Forensic Audit Report Describes Continuing Challenges for SID

A forensic audit investigating a case of embezzlement in the Southern Africa Indian Ocean Division (SID) of the Seventh-day Adventist Church raises troubling questions about financial misconduct in that division and whether leadership properly handled the ensuing investigation. According to sources familiar with the situation, repercussions continue today for employees who try and raise concerns about issues contained in the audit.

The SID, with a reported membership of over 4 million, is one of the two largest world divisions of the Adventist Church. From its headquarters in South Africa, the SID oversees work in 23 countries.

The forensic audit—a portion of which was obtained by Spectrum—investigates a case of fraud first uncovered in 2016 that paints a picture of lax oversight under which an employee was able to misappropriate tens of thousands of dollars and go undiscovered for years.

In the time since the fraud was uncovered, the financial officer who brought to light the irregularities has left his position at the SID, while another financial officer—identified as the fraudulent employee’s supervisor—remains in his position.

Although the fraudulent employee was eventually fired, sources familiar with the situation raise concerns that the matter was not fully dealt with and that other misconduct has continued without accountability. Current employees feel threatened if they try to raise unresolved issues to leadership.

According to a source with direct knowledge from within the SID, speaking on condition of anonymity for fear of reprisal, there is a culture of secrecy and silence at the division. “Everyone knows that [there is] theft, but people keep quiet due to their fear of losing their jobs,” the source said.

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Habson Chola was hired as the maintenance director for the SID in 2011. His wife, Caroline Chola, had been the division’s Women’s Ministries director since 2005, before which she worked for the regional church in Zambia. According to the official working policy of the SID, it is standard procedure to try and help an employee’s spouse find employment when a family moves from their home country for denominational work. Before Habson Chola began working at the SID, a 2009 biographical entry for the Chola family describes him as an “entrepreneur.”

After becoming the maintenance director, Habson Chola was responsible for taking care of the SID’s buildings, which often included hiring and managing contractors to perform specific work. In 2016, one of the SID’s three financial officers, Russell Raelly, began a routine financial review called for by new SID guidelines. When it came time to examine the property maintenance department, Chola was “hesitant” for his dealings to be examined, the forensic audit states. The reason why would soon become apparent.

Raelly discovered that Chola appeared to have submitted forged invoices, reporting to be from suppliers and contractors, to the SID for reimbursement; doing so could allow the maintenance director to pocket the money himself. Recognizing the legal and ethical ramifications of the situation, Raelly advocated for an independent investigation.

“This makes all of us (CFO, FOs, including myself, a suspect),” Raelly wrote in an email to SID executive leadership on December 8, 2016. “This raises the concern how do we investigate ourselves and not land in the legal risk of predetermined outcomes.”

The stakes for SID leaders were significant. According to South Africa’s PRECCA act, in the case of fraud totaling more than 100,000 Rand (approximately $6,000), “any person who holds a position of authority” is required to report the fraud to the police. Failure to do so is a criminal offense.

Based on Raelly’s entreaties, the SID eventually commissioned Mazars, a renowned international accounting firm, to do the forensic investigation.

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The investigation by Mazars was wide ranging. Although regular audits of the SID (and Adventist institutions around the world) are performed by the General Conference Auditing Service, standard auditors are not typically equipped to carry out a forensic audit, which can resemble a criminal investigation. The Mazars inquiry was headed by Christo Snyman, the national director for the forensic branch of Mazars South Africa, and a former police captain in the nation’s commercial crime division.

Snyman did not respond to a request for comment about the report.

At several points, Mazars casts doubt on the SID’s procedures, as the division worked to get a handle on the misconduct. SID leaders notified Chola that his conduct was being examined on December 5, 2016—the same day that Raelly gave his initial findings to leadership—but did not request that Chola surrender his work computer until more than a week later. Mazars was later given that computer, but an examination of its hard drive contained “very little data.”

It was not until January 13, 2017, that SID leadership voted to put Chola on administrative leave, pending further investigation.

The Mazars report reveals evidence of multiple schemes carried out by Chola, including that he would accompany contractors to the bank when they cashed their checks and demand a cut; a template for creating fraudulent invoices was also found on his computer.

In all, Mazars examined the financial records of Chola’s department spanning two years, and found over 1 million Rand in suspected fraud (more than $60,000), a figure comprising more than 30% of the maintenance department’s budget.

***

Even with robust internal controls, fraud can happen in any organization when there is an employee intent on maleficence. Perhaps the most troubling aspects raised by the Mazars report are not even the fraud committed by Chola, but rather a possibility that the institutional deficiencies allowing fraud to flourish for years have gone unaddressed. 

Goodwell Nthani was the chief financial officer of the division at that time. The report identifies that he “was responsible for overall management and administration of SID’s finances” but “did not exercise proper management control” over the budgets.

