Treasurer's & Council on Finance and Administration Reports - AC2021

Treasurer's & Council on Finance and Administration Reports - AC2021

June 13, 2021

Treasurer's Report Script
Maggie Bigg:
Good morning! My name is Maggie Biggs and I am the Treasurer/Director of Administrative Services for the Iowa Annual Conference. It is a pleasure to be with you this morning. 
Today I’d like to present some information on how the Conference ended the year 2020 in terms of income and expenses as well as how our local churches did in contributing to our connectional community. 
I’ll go over the annual statistical data, update you on the Conference’s PPP loans and then finally show the components of the 2022 budget that will be presented to the Annual Conference Session.  
Here are some of our year-ending results – Our total apportionment budget for 2020 was $13,127,917. Our local churches sent in $8,928,527 which was 68% of the total. The next chart will do some comparisons. 
Here is a comparison of budget versus actual received from 2016 to 2020. In 2016, we received 78.5% of the total budget. We had a high in 2017 of 81.6%, dropped to 74% in 2018, then leveled off in 19 and 20 at 68.9% and then 68% in 2020. 
Looking at the total revenues which would be fee income, contributions, sale of goods & services, investment earnings, and other miscellaneous receipts, there was a 19% decrease. However, along with that reduction in revenues was a drop in expenditures of 28%. As we have talked in previous meetings, the ministry activities of the Conference dropped significantly after COVID arrived. 
This was all at a time when the Conference was making the concerted effort to reduce staff and decrease expenses wherever possible which has been in the works for the past three years or more. 
Our Working Capital Reserve which is the fund that we use to cash flow the Conference and cover deficits, increased by 52% in 2020. There are several factors that caused this: with less expenditures, there were more year end surpluses to go to the Reserve. Also, the budget provides for some apportionments to be allocated to the Reserve and there were no funds that came out of the Reserve to pay 100% of the General Church apportionments. We only passed on the amount of apportionments we received from our local churches. 
Some additional year-ending results, I’ve laid out a comparison of three years showing how many churches paid within each of these designated categories. Keeping in mind that there were 15 less churches from 2018 to 2020, the number of churches who were able to pay 100% decreased by 16 between years 18 and 19 and then decreased by another 35 between years 19 and 20. As you are all aware, 2020 was not a normal year by any means and has affected all these numbers. 
A similar change occurred in the number of churches who paid zero from 2018 to 2020. 
This next chart is the same information but in graph form. As you can see, those two categories showed the greatest change over the three years. That is the 2nd one down, those paying zero, and the bottom lines, 100% payment. 
The following 6 charts contain the statistical information I  have presented to you every year since becoming Treasurer. The first being the weekly worship attendance. With all of the changes in the last year, a drop of over 5,000 would have been much higher without the quick action of many congregations in setting up online services. 
This chart is the numbers received on professions of faith. Dropped by 523 people between 19 and 20. 
This one is participants in Christian Formation Groups. As we would expect, it dropped by 26,963 people. 
This one is the number of persons engaged in mission activities. It dropped similarly to worship attendance by over 5000. 
This one shows the dollars local churches paid out for apportionments, district askings, advance specials, etc. In light of the COVID situation, the drop of just under $600,000 was not near as much as the drop between 2018 and 2019 which was over $2M. 
And the last statistical chart is of membership which remained on a similar path of decline as the past 7 years. Membership sits at 145,733 members. 
As was reported earlier this year, the Conference did receive the first Payroll Protection Program (PPP) loan for $1.2 million. As of the date of this writing, we do not yet have confirmation that the loan has been forgiven even though we are expecting that to happen. 
In April of this year, the Conference applied and was approved for the 2nd PPP loan at $1.1 million.  
There were thoughts and opinions on both sides of the fence concerning applying for the PPP loans. Without those funds, I believe there would be more ministries in the future that will not be supported, and the services that the Conference provides clergy and local churches would be in increased jeopardy beginning in 2022. 
The last item I have is the 2022 budget – maybe a bright spot in my presentation.  With continued re-alignment of staff, reducing expenses wherever we could, and leaving Conference Missions’ part of the budget unchanged from 2021 to 2022, the 2022 Budget proposed by CFA to the Annual Conference Session is a total of $8,217,654. This table has the numbers broken down by the budget categories, 1,2 &3. Connectional Resources is mainly staff and fixed costs, the bulk of the reduction. In total, a drop of $1.5M, which is a 15.5% reduction.  
With that good news, I’ll turn it over to Norlan Hinke, our CFA President. 

