United Church of God, an International Association

Council of Elders Meeting Report

Wednesday, August 12, 1998 - Cincinnati, Ohio

A more favorable and positive income report highlighted the opening meeting for the Council of Elders as they gathered today for the first time at the United Church of God's new home office facility in Cincinnati, Ohio. Two major events have occurred in the church since the last face-to-face council meeting in April-relocating its center of operations and responding to its reduced income-and Council members were eager to see the new facilities and move on to a number of agenda items in the August 12-19 conference. Today's meeting, which began at 1:30 p.m. in the conference room at the home office, focused on setting the agenda for this session and the financial report.

Financial Update from the Treasurer

Treasurer, Tom Kirkpatrick, offered to the Council a heartening, but circumspect, financial picture. It is important to think of our income in three different categories rather than just as one when looking at an overview of income trends, he said in his introductory remarks. Category one (first and third tithe, for example) tends to come in on a steady basis. Category two (Holy Day offerings) comes seven specific times per year while category three (excess festival tithe, youth program and estate donations, interest, etc.) is highly seasonal.

"There are two ways to view what we have received so far this year," he observed. "Through today we have had 94 (or 39 percent) of the 242 banking days of this fiscal year. The daily average of what we have received is $45,131, which is actually a half-percent above our budget. This is obviously very encouraging, especially in light of where we were a month or six weeks ago."

"A further analysis of that is appropriate, however," he cautioned. In the 58 banking-days period from April 1 (beginning the fiscal year) to June 23 (when the Arcadia office closed and around the time of president Les McCullough's member letter requesting assistance) the average daily income was $37,454. This represented a nearly $7,500 per day deficit from the projected budget and caused the Council to severely trim several major areas.

During the interval of 15 banking-days from the time the new office opened to July 14 we received a huge "bump" of $701,000 as members liberally responded to the needs. In the 21 days since then the average has returned to a more predictable level of $38,431.

So while the year's daily average is on the budget target, it is primarily due to the one-time support from the members to the financial emergency. "If we want to focus on the $45,131 I think we do so irresponsibly, because I see nothing in these numbers to indicate that this is sustainable," Mr. Kirkpatrick noted. The income trends both before and after the "bump" are very similar and significantly below what was budgeted.

"It appears that we are receiving a sustainable level of category one income of approximately $37,000 to $38,000 per day. This is roughly 16 percent below budget. Just to look at some 'what ifs?,' assume for the moment that the other two categories of income (Holy Day offerings and seasonal incomes) were to be received during this fiscal in exactly their budgeted amounts ($3,965,000 and $665,000 respectively). Further assume that category one income continues for the rest of the year at this rate of $37,500. With all of those assumptions in place, we would end this year, next March 31, with the following scenario. We would have received in category one income $9,792,341, category two $3,965,000 and category three $665,000, for a total of $14,422,341. We would be a little over a million dollars under our budget."

"Admittedly, there is a lot of difference between this scenario and what we were facing June 23, because we didn't know there was going to be a bump. We were certainly hoping there would be, but I think we have to be responsible in the way we interpret these numbers."

Mr. Kirkpatrick also reviewed the following steps that have been taken to reduce expenditures in the last couple of months:

Terminated two employees, with a third planned for after the Feast

Put 29 ministers on half salary

Implemented temporary graded pay reductions for all but the lowest paid ministers

Implemented temporary reductions in the expense reimbursement procedures

Reduced or deferred subsidies to local congregations and some international areas

Implemented a policy which will significantly reduce the accrued vacation liability by March 31, 1999

Sought other ways to reduce operating costs, such as teleconferencing, shipping, and deferring previously-authorized hires in the home office ("The council has authorized the hiring of four people, none of whom have been hired. We're trying to defer that as long as possible," Mr. Kirkpatrick said, but we don't have a secretary in the entire office, we need part-time proof readers and copy editors, or mail room clerk. When Matt Fenchel arrives the office will have 12 employees, he said, compared with 30-plus a few months ago).

