10 March 2011 – Report to Presbytery Leadership Council
From FPOC Committee, Leonard Nielson and Pete Endow
1) Budget Narrative (document attached). This is the “paper trail” as it were about what the end of the 2010 budget process, the initial discussions with Council, the November Presbytery presentation and progress reports to date. We will want to finalize what to report at April Presbytery about the budget and its process.
- Show giving reports to the Presbytery (church by church)
- Begin to think about what will be mission budget for2011.
- Interpret the Mission Giving.
- Interpret the Admin costs.
- Since Council does not meet again until after Presbytery, how can we delegate this reporting?
2) Real Estate Asset Mobilization:
We looked at each property: how we want to propose moving forward (next steps), and revisited the information that we have already received on these properties, including appraisal info, potential broker info and consultant info. We finished the discussion with what we want to report to council on Thursday regarding the implementation progress.
Consensus (100% of committee present) : Instead of studying them more, we do not see a scenario where we want to develop or lease these properties, so we propose to put all four properties up for sale asap.
Report this to council: the council/presbytery has already set in motion a process where money from selling assets cannot be used or spent without a specific motion from the committee that was charged with investing this money and concurrence with Council and/or Presbytery. However, this committee, while being charged with this task, has not been constituted, so council needs to constitute this committee and begin the discussion of what to do with sale proceeds and how to invest them.
Next steps: we will interview brokers for proposals to sell each property.
28 February 2011 – Presbytery Budget Story
Report from FPOC to Council
A) Presbytery Budget Discussion, Presbytery Council, Oct 14, 2010
The First Problem: We have had a drastic fall-off in Mission Giving and to a lesser extent, in Per Capita giving.
For Mission Giving, this has been a long term trend. For the last five years we have seen approximately $200,000 per year reduction in Mission Giving each year. Most churches express, rightly or wrongly, that they consider Mission Giving to be either optional or else something that they want to designate themselves for other causes.
For Per Capita giving, we have seen a fall-off over the last few years although not as much as Mission Giving. With Per Capita, some churches have been giving little or nothing, either expressing their belief that they didn’t need to pay Per Capita if it was financially difficult, or else expressing their belief that Per Capita payments were not required. Some churches have been deliberately withholding some or all of their Per Capita as a protest against policies of the local Presbytery and/or the higher Governing Bodies. One church has protested the “accounting” process which assesses Per Capita based on reporting statistics, and has withheld some of their Per Capita assessment. Some churches this year, having paid most or all of their Per Capita in previous years, are experiencing serious financial difficulties and may not be able to pay the entire amount this year.
The Second Problem: For a great many years, the essential services of Presbytery have been funded by both Per Capita Giving and a portion of the Mission Giving. It seems as if most churches assume that all Presbytery essential services, including the mandatory pass-along amounts to Synod and GA, were funded solely by Per Capita Giving, and that Mission Giving consisted of external giving to outside causes. This misunderstanding is so widespread that even the Gracious Dismissal Policy reflects the assumption that a church’s obligation is only to pay Per Capita. Using this year’s budget, the total cost to fund the essential services of Presbytery is about $42 per year per member, not the $28 that is the published Per Capita expense.
The Result: As of Sept 30, 2010, we have a real YTD deficit (actual expenses ahead of actual revenue) of $96,000. For General Mission (SFPY only) to date we are behind approximately $120,000 in expected Mission Giving. We are projecting ending the year behind in Per Capita about $60,000-$70,000, and perhaps as much as $200,000 more in expected Mission Giving. That means that we could end up this year with a real deficit (actual expenses ahead of actual revenue) of $360,000. Next year’s Presbytery budget proposal has a projected shortfall of about $327,000 assuming nothing in Mission Giving.
The Challenge: Without Presbytery leadership articulating this income problem to the churches, Presbytery will end up with a substantial deficit for both this year and for next year.
