Minutes of the Synod of the Diocese of the Central States Meeting at St. Jude s Anglican Church, Richmond, VA October 24 and 25, 2013

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1 Minutes of the Synod of the Diocese of the Central States Meeting at St. Jude s Anglican Church, Richmond, VA October 24 and 25, 2013 Having celebrated Holy Communion, the Synod of the Diocese of the Central States was called to order by the Rt Rev Dan Morse on Thursday October 24, Fr Scott Thompson, vicar of host parish St Judes announced 67 registered attendees. It was moved, seconded and approved unanimously that the 67 delegates constituted a quorum. Visitors were introduced. It was moved, seconded and approved to give visitors voice but not vote throughout the synod. The Bishop deferred nominations of officers, which was to be the next item of business, until after consideration of the new Constitution and Canons. Fr Scott Houser, chair of the Constitution and Canons committee presented the proposed new Constitutions and Canon. 1. Discussion followed which included numerous corrections and proposed amendments: A Motion to strike a portion of Title 1 Canon 7 Section 2 failed. Multiple other issues were brought forth, upon which Bishop Morse ordered all members of Synod to get their corrections to the C&C Committee and for the Committee to meet during lunch to review and make such modifications as may be necessary or appropriate. Bishop Morse read his Episcopal Report (copy provided). 1. It was moved, seconded and approved to accept the report. 2. It was moved, seconded and approved that all recommendations of the report be accepted by Synod. It was moved, seconded and approved to accept the Minutes from the 2012 Synod. Fr Sanders presented a rational of his Gold and Silver Policy as followed by the Diocese. 1. Katherine Hegyi presented a Minority Report on the Trustees Investment Policy (see Trustee Report) prepared by Tom Arrington. The Synod broke for lunch. Upon return from Lunch Deaconess Michelle offered a report on the plans for the pending consecration of Fr Manto as diocesan Suffragan Bishop, scheduled for 10:30 AM on December 7th

2 2013 DCS Synod Minutes Fr Houser resumed discussion of the proposed Constitution and Canons, incorporating such corrections and changes as were offered by Synod and found reasonable or appropriate by the Committee. The Canons were approved unanimously as amended and offered by the Committee (copy attached). The Synod moved to Committee Reports: Trustees o Fr Sanders and Mark Malson provided the Trustees financial report. The metals portfolio had lost 9.9% over the past year, however they expected it to come back The 2013 Financial report was provided (copy attached) The 2014 Budget Report was offered In accordance with the 2012 Synod requirements, the Trustees provided the Synod their Report on Investment, including the Trustees investment philosophy (copy attached see also Minority Report prepared by a member and noted above). General discussion and questions followed, including questions about the CPA s report (copy attached). Fr Sanders indicated some suggestions in the CPA report would be implemented and some would not. o The Trustees report was accepted and approved. Standing Committee o Fr Camlin read the Standing Committee Report (copy attached). o It was accepted and approved by the Synod. Committee on Ministers Salaries o Fr Manto reviewed a report on minister s salaries (copy attached). Board of Foreign Missions. o Fr Manto provided information on Matt Colvin s ministry Joan Workowski provided a report on the Women of the Church The Synod ended the afternoon session and enjoyed a banquet, fellowship and singing by St. Andrews, Asheboro Choir Thursday evening. Having celebrated Morning Prayer the synod resumed its Business Session Friday Morning. Nominations for Diocesan Officers: o The Nominations Committee nominees for Standing Committee, Trustees and Constitutions and Canons Committee were approved by acclimation as follows: o Standing Committee Fr Charlie Camlin Fr Scott Houser 2

3 Fr Wayne McNamara Mr. Sam Mansour Mr. Ron Mount o Trustees Fr Keith Boettner Fr David Straw Fr Franklin Sanders Mr. Perry Hayes Mr. Mark Malson Mr. Chip Byers o Constitutions and Canons Fr Scott Houser Fr Ian MacGregor Mrs. Martha Berger Mr. Wyatt Boutwell o Fr Manto was nominated as President of the Standing Committee and approved unanimously. o Fr Camlin was nominated as Vice President and approved. o Fr Sanders was nominated as Treasurer and approved by voice vote DCS Synod Minutes o Fr MacGregor was affirmed and approved as Secretary. Holy Trinity, Mason Ohio offered to host the 2014 synod on October 23 rd and 24 th. Approved. A motion of thanks to St Jude s and Fr Scott for hosting a successful and enjoyable synod was approved. The synod adjourned with a closing Eucharist. 3

