Decision Number 334
Status of an Annual Conference Audit of Its Treasurer's Books During the Transition from One Fiscal Year Period to Another.
An Annual Conference which changed its fiscal year in 1969 from a conference year to a calendar year basis, resulting in a transitional seven month fiscal year from June 1 to December 31, 1969, may direct an audit of the books of its treasurer for such a transitional fiscal year, and thereafter on a fiscal year basis corresponding to the calendar year, without a further obligation to direct an audit for the full period of the conference year ending May 31, 1970.
Statement of Facts
The General Conference of 1968 established a fiscal year for The United Methodist Church and its Annual Conferences on the basis of a calendar year beginning January 1, 1969, and requested its Annual Conferences to work out their fiscal years on a percentage basis between the end of the existing conference year and the end of the calendar year (Daily Christian Advocate, 1968, Pages 266, 509-511, 668).
The Alabama-West Florida Annual Conference implemented this directive at its 1969 session by establishing the calendar year as the fiscal year of the Annual Conference beginning January 1, 1970. This resulted in a seven month fiscal year in 1969 from June 1 through December 31 (the end of the previous conference year to the beginning of the new fiscal year based on the calendar year). It also directed that the books of the conference treasurer be closed for audit on December 31, 1969, for the transitional seven month fiscal year of 1969. Finally, it ordered that such an audit should be included in the Annual Conference Journal carrying the proceedings of the 1970 session of the conference.
Since April 23, 1970, Paragraph 909 of the Discipline has required of an Annual Conference an audit for the preceding conference year made within ninety days of the conference fiscal year; but prior thereto it was mandated within ninety days of the close of each session of the Annual Conference.
On June 5, 1970 at a session of the Alabama-West Florida Annual Conference a ruling was requested of the presiding bishop (1) as to whether the audit previously directed for the transitional seven month period of 1969 met the requirements of Paragraph 909 of the 1968 Discipline, and (2) as to whether the seven month audit of 1969 met the requirements of Paragraph 909 after the paragraph was amended in 1970.
The presiding bishop, Bishop W. Kenneth Goodson, answered both questions in the negative, ruling: "Since the Book of Discipline calls for a full audit within ninety days after the close of annual conference sessions, I, therefore, rule that a 7/12 audit does not satisfy the requirements of Paragraph 909 and the Commission on World Service and Finance should have an audit made for the full period of the preceding conference year within ninety days following this session of the annual conference."
The question before the council is the correctness of this ruling.
The Judicial Council has jurisdiction under Paragraph 1712 of the 1968 Discipline.
Analysis and Rationale
When the Alabama-West Florida Annual Conference voted at its 1969 session to change its fiscal year from the conference year to a calendar year basis, it directed that an audit of its treasurer's books should be made at the end of that year for the seven month transitional fiscal year of 1969, and that this audit should be included in the 1970 Conference Journal. At the time this audit was ordered it did not comply with the requirements of Paragraph 909 of the Discipline as then written because it was not a direction for an audit for a conference year to be made within ninety days after the close of the Annual Conference session.
However, by the time the adequacy of the 1969 audit was challenged at the Annual Conference session in June 1970, Paragraph 909 had been amended to direct an audit within ninety days after the close of the conference fiscal year. There no longer existed a disciplinary requirement that the audit be made within ninety days after the close of the conference session. Consequently, and with deference to the presiding bishop, we conclude that he should not have ruled that an audit must be made for the full period of the preceding conference year (June 1, 1969-May 31, 1970) within ninety days following the 1970 session of the Annual Conference. The basis for such a ruling had been repealed before the additional audit was ordered. The only audit that could be required of an Annual Conference at that time was one based on the fiscal year as distinguished from the conference year. This was the situation regardless of the status of the seven month 1969 audit under Paragraph 909 of the Discipline, either before or after its 1970 amendment.
An Annual Conference has the inherent authority to order an audit of its treasurer's records at any time and for any period that it desires an audit; and it has the inherent authority to publish such an audit or audits in its Conference Journal.
Consequently, we see no reason why the seven month 1969 audit could not be accepted by the Annual Conference as its audit of its treasurer's records for that period and published in its journal.
Moreover, its action was a reasonable response to the General Conference request of the Annual Conferences that in moving from a conference to a calendar fiscal year, they should work out on a percentage basis the interim period between the end of the old fiscal year and the beginning of the new. How else could this Annual Conference make the transition through this seven month fiscal period unless it let the period pass without audit or directed a nineteen month audit at the end of calendar 1970?
If the 1970 amendment of Paragraph 909 of the Discipline did not have retroactive and curative application to the 1969 audit, the consequence is that the General Conference imposed no requirement for an audit of the transitional seven month period.
We need not decide between these alternatives. The Annual Conference needed no disciplinary authorization to order this audit or any other audit of its own records.
No matter what the standing of the 1969 audit, there remained no disciplinary requirement in June, 1970, for an audit for the period of the conference year, June 1, 1969-May 31, 1970. This was no longer the fiscal year of the conference.
The rulings of the presiding bishop of the Alabama-West Florida Conference that the 1969 audit did not satisfy Paragraph 909 of the Discipline, and that an audit must be made for the full period of the preceding conference year were in error.