Conference Council on Finance and Administration Script
Norlan Hinke

Please let me introduce myself. I am Norlan Hinke, a member of St. John’s United Methodist Church, Davenport, Iowa. I live in DeWitt, Iowa with my wife and grandson.                                                                                                                                                      

It is my pleasure to serve as Chair of CF&A when Jon Disburg stepped down after several years of successful leadership.  We have a group of committee members who are committed with a focus on working with the Cabinet as well as every individual church and all church members throughout the Iowa Conference. 

It is the objective of CF&A to propose an annual budget to serve the Conferences program needs, while established at a level that allows Iowa Conference churches to meet their apportionments. This is essential to allow us as Methodists to serve the many needs and people throughout the conference as well as the programs and services we provide to spread the Word of God and Make Disciples Throughout the World.  Another financial objective is to establish a balanced budget to assure the Reserve Fund is not diminished after being reduced to a low dollar amount, but currently has been restored to an acceptable level.                                                                                                                                                  

You will denote from Maggie’s previous reports and the reports I share with you, that the number of churches in the Iowa Conference continues to reduce annually as does church membership and church attendance.  This is not unique to the Methodist faith as it is a trend throughout our nation.  These reasons, plus various other reasons including the Covid Pandemic, have impacted apportionment giving.                                                                                                                                                                                                                                                   

As Maggie mentioned, we are pleased that our conference finished with a modest surplus in 2020.  This was primarily due to making substantial internal adjustments, the conference deciding to pay General Conference apportionments at the same rate as they were received,  plus the Treasurer's office managing expenses to meet the criteria of the Contingency Plan.  We were able to utilize the PPP loan program, which was established to stabilize the economy while assisting organizations such as the Iowa Conference as well as for-profit businesses to maintain their level of employment while keeping businesses in operation to work through the Pandemic.  The conference was able to complete a balanced 2020 budget as a result of the generosity and financial commitment from all conference membership.  In addition, conference members donated unlimited gifts of time and talent to share our faith and love of God.                                                                                                                                                                                                   

Following are reports intended to share information with you to show the historical pattern of apportionments and giving, the financial impact on the Reserve Fund, information supporting the reasons and impact of implementing the Contingency Spending Plan and the hopeful outcome that we can discontinue this program in the near future.  Finally, staffing information to show membership the internal staffing changes undertaken to reduce budgetary needs.                    
Historical Review Apportionment Budget - Payments     
                  Budget                      Payments                Churches
2016         $14,810,617            $11,804,320            777
2017         $14,171,974            $11,120,639            761
2018         $14,794,211            $10,973,012            753
2019         $14,288,286            $9,849,386              747
2020         $13,127,917            $8,928,527              738
2021         $9,724,498              TBD                         732
 *2022*     $8,217,654             TBD                          TBD                         

You will note the apportionment budget has been reduced $6,592,963 or 44.5%.  This has been a challenging and difficult process.  The intent is to continue to provide the programs and services necessary to carry out the missions of the conference while at the same time reducing expenditures so funds received could pay expenses without depleting the Reserve Fund and placing the conference in a tenuous financial position.  The good news is that we finished in the black last year, this year-to-date shows improved giving, and we were able to restore Reserve Funds to an adequate level.                                   

CF&A Objective to Present Proposed Balanced Budget - allow churches fair opportunity to meet apportionments - eliminate utilizing Reserve Fund Account to fund budget
Reserve Fund Account
2016                  $3,416,359 
2017                  $3,212,001
 2018                 $2,916,289
 2019                 $1,985,546
 2020                 $2,041,402
*Current*         $3,194,509                                                                 

*Based on transfer of apportionments received, donation, transfer from General Conference Contingency after 2020 year-end*   

The Reserve Fund is a Balance Sheet item to assure the conference has adequate funds to cover annual budget shortfalls.  As you can see the fund was significantly reduced to a point where with continued losses at the amounts of the previous year, it would be basically depleted.  Through effective financial management by reducing general expenses, implementation of the Contingency Plan, changes in conference apportionment payments to General Conference, and other factors, the Reserve Fund has been restored to over $3 million.  We anticipate this amount of Reserve Funds should provide a financially stable future for the Iowa Conference.