4 Dear Brothers and Sisters, 2013 Report of the Rt. Rev. Daniel R. Morse Bishop, The Diocese of the Central States In accordance with the Canons of this Church, I hereby present you with a list of all active clergy in the Diocese of the Central States. Attached to the end of the Annual report is the current list. All Deacons and Presbyters on that list are current. On this occasion of my Sixth report as Bishop of this Diocese, I submit this summary of my activities during this past year in the work of the episcopate. Due to the great distances that most REC bishops have to cover some of our work is done on the telephone, and I certainly have had my share of very long telephone conversations, but those are much less expensive than car or plane travel. I made 28 Episcopal visits to the Parishes and Missions of this Diocese, and 27 persons were presented to me for the laying on of hands in the ancient rite of confirmation since I reported to you in In addition to those Episcopal visits, I had preaching engagements and meetings with clergy as enumerated below. EPISCOPAL VISITS Location Date Special Purpose Confirmations Owensboro, KY, Feb. 5 New Mission Houston, TX Feb. 16, 17 Church Growth Seminar Loganville, Georgia Feb. 26 Bp. Foley Beach, Holy Cross Anglican Church Roanoke, VA Mar. 4 Covenant Chattanooga, TN Mar. 18 St. Andrew s Richmond, VA Mar. 25 St. Jude Dayton, OH Mar. 26 Christ Our Hope Vestry Westpoint, TN April 8 Christ Our Hope Birmingham, AL April 22 St. John s 4 Summerville, SC April Conference of Bishops Westpoint, TN May 2 Vestry meeting Raleigh, NC May 6 All Saints 1 Asheboro, NC 6:00 pm May 6 St. Andrew s 4 Fairfax, VA June 3 Holy Trinity 7 Ridgecrest, NC June 4-10 ACNA Asheboro, NC Aug. 1 Bp s. Comm. Meeting Lynchburg, VA Aug. 2 Pastoral need Wilson, NC Aug. 5 Redeemer 5 Grand Rapids, MI Aug. 23 Holy Communion in hospital Dayton, OH Aug. 24 Christ the King Vestry Mason, OH Aug. 25 Matt Colvin Ordination Dayton, OH Aug. 26 Reception of Dorino Cozzini

5 Location Date Special Purpose Confirmations Lynchburg, VA Sept. 9 St. Timothy 3 Birmingham, AL Sept. 12, 13 Visit bereaved Memphis, TN Sept. 23 St. James 2 Philadelphia, PA Sept. 29 Consecration of Bp. Chuck Gillin Summerville, SC Oct Conference of Bishops Westpoint, TN Oct. 13 Seminar leader Shalimar, FL Oct. 25, 26 Synod Shalimar, FL Oct. 27, 28 Mason, OH Nov. 4 Dayton, OH Nov. 18 Need to make clear the grace of God and that the Gospel is trust in Christ alone for salvation. The strength of the Reformed Episcopal Church has always been a commitment to traditional Anglicanism and prayer-book worship without chasing rabbit trails such as Anglo-Catholic, or charismatic emphases, and dressing up in fancy clothes. Some in the history of the REC have insisted on black gown vestments to the exclusion of other more traditional Anglican vestments. Several years ago when I tried to discuss with Bp. Grote the matter of proper attire his response was that it was all just a bunch of rags. Over the last few years some churches have left our diocese because we were too Anglo-Catholic or because we were not Anglo-Catholic enough. My emphasis has been, and will continue to be, that the Constitution and Canons of the REC require the use of the Book of Common Prayer in the main worship service on Sunday morning Keep up to date on addresses and phone numbers It has certainly been a great blessing to me to visit all of you and your parishes, and my prayer is that God will bless the communities around us by the ministry of the Gospel. I remind you to download the packet of Episcopal visit report forms from the diocese web site so that when I make Episcopal visits I will have the information I need to be a more effective pastor to this diocese. You should also remember that the diocese depends on your tithes for its operation, and we also depend on your monthly reports to the Treasurer for an accurate view of the state of the diocese. The General Council depends on tithes coming from all the dioceses to fund its functions, so that if the parishes do not tithe to the diocese, then the diocese cannot contribute as much to the General Council. Even if your parish only had $10 contributed in a month, your $1 contribution to the diocese along with the written report helps to maintain our connection to each other. Most of our churches are lonely islands whose primary connection to the REC may be my occasional visit. For all intents and purposes we may as well be independent evangelical churches doing a liturgy that nobody cares about in a sea of independent mega-churches that are raking in the dough. We must 2

6 make every effort to stay connected to each other. God has established our oneness in Jesus Christ, but we must do all that we can to maintain that oneness. ORDINATIONS/RECEPTIONS I ordained the Rev. Dcn. Chris Herman to the sacred office of presbyter on Nov. 19, 2011 at Christ Our Hope, Dayton, OH. I ordained Matt Colvin to the office of Deacon on Aug. 25 at Trinity Church, Mason, OH. God willing, I will ordain the Rev. Dcn. Scott Thompson to the sacred office of presbyter on Dec. 8 in Richmond, VA. On Aug. 26 at Christ the King Church in Dayton, OH I received the Rev. Dorino Cozzini from the Roman Catholic Church. THE COMMITTEE ON MINISTRY OF WOMEN Mrs. Gail Hill, the wife of the Rev. Willie Hill, is the president of the REC ministry to women. The women of the REC have a project every year that is approved by the bishops. The 2012 Women s Day Project goal is to raise $7,500 to support the Protestant Reformed Christian Church/Reformed Episcopal Church mission churches in Croatia. Presently there are seven new Reformed Episcopal mission churches in Croatia. The total amount received to date is $5,120. Jolie Grout, a member of Team Croatia the Reformed Episcopal Church s Board of Foreign Missions 2011 Short-Term Mission Team, was the featured speaker. Jolie inspired all in attendance by her moving description of her trip to Croatia and concern for the growth of the gospel in Croatia. The Committee reports that $6,536 has been raised for Croatia. $1,000 short of the $7,500 goal! If you ve been following the missionary news on Croatia, you should be able to see how God is working in this part of the world. Visit the Board of Foreign Missions website at: Please see what you can do to assist in the realization of the 2012 goal and please keep our brothers and sisters in Croatia in your prayers. Ask your church to participate in this worthy project. Send contributions to: Mrs. Diane Wright, 65 Harrison Drive, Berkeley Heights, NJ

