Finance Committee, March 9, 2016

Minutes of the Finance Committee

First United Methodist Church, Santa Rosa

Wednesday, March 9, 2016—Carriage House

Present: Greg Roth(Chair), Jack Dupre, Ryan Comiskey, Charlie Amezcua, Bill Stephens (Lay Leader), Chris Bowen, Mary Brunet (Business Administrator), Tokasa Buinimasi, Thomas Barnett (Trustees).

Absent: Mike Ferrel, Peg Ferrel, Larry Schmidt, and Heather Young.

Greg Roth called the meeting to order at 7:00pm, beginning with a prayer.

 

Approval of Minutes

The two minutes of meetings on February 10 and February 24 were discussed.  Chris Bowen moved and Bill Stephens seconded (with some corrections) to approve the February  10, Finance Committee meeting minutes. The motion was passed unanimously.  Jack Dupre moved and Chris Bowen seconded to approve the February 24, Finance Committee meeting minutes. The motion was passed unanimously.

 

Finance Report

The Committee reviewed the Financial Statements for February 2016. During the month the main checking account balance rose by $12,398 to a new balance of $21,749.54. The operating fund balance increased by $14,988.35 to a new balance of $54,077.49.

Year-To-Date (YTD) pledges and gifts were $148,767.52, which is 114.96% of the YTD budgeted amount. Total YTD income was $160,359.43, which is 114.13% of the YTD budgeted amount.  YDT total expenses were $152,005.32 which is 98.66% of the YTD budget amount.  Overall, YTD total income exceeded YTD total expenses by $8,354.11.  Performance has been good so far this year and better compared to the same time last year.  Efforts to increase the congregation’s awareness of the forecasted budget shortfall, that started last month, may have had an impact.  There have been increases in pledges. Greg and Mary said that we will continue to revise the budget until after the mini-stewardship campaign.

 

Cash Flow and Operating Budget Report

In regards to the Cash Flow and Contingent Expense Cut Plan, it was noted that FUMC is forecasted to spend about $67,000 more in operating cash than it will receive in operating cash. Greg said that some adjustments were made, but the current forecasts have not taken into account the stewardship campaign. The two contingency plans were also highlighted. Firstly the 5.1% spending cut is designed to save $28,000 in 2016 and secondly the 7.7% spending cut is designed to save $42,000 in 2016.  The Committee approved a draft for an article on the current state of FUMC’s financials which was prepared by Greg. Mary gave an update of the mini-stewardship campaign which was launched last Sunday (February 28).

 

Next Step Action Committee Activities

Greg briefly updated the Finance Committee on the two issues that were taken up with the Next Step Action Committee (NSAC).  The NSAC adopted the Finance Committee’s recommendation to develop a contingency plan to reduce expenses.  The NSAC did not adopt the Finance Committee’s recommendation to develop a contingency plan to sell assets and pay down debt.  However, the NSAC did agree to revisit the asset sale contingency plan recommendation in May, after results of the mini-stewardship campaign become known.  Both of these recommendations are explained in more detail in the appendix of this document, immediately following the March Finance Committee meeting minutes.

Update on Stony Point Study Group Activities

Bill Stephens highlighted that the group reviewed the information sheet that was prepared by Heather Young, which covers in part the potential sale of the Stony Point property.  Bill said that whilst there were two opposing views within the church, Pastor Blake stated that any sale would be a last resort.  An Evaluation of the Future Needs at Stony Point was also discussed and was agreed that if an evaluation is to be undertaken it should be tied with the mission of the land to the mission of the church. The group developed some guiding principles of the future work and development of the Stony Point property.

 

Business Administrator Report

Mary is working with an accounting firm to put together the Compilation Report for FUMC and has also made inquiries for the cost of a formal Review of Financial Statements and Internal Controls (RFSIC). It was generally agreed that an RFSIC should be undertaken.

 

Financial Transparency

Greg discussed a draft transparency policy, to reassure the congregation of the Finance Committee’s transparency.  At a later meeting, he will submit a revised policy for the Committee to vote upon.