"As a result of the combined effects of the bump in income and the restrictions on expenses, we are temporarily in a good financial position, and right now we have some money in the bank with over $1 million in liquid assets," he reported, "But I'm quick to add that we are facing some major outflows of cash in the next few weeks," such as congregational subsidies and Festival expenses, assistance and allotments.

Mr. Kirkpatrick projects that the fairly high level of cash that we have right now will be reduced by upcoming expenditures to more normal levels. He added that if we continue with the plan we have implemented regarding expenses, and the income stabilizes at the levels discussed above, we will be in a stable financial posture.

Looking at the longer term, Mr. Kirkpatrick made some interesting observations. "Let's play some more 'what ifs?' Let's assume the following: the plan that has been implemented to date with regard to the payroll (29 half salaries and restoration of the graded cuts after the Feast) and that the income is stabilized around $37,500 category one, HDOs [Holy Day offerings] at $530,000 each, and category three at $500,000. If all of that were to happen we would be looking at about $13.3 million income for the following year. If the plans that have already been implemented with regard to payroll issues are maintained (salary and related costs at $5.67 million), that would leave about $7.61 million for 'everything else.' I find it interesting to note that if you compare 'apples with apples,' and you look at the current budget we are operating with and take away all salary-related issues, the 'everything else' category of this year is $7.65 million.

"You can interpret this however you want, but it seems to me to say that if you can reach stability at these levels of income, then it looks like we can continue on at nearly the same non-salary level that we planned for this year. This would seem to indicate that we could, with continued vigilance regarding expenses, progress next year in our continuing efforts to build and retain a strong Good News readership."

While the cost-saving steps (including completion of severance payments) have resulted in greatly reduced expenditures, they have "disappeared into the sinkhole of reduced income," which is about $2.3 million less than budgeted, said Mr. Kirkpatrick. "That's the bad news, but if you want to look at the good side, it doesn't look like the 'everything else' category has do go down precipitously," especially if the income trends have leveled out. "When you go in one year from 15.5 to 13.2, that's tough to absorb, despite any savings you thought you might have had."

Expense study launched

Mr. Kirkpatrick also announced that the temporary cutback of ministerial expenses stimulated the idea to initiate a comprehensive study on all aspects of expense (primarily automobile and housing subsidy) in order to present well-informed recommendations for future policy. "We have assigned a task force to study into the whole question of ministerial expenses. Some of the components of our ministerial expense reimbursement probably go back some 20 years. Some of our policy is 1960s thought, some is 1970s thought and some is 1980s thought. Some of it is an extension, through nobody's maliciousness, of a mentality of when we had a $200 million income. So rather than somebody at the home office coming down with a policy, we asked a task-force of a cross section of experienced men [in business and administration], some ordained and some not, to take a fresh look at the whole thing."

The study committee consists of Richard Thompson (chairman), Tom Clark, Dave Evans, Larry Greider, Doug Horchak, Melton McNeely, Steve McNeely, Gary Petty and Lyle Welty (Richard Pinelli, Les McCullough and Tom Kirkpatrick also serve as advisors).

The task force aims to bring its report to the home office and Regional Pastors for review by November 1, and any recommendations will be presented later to the Council for policy-development.

Mr. Kirkpatrick also reported that the office has contracted a new company for conference calls, reducing expenses from a .39-per-minute rate to .12 per minute.

Miscellaneous

Mr. McCullough announced that with everything generally settled into place after the relocation, the official opening of the home office will be Sunday, August 16, and will be celebrated with an open house at 3 p.m. Everyone is welcome to view the facilities and visit with Council members.

The Council closed the day's meeting with a brief executive session on finance-related issues.

Jim Franks was absent due to illness and plans to join the meetings as soon as possible.

Clyde Kilough

© 1998, United Church of God, an International Association