7 THE REFORMED EPISCOPAL CHURCH IN CUBA Bishop Charles Dorrington of the Diocese of Western Canada and Alaska and of the Missionary District of Cuba reports that the work he and his wife, Claudia, began in 2003 with only 8 people and one church has grown to 19 churches and about 1,000 people. They have been given the opportunity to purchase a 20 acre farm outside the town of Moa on the NE end of the island. The asking price is $10,000. If you would like to contribute to this need send your check to The Rt. Rev. Dr. Charles Dorrington, Tetayut Rd., Saanichton, B. C., Canada, V8M 2H4. I am sure Bp. Charles would be happy to send you a copy of Cuban Chronicles 2012 if you write to him at that address or him at recwcan@islandnet.com. BOOK RECOMMENDATIONS DATE FOR THE 2014 DIOCESE MEETING At our initial meeting we settled on the third week in September for the annual diocese meeting, but we changed to October this year. We have not yet received an invitation for FOR YOUR PRAYERS Marianne and I thank you for your prayers for both of us, but especially for her as we have battled her cancer together over the last couple of years. She has had some surgery, radiation, and BCG treatment for bladder cancer. According to her doctors, she is free of cancer, but we ask that you continue to uphold her in your prayers that there will be no reoccurrence of any of the cancers. Again I commend for your prayers Mike and Pat Sampson in Cleveland, OH, who continue to work and pray for the re-establishment of Church of the Epiphany. CLERGY TRANSFER The Rev. Dcn. David Abshear was transferred at his request to the Orthodox Church, and the Rev. Ed Hopkins was transferred at his request to the Roman Catholic Church. The Rev. Fr. Gregory Mashburn was transferred at his request to the Diocese of Quincy of ACNA. The Rev. Dr. Lawrence Adams was transferred at his request to the Anglican Province in America. 4

8 REPORT FORMS At the conclusion of this report I have included forms that you can use to report attendance at worship and the monthly tithes and contributions. RECOMMENDATIONS 1. That until the heinous practice of Abortion on demand is abolished in this Country that the Third Sunday in January, or the Sunday closest to Holy Innocents, be designated Sanctity of Life Sunday and observed in all our Parishes. Furthermore, that our Clergy be instructed to prepare and deliver a sermon on that theme at the Worship services on that day. Liturgical resources are available from the Diocesan Headquarters of the Diocese of Mid-America for use on this Sunday. 2. That this Council commend the support of Cranmer Theological house to the parishes of our Diocese and that every effort be made to support this essential ministry both in terms of finances and personnel. 3. That the parishes of the Diocese support the work of the Women in the Church. 4. That the parishes of the Diocese support the REC mission in Cuba. 5. That Dss. Teresa Johnson be thanked for her work in producing a newsletter for the diocese and that all parishes be encouraged to cooperate fully and communicate with her (trjohnsn@gmail.com) any news items about their parishes so that we can improve communications in the diocese. 6. That this Council commend the ministry of Matt and Sora Colvin in the Philippines to the continued support of all REC parishes. Respectfully submitted, The Rt. Rev. Daniel R. Morse Bishop Ordinary 5

9 BISHOP MORSE, The Rt. Rev. Daniel R. (Dan) PRESBYTERS BOETTNER, The Rev. Roy K. (Keith) CAMLIN, The Rev. Charles F. CLAUSON, The Rev. Dr. Marc A. EDGERTON, The Rev. Paul GOUGH, The Rev. Frank HARKNESS, The Rev. Mike HEATON, The Rev. John HERMAN, The Rev. Christopher (Chris) HOUSER, The Rev. Canon Jon S. (Scott) JENKINS, The Rev. Kit R. JOHNSON, The Rev. Dr. John LONGMIRE, Jr., The Rev. Rodney H., Canon Missioner MANTO, The Venerable Peter, Archdeacon MACGREGOR, The Rev. Ian H. MCNAMARA, The Rev. Wayne M. ROGERS, The Rev. Burlyn RUBY Jr., The Rev. Dr. Walter M. SANDERS, The Rev. Franklin STEERE III, The Rev. Samuel A. (Sam) STRAW, The Rev. David USELTON, The Rev. Randy BAIN, The Rev. Johnny Ray FLYNN, The Rev. Chris HANNA, The Rev. Mark KELL, The Rev. Jonathan LITTLEJOHN, The Rev. Dr. Robert, Ph.D., MARTIN, The Rev. Bartholomew P. (Bart) SIMON, The Rev. Camden SPIETH, The Rev. Michael Spieth THOMPSON, The Rev. W. Scott TRUAX, The Rev. David DEACONS 6

10 DEACONESSES JACQUES, Ella Carol (Candy) CALDWELL, Michelle JOSEPHSEN, Jr. The Rev. Dr. Hans E. NEEB, The Rev. Robert KUMP, The Rev. William T. JONES, Josiah SEXTON, Rob ALABAMA FLORIDA KENTUCKY St. John s Of Mt. Laurel Birmingham Church of the Resurrection Shalimar St. Nicholas Owensboro NORTH CAROLINA INDIANA OHIO Church Of The Redeemer Wilson All Saints Raleigh St. Andrew s Asheboro Trinity Evansville Christ Our Hope Dayton Christ The King Dayton Trinity Mason Epiphany Cleveland RETIRED CLERGY POSTLUANTS PARISHES 7