1) The next step to take is to immediately begin to correct this funding misunderstanding, before churches set their budgets for next year and before their the end-of-year appeals are made. This is a critical step that requires ministers and elders to inform their sessions of how Presbytery is funded, and to reconsider the misunderstanding that they may have.
We need to have an understanding of how changing this misunderstanding will impact our income before we can really plan for how much we have to spend.
2) Having some reasonable idea of what our income might be, Presbytery will then need to decide how to address whatever deficit we incur this year. We do not have to assume that we cannot carry over a deficit, but we need to plan for it if we do. An important consideration is that Presbytery, like most churches, is property rich and cash poor, meaning that we do have resources that can be used to cover the deficit.
3) Following those two steps, Presbytery then needs to begin to assess what cost cutting measures it wants to undertake. Since the bulk of budget costs are staff related, considering staff cost cutting must first involve an understanding of what the mission of Presbytery will be going forward, and that process is just beginning.
Under the Book of Order, it is the responsibility of the Sessions to maintain regular and continuing relationship with the higher governing bodies, to ensure that their members participate in those higher governing bodies, and to observe and carry out the instructions of those bodies, and it is the responsibility of the Minister Members to lead their Session in this task. This responsibility of each Session includes the funding of Presbytery, because Presbytery has the responsibility for the mission and government of the church throughout its geographical district, the area in which each church participates in its mission.
Each us, as Elders or as Minister Members of Presbytery, agreed in our ordination vows to be governed by our church’s polity and to take on our responsibility for the maintenance and mission of the church. This is our task, and we cannot assume that someone else will solve this problem for us.
B) The above information was presentation with the Budget to Presbytery Nov 9
Presbytery approved the budget as presented, but only approved $28 per Capita.
C) Presbytery Budget Discussion, Report from FPOC to Council, Dec. 2010
Here is what Leonard Nielson heard in the comments from the Nov. 9 Presbytery meeting and discussed with FPOC:
- The budget is basically ok as presented. It was passed without much comment although two people suggested we consider cutting it
- $28 per capita is ok, but not more.
Although a few said they might consider trying to pay more if there were some education around why they should
- Mission dollars should be spent on Mission-not “toilet paper and power bills”
- Churches want to retain some autonomy over how many dollars they send to Presbytery
- Churches are willing to be asked for more money, but there is little indication that more will be reliably available this year.
- Churches want to be presented with Mission Giving opportunities
Given that Presbytery has already made a commitment to keeping the staff structure of Presbytery as it currently stands (pending the completion of a Mission study and recommendations for new Presbyter), FPOC submits that Council has been given a mandate to propose funding the 2010 shortfall and any potential shortfall for 2011 with a combination of funding cuts (non-staff layoffs) and raising income from other sources.
FPOC proposed that Council take the leadership in this issue by doing the following:
- Immediately implement the Real Estate Task Force recommendations with the idea that we can identify approximately $500k of funding available sometime during FY 2011 (shortfall of 2010 and 2011). This will possibly involve a combination of rental plus some sale.
- Boldly make a commitment to remove all of the $14 for essential services that was previously funded from Mission Giving, and restore that $14 per person to a Mission budget (recipients to be determined by Presbytery vote). We thus commit to raising the extra $14 for essential services through sources than Mission Giving dollars, and going forward we will commit to not fund essential services through Mission Giving dollars.
- Immediately send out an appeal letter to the churches for pledges for 2011, with the above new information and an articulation of essential Presbytery services
- Partner with COM to begin a dialog with all churches, starting with those who cannot give the full amount of $28, to discuss what Presbytery does and how each church is a part of Presbyterian Mission, and discuss whether the $28 can be funded. If a church cannot (or will not), make a plan that recognizes that inability rather than leave it undiscussed.
- In FY 2012, depending on the final configuration of staff, Presbytery essential services budget will be funded by a combination of continued outside funding using ongoing asset mobilization combined with any staffing reductions that may be presented.
