tell what happened, and print it out for all to see."

Thanks for raising these questions and allowing comments.