The Contingency Plan was implemented April 15, 2020 to assure the conference maintained adequate cash funds to meet payroll, required fixed payments and necessary operating expenses.  CF&A through the Conference Treasurer’s Department established a cash-available formula that matches available funds with the potential required dollars of expenses per diem.  CF&A set a policy that requires maintaining a minimum of 90 days liquid cash to a maximum of 180 days cash funds.  As of December 31, 2019 available cash funds had reduced to 44 days, which resulted in the Contingency Plan being implemented.  Through effective management procedures this ratio increased to 54 days as of October 31, 2020 and 70 days as of 2020 year-end.  The cash funds available has increased to 78 days 2021 year-to-date.  It is the intent of CF&A to maintain the Contingency Plan to increase cash funds to meet policy guidelines, with the hope that at some point in the near future we can discontinue this program and return to normal funds management.

The Contingency Plan directs the Conference Treasurer to paid operating expenses according to the following priority:
1.    mortgage, lease payments; salaries and benefits
2.    occupancy expenses; telephone, utilities, property maintenance, insurance, expenses deemed necessary to continue normal business operations
3.    monthly grants to agencies (except Equitable Compensation grants ) reduced to 50%. CCMC and other granting agencies are to convey how they prefer their grants be determined.                           

In addition, new equipment purchases and signing long-term leases require approval and open staff positions will only be filled if they are mission critical as determined by the Administrative Team.

This explanation will hopefully be transparent to all conference members, so we focus on the same intent to attempt to assure the conference remains financially viable and stable. 

The Conference staff has reduced by 32% in the last 8 years.  Alternatively, the conference is offering basically the same programs and services, which means we owe the current staff tremendous appreciation and support for “stepping to the plate” by assuming additional workload and responsibilities.  We should also recognize, as a conference, that we cannot expect the same amount of work and additional levels of responsibility to be completed under these circumstances for the long-term.

In other words, we should be tremendously proud of the efforts of our conference staff but at the same time be cognizant of the fact that they cannot operate at this level in the long-term.  Bottom line is that if the Iowa Conference wants to continue to serve and spread our faith at the present level of programs and services, we need to enhance revenue to support these programs and services.                                                                             

A special Thank You to ALL conference staff members for their dedication and commitment.  
Also, a special Thank You to ALL conference members for your commitment and contributions of time, talent, and financial support.

As President of CF&A, I would like to take a couple minutes to update comments that were made by Conference Treasurer Maggie Biggs and myself in our taped presentations.

Maggie mentioned the PPP loan (SBA Payroll Protection Plan loan program) was expected to be forgiven.  The local lender and SBA have notified the conference of the fact the loan has been forgiven.  This results in the $1.2 million funds being converted from a liability in our Balance Sheet to a cash asset.  This is the primary reason the liquidity funds available to fund expenses are improved.

CF&A is pleased to share with fellow Methodists that apportionment giving 2021 YTD is showing an improvement over the previous years.  If current projections prevail, we will receive 85% total apportionments, which is up from 68% in 2020 and 69% in 2019.

We believe this is due to several reasons, one of which is a $5 million or 34% reduction in the apportionment budget in the last five years.  The 2022 budget proposes another $1.5 million reduction in apportionments, resulting in a 44.5% overall reduction since 2016.  This has been accomplished through the cooperative efforts of the Cabinet, Conference staff, and general church membership.  However, the PRIMARY reason is the faithful commitment and giving of individual churches and church members.    

To share a few numbers with you:                     
2020 - 2021 shows an increase from 292 churches paying =>20% YTD apportionments compared to 390 churches - an increase of 1/3rd of conference churches.

There is a 13% decrease in churches that have NOT paid YTD apportionments through April 30, 2021.
We encourage ALL churches to continue, or if possible, increase this level of giving so that the Conference can continue to carry out the programs and services we deem so important.                                                                                

Bishop Laurie, the working budget from CF&A is before us. As a reminder, this budget is not debatable at this time, you may debate or amend the budget on Sunday afternoon and through the various Action Items before us today.