D) From the Dec Council Meeting Minutes this was reported:
Budget Priorities are:
- Evaluate cash flow to see if the deficit can be managed without adverse consequences,
- Evaluate what, if anything, can be cut without cutting staff,
- Implement Real Estate Task Force recommendations to mobilize assets—identify what can happen, how and when it might take place.
- By beginning of second quarter 2011, a) decide if we can sustain a deficit budget or not and b)begin a larger discussion of what we might do with those real assets including how to manage them with respect to the current budget and to the long term possibilities.
Chuck recommended that the budget progress be reported at the Feb 8 Presbytery meeting, noting that we have a spending plan but not a complete income plan.
Leslie recommended putting budget info on the website including info on what the essential services of Presbytery are, as well as the overall progress of the budget for 2011. Leslie will start with a video of the essential services. Leonard to get overall budget info to Leslie for use on the website. Emphasis will be: this is not a short term problem with a short term solution, but it is a structural imbalance based on the income that the churches choose to send in; and it is due in part to lack of articulation of what the missional work of Presbytery is.
Consensus was to send an end of year appeal letter to the churches, containing info about the essential services of Presbytery. Janet and Pete to get this out next week
E) From Jan Council Meeting Minutes
Goal for the year: a sustainable and predictable budget for 2012 going forward, and a do-able budget for 2011 that doesn’t cut staff until a longer term plan is in place later this year. Interim Goal: We will reassess our budget by the end of the first quarter.
To that end we are taking on 4 major tasks, in this order:
- Identify cash flow sources that can be used to cover our 2010 and 2011 budget shortfalls. stay ahead of the curve to avoid cash flow crisis.
- Work toward implementation of the RETF to mobilize assets this year and going forward
- Begin to identify any non-staff budget items that might be reduced for FY 2011
- Begin to identify (but cannot complete until DP hire) a target staff salary number that is sustainable.
Progress to date:
So far we have identified 3 potential sources of cash flow and are exploring them, and we will look for more. We will spend a significant amount of our Jan meeting discussing how to implement the RETF suggestions. We are asking for 4-5 more people for FPOC for the year, people with specific skills in management, finance, strategy and personnel.
F) From Feb Council Meeting minutes:
Council to identify current mission giving and report to Presbytery
We propose that Council define the present Mission Giving that is already within the Presbytery budget-that which is unarguably Mission. NCD, and some COM work, at least, and report at Presbytery.
Progress on implementation of Real Estate Task Force Implementation
We have had a proposal from one firm to consult with us regarding disposition of the 4 properties in question. We are moving forward with making a commitment to sell Northminster. We are looking at Alamo and Berkeley with a similar idea in mind but they are not yet at that point. However, we want to have an implementation plan in place, and if property is to be sold, a listing plan by around early summer if possible, so that some proceeds can be utilizable this year.
Report on what asset mobilization might bring in
The working idea is to take sale money and reinvest it in some very safe income producing way. $10M would give $500k per year income on a 5% mortgage for example. Of this, some amount could be used to augment Presbytery budget needs and remainder of income could be used for mission such as NCD and other mission work. Some sale money could be used directly and might need to be but that would not be the first choice
Cash flow recommendation: Synod LOC
In order to ensure that there is no crisis in cash flow from carryover loss and for potential shortfall going forward in 2011, it is recommended that we secure in advance a Synod Line of Credit for up to $500k (the amount of 2010 and 2011 shortfall). This would be repaid by asset mobilization. This will allow us a back-up plan for reorganization that does not require us to do so under crisis conditions.
Develop a budget report to Presbytery at next Council meeting
At our next council meeting we will need to develop a plan for how to report the budget process to Presbytery.
FPOC may meet 2x per month for awhile
Consensus of the council: put this info in simplified form on the website, and then schedule time at the next Council meeting to make a presentation plan to April Presbytery.