11 TENNESSEE VIRGINIA St. James Memphis St. Andrew s Chattanooga Christ Our Hope Westpoint St. Andrew s Appomattox Covenant Roanoke Holy Trinity Fairfax St. Timothy Lynchburg New Mission Work Lynchburg St. Jude s Richmond NAME OF PARISH MONTH DIOCESE OF THE CENTRAL STATES MONTHLY REPORT FORM FOR MISSION WORKS AND PARISHES Date Attendance No. of Visitors Offering Name of Visitors Address of Visitors TOTALS FOR MONTH Please fill out this form each month and return to the Diocesan Office at 511 Rochelle Dr., Nashville, TN

12 Reformed Episcopal Church Monthly Income and Tithes Year Parish: City/State: Date Total Income (-) Designated Gifts (-) Net Income Tithes Wed. 1 st Sun. Wed. 2 nd Sun. Wed. 3 rd Sun. Wed. 4 th Sun. Wed. 5 th Sun. Wed. Date of Tithe Check: Amount of Tithe Check: Check No. Treasurer: Explanation of designated gifts: 9

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21 Majority Report of the Trustees to the 2013 Synod of the Diocese of the Central States Strategy to Handle Excess Funds Last year, the synod asked the Trustees to produce an "investment strategy" statement to express the decision-making process that the Trustees use to handle excess money. A lot of discussion led up to this request, and many differing opinions were offered. This report is intended to express the current thinking of the majority of the Trustees (hereafter referred to as the Majority). It does not intend to bind future Trustees to any particular policy or procedure. A minority report also accompanies this. First, we begin by asking some important questions. Who are we? Knowing who one is and what one's position is before God and in the world is perhaps one of the best ways to ensure obedience and success in the Kingdom of God. For example, Joseph had an acute and complete sense of who he was: though he became extremely powerful in Egypt, his identity as a son of Abraham and as a servant of the Almighty God kept his vision clear; whatever ambition he might have had was put in check by his identity as a servant. Likewise, Adam and Eve's failure to recognize who they were and who they should become led to their downfall. So it's appropriate to ask: Who are we? We need to know who we are because it dictates what we do. Just as importantly, we need to know who we are not. We are not an investment bank or a retirement plan or a fund manager; we are the Church. One should expect the Church to handle its affairs (and its money) differently from other institutions. This is the main reason why the Majority can so easily reject the notion of "generally accepted practices" when it comes to the way in which we invest money -- those practices address precisely the types of organizations that we are not. Our mission and calling are different. What are we doing? We also need to know WHAT it is that we are doing: we are not handling the Bishop's retirement account or an investment account; we are not speculating with extra free money that we have run across. We are handling the tithes and offerings of current or past parishioners in the REC. Whether these tithes and offerings are checks written by REC members last month or last year, or whether they were offerings converted to real estate or liturgical furnishings years ago and then back to cash, the money we handle remains the tithes and offerings of the people. As such, the money we are handling is holy. Our liturgy bears out this notion: the people present their tithes and offerings as an act of worship; we present them to The Lord with uplifted arm, we place them on the Table next to the bread and wine. Our Liturgy and

22 practice also teach us that things that are holy do not normally revert to common use; when we break the bread or pour the wine but don't use all of it, we don't take it home and serve it that night for dinner -- we either finish it reverently after the service, reserve it for the following week, or dispose of it some special way in accordance with its holiness. Tithes and offerings are equally holy - whether a parish realizes a surplus, or it has to dissolve and turn its assets over to the diocese, that money does not somehow revert to a common use. We are not ignorant of the fact that the Bible talks a LOT about what we should do with our money. However, most of that teaching is to illustrate a larger point, and further, it is not designed to instruct the Church in this specific matter. Biblical examples of what the Church is supposed to do with her money are far different from those of what an individual is supposed to do with his. Most everyone wants to grow their own money in order to pay for college, buy a house, or retire comfortably. In growing those nest eggs, we are free to use common mechanisms for doing so; we can invest in other people's businesses, loan money out at interest for non-charitable purposes, etc. We can invest in companies (by purchasing stock) that produce things like iphones, electricity, durable goods, or if conscience permits, booze, gambling equipment, cigarettes, and more. We are also free to loan money to those same companies or to the local, state, or federal government by purchasing their bonds. We are also free to engage in private transactions such as providing venture capital to startups or buying property to rent to someone else. After studying the scriptures, however, there does not appear to be any clear instruction that the Church is supposed to handle tithes and offerings that way. Yes, many DO (e.g., the Mormons running hotel chains), but if the Bible instructs us otherwise, the Majority is content to disagree with common practice. Ethical problems of buying stock in this or that company, knowing, say, that they extend benefits to homosexual partners, or that their product could potentially harm its users if used incorrectly, are easy enough to resolve (for or against) on an individual level. But even if we could decide that it's OK to use tithes and offerings to speculate in publicly-traded businesses, there are huge problems in deciding which businesses to own. Instead of individual consciences, the Trustees would need to respect the collective conscience of the diocese's members, and that would lead to a host of problems simply of practicality. However, because we could find no Biblical example of tithes and offerings being used to buy businesses in the first place, we would oppose stock purchases for that reason alone. The decision is even more sharply focused when it comes to bonds. The process of buying bonds is simply loaning money out at interest to businesses or governments. While there may be differing levels of individual opinion on the subject of interest, many Christians do not have any objection to loaning their own money and receiving interest, if that loan is for the purpose of enhancing a business or funding development, i.e., for profit. We did not see any Biblical example of this being done with tithes and offerings. The issue is not even the interest -- we didn't see the tithes and offerings being used for