Even before the questions that led to the final investigation, there were reports that should have raised red flags, Mazars found. “Mr. Nthani’s failure to properly investigate any of these complaints and/or institute proper action against Mr. Chola is regarded as being questionable.”

Not long after the affair came to light, Nthani left the SID and moved to the United States for a job with the Adventist Development and Relief Agency. Nthani declined to answer questions pertaining to this story or address the characterization of his conduct by Mazars, responding in an email that all questions should instead be directed to the SID.

Working underneath Nthani were the three financial officers for the division: Russell Raelly, Good-son Shumba, and Michael Muchula. Of the three, Mazars found that Muchula should have held direct responsibility for overseeing the maintenance department.

“Mr. Muchula had the overall responsibility of repairs and maintenance, which included budget, approval of expenses as well as the supervision of Mr. Chola. This responsibility was assigned to Mr. Muchula since 2011 until Mr. Chola’s suspension,” the report stated.

Muchula and Shumba remain in their positions to the present, according to current staff listings. Only Russell Raelly, who raised the questions that launched the investigation in the first place, is gone. He returned to work in his home Cape Conference, where he is listed as the CFO. Raelly has not responded to a request for comment for this story.

Later in 2017, following delivery of the Mazars report, the SID fired Habson Chola, sources with knowledge of the situation say. A letter, obtained by Spectrum, notified Chola of a disciplinary hearing in July of 2017, charging him with “gross misconduct” for committing fraud and causing the SID to “suffer reputational damage.”

Although the Mazars report came to conclusions about what had happened, it also found that there was much investigation left to do. There was missing money that Mazars never located, preexisting audit trails that should be examined, and bank accounts that the SID should request the police to subpoena, the report says.

One of the most striking recommendations is that the SID must assist in a criminal case against Habson Chola.

The SID should “register a criminal case with SAPS [South African Police Service] against Mr. Chola for the funds misappropriated,” Mazars states, adding that doing so “is an obligation as per section 34 of PRECCA.”

The SID has not responded to multiple requests for comment, including specific queries to the division president, Solomon Maphosa, and executive secretary, Gideon Reyneke. A search of South African court records has revealed no evidence of criminal proceedings against Habson Chola. As such, questions remain as to whether the SID carried out its legal responsibility to pursue the case, and whether any SID leaders have individual legal exposure from any failures to do so.

It is possible that the General Conference Auditing Service has been involved in the matter, but GCAS Director Paul H. Douglas said in an email that “GCAS was not involved in the forensic audit performed by an external firm and is not in a position to comment on the findings and follow up to the resulting report,” adding that GCAS does not engage in discussions about its audits.

***

Controversy has followed the SID in recent years, notably in the leadership scandals and upheaval that were a backdrop to the time period covered by the Mazars report.

In 2016, a story in a South African newspaper revealed that the communication director for the division, Paul Charles, had touted phony doctoral degrees to advance his career. Charles eventually resigned.

Controversy over degrees continued, as reported by Spectrum, when the SID president, Paul Ratsara, was accused of using a ghost writer complete part of his PhD thesis, and resigned under pressure. A later statement from the university that granted the degree said it was legitimate, but questions remained about Ratsara’s conduct.

Solomon Maphosa had been the executive secretary of the SID, until he was thrust into leadership following Ratsara’s resignation. Perhaps the turmoil is one explanation as to how financial misconduct could slip through the cracks, but the Mazars report leaves serious concerns for SID leaders to address in order that employees and constituents might have confidence in the organization.

 

Alex Aamodt is a staff writer and the Roy Branson Investigative Reporter for Spectrum. He can be contacted here

Image courtesy of Adventist.org

 

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This is a companion discussion topic for the original entry at http://spectrummagazine.org/node/10767
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There is a lot more corruption going on there. I know people who worked there and who are still working there and there are just lies and lies and lies. Rules are bent and anything done to cover up money going into people’s pockets. Some former employees are also still owed severance payments. If a proper audit is done in that division many more cases of corruption, irregular spending and money wasting will be uncovered.

Stories have been shared about the fear of threats and losing jobs. No one should in any form go through that, even less so in the church!!!

God bless those who are truly trying to do His work in that division surrounded by corruption and nepotism. One day all will be revealed.

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Sad: a young accountant was made one of the scapegoats and fired; Raelly “left” for the Cape Conference - was it “left” or “pushed”?; one of the directors, who advocated - as with Ratsara and Charles - for the right thing to be done was hounded by the administration.

If a matter is not dealt with, it inevitably resurfaces: Paul Charles has resurfaced: 1. Inspector at ASIC - Accreditation Service for International Schools, Colleges and Universities; 2. The founder of Resilient Faith - ironically a certificate-issuing institution providing training in Christian ministry, headed by ‘Dr’ Paul Charles. (See https://resilientfaith.co.za/about-paul-charles/)

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Utter respect to Mr Raelly for standing his ground and unfortunately being pushed out to the Cape Conference, I pray that God will bless him there. There are others who have lost their jobs or felt it necessary to resign and have suffered breakdowns due to trying to stand up for what is right.

