February 19, 2008
Three Angels Broadcasting Network United States Postal Service Certified Mail
Mr. Larry Ewing, Director of Finance United States Postal Service First Class Mail
P.O. Box 220
West Frankfort, Illinois 62896
Dear Larry,
I am writing to you with a very heavy heart, but after our recent conversation and my confirmation that the IRS investigation of 3ABN is of a criminal nature I feel I must sever the volunteer relationship I had with 3ABN. It has been just over a year since I was invited to attend 3ABN’s 2007 Annual Day of Prayer. At that meeting, I heard a good deal of discussion and fervent prayer regarding “this new enemy”. Since then, I have been shocked at some of the allegations that have been made public. I did not want to believe them, but after some of the practices I observed and conversations I was party to, now coupled with IRS Criminal Investigation Department involvement, I am compelled by the American Institute of Certified Public Accountants Code of Professional Conduct Section 102 to write this letter and document what I saw while at 3ABN. I am disappointed that in my attempt to do something for my Lord, I unknowingly walked into a situation involving alleged activities that violate IRS rules and regulations. My footprint can be found on many documents and general ledger entries at 3ABN and if called upon, I will make every attempt to tell the truth as I remember it.
As you know, I came to 3ABN after surviving a terrible auto accident and feeling like I needed to do something on behalf of my Lord and the posse of angels He must have sent that night to protect me. I came to you with no agenda, other than how I might be able to help the ministry with the talents, training and experience God has given me. I made a cash donation to 3ABN in April of 2005 and contacted you later that year to offer my volunteer services as an accountant. From January through mid-May of 2006 I traveled from Nashville to West Frankfort nearly every other week (until personal complications changed my availability) to assist in the Accounting Department with anything I could.
I hope you know how much I enjoyed being there. I grew very fond of each and every one in Accounting and even made some good friends outside the department. However, I am sure you recall that I had some serious concerns regarding the internal business control environment at 3ABN. When I made my first visit to your office in August of 2005 and again while I was volunteering during 2006, you told me that internal controls are not a priority with you and that you didn’t want to be tripped up by them. With the background I have as a public accountant and internal auditor, these declarations made me cringe inside. But as a volunteer I did not feel it my place to insist otherwise, although I did share my concerns verbally with audit partner Alan Lovejoy from the Gray Hunter Stenn LLP CPA firm in April of 2006 while he was at 3ABN working on the 2005 financial statement audit (a copy of a brief email correspondence with Mr. Lovejoy is enclosed).
The following is a list of the concerns I recall from the days I spent at 3ABN:
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Internal business controls are a vital component of a healthy business (or ministry) and materially accurate financial statements. In my professional opinion, the situation 3ABN currently finds itself in is a direct result of a poorly controlled accounting environment and a lack of governance and oversight. I desperately wish it were not the case, but I believe you know me well enough to know that I call it as I see it. I am close to completing a Master of Science in Economic Crime Management, but I had no idea that my studies would correspond so closely with my volunteer work.
The North American Division of Seventh-day Adventists and Adventist Risk Management, Inc. have prepared a guidebook entitled “Trustees of the Lord’s Finances” which provides an excellent summary of policies and procedures an organization should take to ensure appropriate internal business controls and provide adequate safeguards against misappropriation of assets. I saw no evidence to indicate this valuable resource had even been consulted. The following is taken directly from page 25 of the Quick Reference Guide bearing the same name:
No one wants to admit that theft and cover-up exist in a Christian environment. Yet insider theft occurs at all levels throughout our churches and schools. Without effective controls, such illegal and destructive practices will continue. In order for such events to occur, two elements must be present:
Opportunity is provided when:
• Too much trust is placed in key individuals.
• Too few people share duties and responsibilities.
• Cash is easily accessible.
• Fiduciary controls don’t exist.
• Audits are performed too infrequently.
Motivation is provided when:
• A lack of standards or integrity exists within the organization.
• Employees or volunteers face personal financial challenges.
• Employees or volunteers rationalize that they’re only “borrowing” or that the organization “owes” them something.
• Employees or volunteers believe that non-profit organizations refrain from prosecuting theft cases.
Given the current environment 3ABN now finds itself in, I strongly recommend the organization invest in a forensic accounting review of its financial records. Concurrently, 3ABN needs to implement a system of internal business controls immediately. These combined actions will serve to identify previous abuses if any do exist, as well as to create a controlled environment going forward that will substantially reduce the possibility of future abuses as well as to rebuild both public and IRS confidence in 3ABN. While I did not personally observe any specific incidences of fraud that I am aware of, the lack of internal business controls has created an accounting environment that is ripe for abuse. In addition, I believe serious consideration should be given to changing audit firms. I am not implying that Gray Hunter Stenn LLP is in any way at fault, but publicly traded companies are required to change audit firms periodically and this action would be in 3ABN’s best interest as well, in my opinion. Finally, I believe 3ABN could benefit substantially by requesting the services of the General Conference Internal Audit Department. While a good external audit serves many purposes, the value of a regular internal audit cannot be understated. The audit techniques and objectives employed by each are substantially different, but I truly believe it would be beneficial for 3ABN to obtain the services of both types of audits in an effort to overcome the current financial management issues. An external audit is designed to test and opine on the reported financial statements of an organization while an internal audit is designed to test operational functions and internal business controls.
In closing, I want you to know that you and 3ABN are in my thoughts and prayers. I truly believe that the ministry of 3ABN can be a strong tool used by the Lord to bring the gospel to all far reaching corners of our condemned world. However, I am very disappointed with the current state of affairs and some of the 3ABN decisions that have been made public. Based on the concerns I have outlined herein, I believe I am entitled to request that my $25,000 cash donation be returned to me (a copy of my receipt is enclosed). I was impressed to send it to 3ABN as a small contribution to furthering the Lord’s work but I am now not at all certain it was used to that end. I would also like to be reimbursed for the $100 I was asked to pay to Bea Johnston for utilities while I was volunteering at 3ABN. I will look for my check within 14 days of your receipt of this letter. When management is willing to implement the obviously necessary changes in the internal business control environment at 3ABN, I hope you will feel free to contact me if I can be of any assistance. Until then, best wishes to you Larry. I truly enjoyed working with you.
Sincerely,
Lynette Rhodes, CPA, CFE
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Cc: Walter Thompson, Chairman of the Board
Max Trevino, Director
Danny Shelton, Director
Stan Smith, Director
Mollie Steenson, Director
Larry Welch, Director
May Chung, Director
Kenneth Denslow, Director
Carmelita Troy, Director
Leonard Westphal, Director
Merlin Fjarli, Director
Bill Hulsey, Director
Garwin McNeilus, Director
Ellsworth McKee, Director
Wintley Phipps, Director
Jim Gilley, Director
Larry Romrell, Director
Author
Topic: February 2008 letter sent to Larry Ewing and the 3ABN Board of Directors (Read 873 times)