23 any sort of loan, even interest-free charity loans. (Charitable gifts are another story.) So for that reason we could not support the purchase of bonds either. With those two things off the table (and, by extension, mutual funds and most ETFs), there is no way the Majority could adopt any "generally acceptable investment strategy" because such things would inevitably cause us to invest the Church's money in ways that we would consider to be unbiblical, or at least inappropriate considering the holiness of tithes and offerings. We want to do what's right, but what's left? So what's left? We looked to the Bible to see what they did. First, we need to look at the sorts of assets that the Church has historically held. The economy laid out by the sacrificial law beginning in Leviticus required Israelites to bring the fruit of their labors: sheep, goats, grain, oil, etc. Other things were also acceptable, such as grain converted into bread or birds (which were likely wild). Further, the Church held silver coin, e.g., as the redemption price of the firstborn. During building projects, Israelites also donated wood, fabric, gold, and jewels. The common theme here is that the Church's assets were either commodities that had inherent value or coin, which at that time, also had inherent value. We never see the Church converting these assets to debt instruments or investing them in business (except the business of the Church). Second, we need to look at what the Church did with those assets. The aforementioned Levitical economy was created to care for the Levitical priesthood, who were not given an inheritance in Israel -- the tithes and offerings of the people were their provision. While Levites were permitted to make livings for themselves, the tithes and offerings of the people were clearly there to provide for them, because they also had responsibilities to the Church which did not produce support for their families except by their share of the tithes and offerings. Caring for the priestly tribe was clearly a priority in the Church's finances. Another way the Church used her assets was in Church-building programs. When God commanded the Tabernacle and the Temple to be built or renovated, offerings were given to the Church which were directly used in the construction and decoration of the Holy places. Some men also gave up their regular livelihoods to be craftsmen for the Lord, and supplemental (if not total) support likely was provided for their families from the Church's assets. Yet another way the Church used her assets was to care for the widows and orphans. Charitable gifts were certainly permitted, if not commanded, for those unable to care for themselves. Third, we need to look at how the Church kept her assets. The only way ever mentioned in Scripture is that the Church stockpiled her assets. Naturally only non-perishable goods could be stockpiled, but the tradition of stockpiling has survived even as far down as the 19th century, where churches put their tithes in barns, rather than converting them to cash or pooling them with other organizations' assets under a manager.

24 Summary Our primary desire in handling the diocese's money is to obey God. After study and discussion, the members of the Majority have agreed that it is appropriate even today to use a Biblical model for our policy. As such, we drew the following conclusions: 1) The Israelite Church held all kinds of commodities, that would, for the most part, not be feasible for us today. However, precious metals (coin) were acceptable commodities for the Israelite Church, and are feasible today. This report supports the holding of gold and silver coin as being a Biblical way to hold the Church's assets. 2) This report supports the holding of US currency, the primary means by which the people give their tithes and offerings. 3) This report does not support handing the diocese's assets over to a management company for a variety of reasons. The holy tithes and offerings of the people were never mingled with assets used for common purposes -- they were always held by the Church and managed by the Church. The majority of the Trustees feel that we would not be Trustees at all if we delegated this responsibility to someone outside the Church. One of the reasons Fr. Sanders was appointed to the original board of Trustees was because of his decades of experience in analyzing gold and silver coin prices. Additionally, Fr. Sanders has provided his service and experience to the diocese at no charge. We feel that this model allows us to obey our consciences by allowing us to hold Biblical assets while also keeping the responsibility for handling the diocese's money within the diocese. (Fr. Sanders can provide extensive information in the specifics of how gold and silver can be held, and why he feels it is a better and more Biblical asset than currency. This report seeks to document the framework for operation and refers to the works that Fr. Sanders has provided as an attachment.) 4) This report asserts that the primary use for the Church's assets is to care for the clergy within the diocese. This includes the Bishop's paycheck and expenses, expenses of the Bishop Suffragan, the Archdeacon, and the Canon, assistance with living expenses for ministers within the diocese who are planting churches or growing small ones, and the support of any other person (ordained or not) whose livelihood is their work for the diocese. Currently, of course, we provide support and defray ministry and travel expenses for the Bishop Ordinary. We also provide funding for travel for some ministers to attend Synods and General Councils, and financial support for clergy whose parishes are unable to fully support them. 5) This report asserts that the secondary (or co-primary) use for the Church's assets is to advance the Church. This includes expenses associated with church plants, assistance with the construction or renovation of Church buildings in the diocese, and any other thing that we can do to enhance the growth and propagation of the REC. Currently we provide travel funding for clergy to administer the Sacraments to church plants, interestfree loans for church building projects, and support for missionaries in places such as Cuba and the Philippines. We see this area as being the primary means of "investing" the Church's money. While this report does not support "investing" in the traditional

25 sense, the Majority feel that investment in the Church of Jesus Christ is where our priorities should lie. While these "investments" do not provide immediate or short-term financial gain, we are not concerned with that. We'd rather use excess money in this way rather than chasing monetary gain. 6) While caring for widows and orphans is a valid use of the Church's assets, this report supports the handling of those gifts at the parish level. We hope this report has expressed clearly the mind of the Majority. Again, this does not intend to bind the diocese to any particular procedure or policy, only to provide the diocese with an adequate explanation of our actions.