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Why has it taken so VERY LONG for Spectrum to report on this matter? This once again proves that too many people at SID are not sufficiently competent to hold office. Nepotism rules and to have appointed a person from outside the borders of the country who knows nothing about local contracts and local contractors is where the problem started. Did Russell Raelly report this to the GC officers, and if so, why did they do so little about it??? This is a public shame. Since Coenraad Haupt, the previous Director of the GC Auditing Services retired a few years ago, the GC Auditing Service has deteriorated to a state of inefficiency and near collapse. For them to make the comments they did, is totally unacceptable. Why are there no adequate control measures instituted and the SID??? It is a public disgrace. Who can help rectify this mess?

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The reason it has taken so long is because of how scared people are to lose jobs or lose comforts. Anything that goes wrong is swept under the carpet or hushed to not create a bad image with the leaders. Yet now that it has exploded like a boil the mess is even bigger than what was perceived. Another reason is that many times people didn’t believe the accusations

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Sounds like there is an attitude at the General Conference that “SOULS ARE BEING SAVED! OUR MISSION IS BEING SUPPORTED! So let’s no inquire too closely abut the financials…too upsetting… We’ll just pretend it’s not happening”.

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Thank you for reading and responding. If you or someone you know has information to share on these issues, I encourage you to get in touch! Contact Alex Aamodt

Corruption in the SID has been well known for a long time.

The “relative as a contractor” is one of the most obvious scams people use to steal money from organizations. In fact, this should be a matter that is against policy, period. I learned about it in intro to accounting, for goodness sake.

I have heard through the grapevine that auditing has been purposefully lax. In other words, the leadership didn’t want to have a fiscally tight organization because it likely benefited them to have lax fiscal controls.

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The only way to prevent corruption is for the general membership to demand of all aspects of Conference leadership full financial accountability and open books. Why not? What is there to hide? This alone can prevent double entry bookkeeping and hidden accounts, as we know was the case of big banks as in the 2008 Great Recession.

Open book accounting (to all interested observers) is good government and good policy–nothing less should be required of all church leaders that handle sizeable amounts of tithe dollars. Without this…there will always be pockets of corruption and misuse of funding.

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I will see who I can try and get hold of, unfortunately again too many times people are scared to speak out of fear of threats and / or losing their jobs

“GCAS does not engage in discussion about its audits.” Really!! Doesn’t sound like transparency to me.

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What happened to TW’s Compliance Committees? It is becoming too obvious that it was meant to stifle WO, and only WO.

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Not totally sure in this case, but the SDA translation of this statement has usually been, “…was eventually fired promoted (or transfered)” Like they did with Ratsara and Charles.

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Yes…, good luck! Not going to happen. Ever!

“Oh brother Peachan, the Lord is in control of His remnant church; you don’t have to worry about those things. Just move on with your life, keep the faith, and leave us alone…” :roll_eyes:

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That was just one of TW’s “Machiavellian Maneuver” intended only to intimidate those who support WO.

  1. Doesn’t the GC have auditors that audit it’s own Divisions?
  2. When was the last audit conducted at the SID?
  3. Who was the auditor, and what has s/he to say about it.
  4. How much disappearing-money are we talking about here?
  5. Elmer, no wonder our “Nutcracker Clinic” was not yet authorized to move in into the GC building. We may find out that they are mentally slow and totally inept to manage a big organization. Besides, we have women in our staff… :innocent:
    @cincerity @pattigrant @ageis711Oxyain

Apparently the GCAS needs to be audited…
:wink:

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Do the unions on this division need to ask the division for some serious answers right now ? Is there on Union President who will be brave enough? What happens from here?

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One has to wonder if this can be applied in this situation. Does the SID fall Into this category ? referring to the Prevention and Combating of Corrupt Activities Act No 12 of 2004 (“PACCA”), where:
Section 34 places a duty on certain individuals to report corrupt activities to any police official. This duty arises when the relevant individual knows or should reasonably have known, or suspects that a person has committed an offence of corruption, involving R100 000 or more. Failure to report is a criminal offence and carries a penalty of the imposition of a fine or imprisonment of up to 10 years.
This duty is placed on individuals who hold “positions of authority”. PACCA sets out a comprehensive list of persons who hold positions of authority. These include:
• the manager, company secretary or a director of a company;
• chief executive officers (executives);
• any other person who is responsible for the overall management and control of the business of an employer;
• any person who has been appointed to the aforementioned positions in acting or temporary capacities are also regarded as persons who hold positions of authority."

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Our prophet with unbroken record has predicted. :rofl::rofl::rofl:

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See? People only believe when my predictions actually happen!!! :laughing: :laughing: :laughing:

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