 

Other Business

Bill Stephens thanked Greg for the great work done so far.

The meeting ended about 9:15 with a closing prayer from Mary Brunet.

 

Respectfully submitted by Tokasa Buinimasi

 

 

APPENDIX TO THE FINANCE COMMITTEE’S MARCH MEETING MINUTES

 

The Finance Committee’s Recommendations for Contingency Plans

On February 10, 2016, the Finance Committee voted unanimously to recommend a three-pronged approach for dealing with our church’s budget deficit: (1) increase efforts to raise income; (2) increase efforts to reduce expenses; and (3) analyze the feasibility of a real estate sale to pay down mortgage debt.  After this February meeting, Greg Roth summarized the Finance Committee’s explanations for items (2) and (3).  These explanations appear below and they were given to the Next Step Action Committee at the NSAC’s March 2 meeting.

 

Contingency Plan for Expense Reduction

On February 24th, the Finance Committee unanimously approved the following recommendation:

               All spending authorities at FUMC should prepare two contingency plans by April 30th.  The first contingency plan would reduce cash payments immediately (beginning in May) and continue for the remainder of the 2016 budget year by 5.1%.  The second contingency plan would reduce cash payments immediately and for the remainder of the 2016 budget year by 7.7%.

The 5.1% spending cut is designed to save $28,000 in 2016.  The 7.7% spending cut is designed to save $42,000 in 2016.  There are two main reasons for preparing spending cut plans before it is known that cuts are necessary:  (1) the cuts can be designed in a calm moment rather than in an emergency (or panic) situation; and (2) staff and others affected can be given earlier warning of potential cuts.

 

Contingency Plan for an Asset Sale

Here are some of the reasons for continuing to develop a real estate sale contingency plan:

(1)          If revenue increases fail to close the budget gap, and there is no real estate sale, then spending cuts must be made to staff, ministries, and/or apportionments. 

•             Cuts in these areas would likely discourage growth prospects and may not be consistent with the church’s mission and values.

•             Selling some property, e.g., the undeveloped portion of Stony Point, might allow FUMC to fully pay off its debt, eliminating our mortgage payments and the current budget gap.

•             Which is more likely to attract new people to our church: (a) undeveloped real estate or

               (b) strongly supported staff and ministries?

(2)          The financial strains on FUMC have existed for over a year and may well become longer term.

•             In 2015, FUMC faced an initial operating budget gap of $73,000.

•             During the 2015 Budget Summit, the budget was balanced in part by: (a) cutting apportionments by $14,300; (b) cutting ministries by $5,000; (c) cutting the staff merit pool by $5,000; and (d) shifting $15,000 from the mortgage fund to the operating fund.

•             On March 11, 2015, the Finance Committee voted to send the following statement to the Church Council:

“The view among the vast majority of Committee members is that the Church is using a variety of short-term, unusual fixes to close a budget gap that will likely reappear in the longer run.  Despite recent and encouraging financial results, most Committee members believe that current spending levels are not sustainable in the longer run.  Most Committee members are concerned that pledges initially designated for the mortgage have been redirected to support the operating budget.”

•             As good stewards of church resources, we should ask ourselves: How likely are we to need all of our current real estate properties?

•             United Methodist Church attendance in the U.S. has been declining for many years.

•             The UMC website provides the following information in a 2015 article:           

For the last 10 years, UMC attendance in the U.S. has decreased, on average, 52,383 people per year.  Between 1974 and 2012, the UMC lost 18% of its U.S. worship attendance and the number of churches shrank by 16%.

Source: http://www.umc.org/news-and-media/economist-united-methodist-church-in-crisis.

 

(3)          Selling any portion of FUMC’s real estate could take a year or more, so it’s better to develop contingency plans now.

•             In the event property did need to be sold, deciding exactly what portion of FUMC property to sell could take a few months and then the actual sale could take many more months.

•             If we wait to develop plans until the church faces a deeper, more obvious crisis, this could extend the period when truly severe emergency spending cuts would need to be in place.

•             A prudent choice would be to develop contingency plans now, so they are ready to use if need

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