26 Minority Report of the Trustees to the 2013 Synod of the Diocese of the Central States On Handling Reserve Funds An inquiry to other REC Diocese and the central REC offices revealed that these other REC bodies use professional investment managers who place their assets across a diversified portfolio of investment types. These investment strategies tend to reflect the UCR (usual, customary, and reasonable) standards whereby assets are never placed all in one basket, neither in one industry nor in one type of investment. Under ordinary circumstances this is what the minority report would recommend for this Diocese. Under the circumstances in which our Diocese is operating at a deficit, that is, every year we use some of our reserve to fund our current expenses, it seems even more important to ensure that these reserves will be ready as needed for current expenses or for the planting of new missions and development of parishes. Therefore, following the UCR standards, I recommend that we reduce our exposure to commodities prices by placing no more than 20% - 25% of our assets, which may be considered long-term savings, in gold and silver, and place the remainder in FDIC-insured money market accounts or fairly short-term FDIC insured CDs. Since we are not operating at a surplus, and may need our money in the near term, investing in mutual funds, even conservative ones, might not be wise at this time. Respectfully submitted, Tom Arrington Board of Trustees

27 Joe Osterfeld, CPA Certified Public Accountant 710 North Main Street ~ Suite A ~ PO Box 807 ~ Columbia, TN Telephone: ~ Fax: AGREED UPON PROCEDURES REPORT Rev. Franklin Sanders Treasurer Diocese of the Central States Reformed Episcopalian Church PO Box 178 Westpoint, TN I have performed the procedures enumerated below, which were agreed to by the management of Diocese of the Central States Reformed Episcopalian Church (the Diocese), solely to assist you with improving the Diocese s financial statement internal control procedures. This engagement is not an audit, but is intended to determine how well the Diocese has done in implementing appropriate internal control procedures. This engagement to apply agreed upon procedures was performed in accordance with standards established by the American Institute of Certified Public Accountants. The sufficiency of the procedures is solely the responsibility of the specified users of the report. Consequently, I make no representation regarding the sufficiency of the procedures described below either for the purpose for which this report has been requested or for any other purpose. The agreed upon procedures that were performed and the related findings and recommendations are as follows: Agreed Upon Procedures: 1. I will discuss with appropriate personnel within the Diocese about internal control principals including proper separation of duties. I will make inquiries as to the Diocese s current procedures and policies. This will include internal controls, cash management, invoice process, record keeping practices, and accounting procedures. I will test samples of current fiscal year source documents for the Diocese. One sample will be for cash disbursements. I will also test a sample of cash receipts. The testing will be limited and is not intended to be as extensive as expected in an audit performed under generally accepted auditing standards. 2. I will read current financial reports and statements for the Diocese. 3. I will read the actions of the board of directors for Diocese from an internal control, tax and financial reporting viewpoint. I will not consider the actions of the board of directors from a legal viewpoint. 4. I will make recommendations for improving internal control procedures and other items listed above. I will report on the findings of the samples of cash receipts and disbursements tested. Findings: 1. Internal Controls: A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent or detect misstatements on a timely basis. A significant deficiency is a deficiency, or combination of deficiencies, in internal control is less severe than a material weakness, yet important enough to merit attention by those charged with governance. A material weakness is a deficiency, or combination of deficiencies, in internal control, such that there is a reasonable possibility that a material misstatement of the entity s financial statements will not be prevented or detected and corrected on a timely basis. a. My consideration of internal controls was for the limited purpose described in the first paragraph of this report and would not necessarily identify all deficiencies in internal control. Since this is not an audit and I am not reporting on financial statements, I did not determine if any of the deficiencies in internal control were material weaknesses, as defined above. b. A deficiency can be either a deficiency in design or operation. A deficiency in design exists when a control necessary to meet the control objective is missing; or an existing control is not properly designed so that even if the control operates as designed, the control objective would not be met. The following items in this section are deficiencies in design that I noted were important enough to merit attention by those charged with governance. A deficiency in operation exists when a properly designed control does not operate as designed; or the person performing the control does not possess the necessary authority or competence to perform the control effectively. See item five under recommendations for a discussion of results and any operating deficiencies noted for the two samples tested. 1

28 c. Separation of Duties Design Deficiency: Because of the Diocese s limited resources, all functions are performed by volunteer members of the Diocese. Therefore, it is difficult to design controls that enable the Diocese to eliminate one person performing duties that ideally should not be performed by the same person. d. Cash Receipts Design Deficiency: The person who receives the money in the mail also prepares the deposit and posts the diocesan tithes summary report. The amounts posted to the diocesan tithes summary report and the Diocese s deposit records, which includes copies of the Church checks, is not consistently reconciled to the bank statement. The amounts received are not confirmed with the paying Church or other donor through an acknowledgement letter. e. Cash Disbursements Design Deficiency: In the area of cash disbursements, the authorized check signer does not see the supporting documentation before signing the checks. Because of the distance between the Bishop and the Treasurer, the Diocese generally relies on for documenting expenses. The Diocese generally does not require detailed supporting documentation, such as approvals, invoices, packing slips or other receiving documentation, or expense reports prior to payment of expenses. 2. Financial Statements: I read the profit and loss statements for the years ending December 31, 2011 and 2102 and the balance sheets as of December 31, 2011 and 2012 for the Diocese. The financial statements are prepared every six months by a Trustee who looks at and enters the detail transactions of the Treasurer. They appear to be adequate for the internal use of the board for monitoring expenses and budget purposes. The financial statements are not in accordance with US generally accepted accounting principles for non-profit organizations and are not appropriate for external purposes. Proceeds and expenses from dissolved parishes, clergy relief, and miscellaneous pass through activities are treated as liabilities instead of as revenues, expenses, and as applicable, board designated unrestricted net assets, temporarily restricted net assets or permanently restricted net assets. The values reported on the balance sheet of the investments in gold and silver did not agree with the cost or the market value at December 31, 2011 or The gain or loss in market value was not presented. Promises to give, if applicable, are also not recorded. A profit and loss statement is presented instead of a statement of activities and a statement of functional expenses. A cash flow statement and footnotes were not presented. 3. Board Actions: I read selected board minutes of the Diocese from an internal control, tax and financial reporting viewpoint. I will not make any determinations regarding the actions of the board of directors from legal viewpoint. There was documentation of approval of budgets, the loan to the Bishop, expenses not budgeted, and monitoring of financial statements and the budget. 4. Transaction Testing: Cash Disbursements: Twenty-seven cash disbursements totaling $136,382 from January 1, 2012 through December 31, 2012 were selected for testing. A total of 131 disbursements totaling $281,607 were made. The following exceptions or deficiencies in operation were noted: Approval of the expenditure was not documented in writing and supporting invoices were not retained for 16 disbursements totaling $8,987. Receiving was not documented for one disbursement totaling $131. See item two for recommendations for cash receipts design deficiencies. 5. Transaction Testing: Cash Receipts: Twenty-seven cash receipts totaling $231,838 from January 1, 2012 through December 31, 2012 were selected for testing out of a population of 99 deposits and credit memos. There was one deposit in May where a check for $ was misplaced and was not deposited until August. Two other deposits were made for amounts that did not agree with the amount on Diocese s copy of the deposit slip. These three deposits per the bank did agree with the supporting copies of the checks and the Diocesan Tithe spreadsheet record. See item one for recommendations for cash receipts design deficiencies. Recommendations: 1. Cash Receipts Design Deficiencies: The Diocese should reconcile their deposit records and Dicesan Tithe spreadsheet record to the deposit amounts posted by bank. The Diocese should send acknowledgement letters, with a listing of the checks received, to the paying churches and other donors so that discrepancies, if any, can be identified and corrected. This would also give private individuals and or tax paying entities that make donations to the Diocese support for their donations for tax purposes. Charities are required by law to give acknowledgement letters to donors. Since the Diocese prepares financial statements every six months, I would recommend that this be done every six months for the Churches in the Diocese. Other donors could be sent letters annually. Reconciling the deposit records to the bank statement and sending acknowledgement letters would provide some compensating controls for the limited staff and limited ability to separate duties. 2

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32 Constitution and Canons of the Diocese of Central States As adopted by the Synod of the Diocese October 24, 2013 CONSTITUTION ARTICLE I The name of this Diocese of the Reformed Episcopal Church is and shall be The Diocese of Central States. ARTICLE II The purpose of The Diocese of Central States is to establish, support, and maintain Churches and Missions of the Reformed Episcopal Church, and to supervise and govern churches within its jurisdiction; aid the ministry of clergymen within the limits of the Diocese; and promote the general charitable work of the churches within the limits of the Diocese. ARTICLE III The Diocese Section 1. The Diocese of Central States is a constituent part of the Reformed Episcopal Church. This Diocese affirms and adheres to the Doctrine, Discipline, and Worship of the Reformed Episcopal Church as enumerated in the Constitution and Canons of the same. Section 2. Said Diocese shall consist of all organized Parishes, Mission Parishes, and Extension Works, and all the assigned resident clergy of the Reformed Episcopal Church under the jurisdiction of this Diocese, such jurisdiction having been established by the General Council and its Constitution and Canons. The Parishes and Mission Parishes shall be represented at Diocesan meetings as the Canons of this Diocese direct. Section 3. The territorial limits of the Diocese of Central States are those defined by the General Council of the Reformed Episcopal Church, subject to such amendment as may be later voted by a Synod of this Diocese, with the consent of the General Council as follows: 1

33 By action of the General Committee Meeting on Saturday, 13 October 2007, the Diocese of Central States is comprised of the states of Alabama, the panhandle of Florida, Indiana, Kentucky, North Carolina, Ohio, Tennessee, Virginia, and West Virginia. ARTICLE IV Government of the Diocese of Central States Section 1. The legislation of the Diocese of Central States and the direction of all matters that belong to and affect the Diocese of Central States shall be vested in a Synod of the Diocese of Central States, subject to the restrictions of Article III, Section 1. Section 2. The Bishop Ordinary shall be the ecclesiastical authority of the Diocese of Central States. If there is no Bishop Ordinary of the Diocese of Central States or if the Bishop Ordinary is certified by three reputable physicians as incapable of acting, then the Bishop Coadjutor shall succeed per Canon 11, Section 3 (a) of the Reformed Episcopal Church, Constitution and Canons. If there is no Bishop Coadjutor, the Suffragan Bishop shall be the ecclesiastical authority until such time as the Bishop Ordinary shall resume his office or a new bishop is elected and installed. If there is no Bishop Coadjutor or Suffragan Bishop, the Standing Committee shall be the ecclesiastical authority until such time as the Bishop Ordinary shall resume his office or a new bishop elected and installed. Section 3. All boards and committees of the Diocese of Central States shall be under the supervision of the Bishop and Standing Committee of the Diocese of Central States, which shall within the limits of the Constitution and Canons of the Diocese have veto power over their operations and actions. Section 4. The Bishop shall be a member ex-officio of all committees whether elective or appointed. ARTICLE V Membership of the Synod of the Diocese of Central States Section 1. The Bishop Ordinary, Assistant Bishop, all Presbyters of the Diocese of Central States, and any Deacon who is Minister-in-Charge of a Parish within the Diocese of Central States. Section 2. All Chairmen of Committees of the Diocese of Central States and authorized Agencies of the Diocese of Central States including lay members of the Standing Committee and Board of Trustees of the Diocese. Section 3. All lay delegates elected in accordance with the provisions of Title II, Canon V, of the Canons of the Diocese of Central States. Section 4. Licensed Lay Readers pastoring a Church or a Parish within the Diocese of Central States may be elected by any Synod to membership therein. 2

34 Section 5. Deacons, who are not Ministers-in-Charge of a parish, and Deaconesses canonically resident in the Diocese of Central States have the right to speak upon the floor of the house, but not to vote in deliberations. Section 6. No one shall be a member of the Synod of the Diocese of Central States who is not a communicant member of the Reformed Episcopal Church in good and regular standing. Section 7. By a two-thirds vote, visitors and friends of our Church may be made Corresponding Members for the duration of the meeting of the Synod. Corresponding membership shall confer the right to speak upon the floor of the house, but not to vote in deliberations. ARTICLE VI Meetings of the Synod Section 1. The Synod of the Diocese of Central States shall convene its regular meeting at such time and place as shall have been designated at the preceding meeting unless such time or place of meeting, or both, shall have been changed in the manner set forth in Section 2 or Section 3 of this Article. Section 2. The Bishop Ordinary, by and with the consent of two-thirds of the members of the Standing Committee, may change time and/or place fixed for any meeting of the Synod of the Diocese of Central States. If such change is made, the Bishop shall give thirty (30) days notice thereof to every Parish and Mission Parish entitled to representation in the Synod of the Diocese of Central States. Section 3. Special Meetings of the Synod of the Diocese of the Central States may be called by the Bishop Ordinary by and with the written consent of a majority of the members of the Standing Committee; by two-thirds of the members of the Standing Committee acting without the Bishop; or by three-quarters of the parishes having certified to the Bishop Ordinary and the Standing Committee that such a meeting was approved by a majority vote of the requesting parish at a properly called parish meeting. Any such meeting shall be held at the time and place designated in the call to the meeting. Thirty (30) days notice thereof shall be given by the Bishop Ordinary to every Parish and Mission Parish specifying the purpose or purposes of such meeting. Section 4. The Delegates appointed to the preceding Synod of the Diocese of Central States shall be delegates to any special meeting, unless in the interim, any Parish shall have elected other delegates. 3

35 ARTICLE VII Officers of the Synod Section 1. The Bishop Ordinary of the Diocese of Central States shall be the Presiding Officer of the Synod and, except in the case of disability or other impairment, shall preside at all meetings of the Synod. Section 2. The Synod shall elect a President and Vice-President of the Diocese. They shall be a Bishop or Presbyter of the Diocese of Central States and shall preside at all Synods or other meetings when the Bishop Ordinary is absent or in the event of a disability or other impairment of the President until the election or installation of a new Bishop Ordinary. Section 3. The Synod shall elect a Secretary and a Treasurer from the clergy or lay persons in the Diocese of Central States. The Secretary and the Treasurer may appoint an assistant to help with their duties as necessary. The Synod may also elect such other officers as it may decide upon from time to time. The officers shall be elected by ballot at each regular meeting, upon the organization of the Synod of the Diocese of Central States, and shall hold their respective offices until their successors have been elected and have qualified. Section 4. The several officers described in Sections 1, 2, and 3 shall perform the duties which pertain to their offices and such other duties as may be assigned to them by the Synod of the Diocese of Central States. Section 5. In the case of the death, disability, or resignation of the President, the Bishop Ordinary, in concurrence with a majority of the Standing Committee, shall appoint a Presbyter of the Diocese to fill the office and execute the duties thereof until the next regular meeting of the Synod of the Diocese of Central States. Section 6. In the case of the disqualification, death, disability, or resignation of the Secretary or Treasurer, the Bishop Ordinary, in concurrence with a majority of the Standing Committee, shall immediately appoint a suitable person to fill the office and execute the duties thereof until the next regular meeting of the Synod of the Diocese of Central States. Section 7. The Treasurer of the Synod of the Diocese of Central States shall be the Treasurer of the Standing Committee of the Diocese of Central States. ARTICLE VIII Proceedings of the Synod of the Diocese of Central States Section 1. The proceedings at the meetings of the Synod of the Diocese of Central States shall be regulated by such parliamentary rules as the Synod may from time to time adopt; provided, however, that whenever ten or more members of the Synod call for a vote by orders, it shall be allowed. In such case the Bishop shall vote as a Presbyter and the concurrence of both orders shall be necessary to the passage of the measure so voted on. 4