Conference Treasurer Peter DiNofia presents a Financial Overview of the Eastern Pennsylvania Conference.
I would like to take this opportunity to acknowledge the generous giving of local churches in the Eastern Pennsylvania Conference. In 2009, 283 churches or 62% of our churches paid their apportionments and other remittances 100%. Many lives are impacted here in our local churches and around the world. Every person touched by the ministries of The United Methodist Church has been enriched by your giving. Thank you for your faithfulness and continued support.
There is much to celebrate and we thank God for the many blessings bestowed on us. However, the current realities that we face as a connectional body bring with it several financial challenges.
One of the more critical challenges that we face relates to item 2. The Conference cannot continue to subsidize churches for unpaid financial obligations. You will see later in this report the actual cash deficits borne by the conference over the past decade because of insufficient support from churches. For health insurance alone, the deficit was $2.3 million. For pension, the deficit was over $500 thousand. This is not a strong financial model and we must do a better job.
The Conference budget for all funds is 19.9 million. The Connectional Ministries Fund (CMF) represents $3.6 million of this total. Through March 2010, church giving was $35,000 less than the budget and $28,000 less than March 2009. This is a concern, given that the US economy continued to expand through the first quarter of 2010.
In addition to CMF, the Conference is responsible for the operation of four camps in Eastern Pennsylvania. The total revenue of these four camps in 2009 was $2.8 million. The conference also manages under a separate 501c3 structure all of the pension and health insurance plans for clergy and lay employees. Total revenues in 2009 were $7.8 million.
We are striving to do a better job of providing quality services and being good stewards of conference resources. As a connectional church we must all come together to make EPA a better conference. To do this, change is required. I ask for your patience and cooperation as we move forward in a positive, progressive way.
The past few years have been extremely difficult in the financial markets in the United States. The weakness in the financial sector and the downturn in the stock markets have introduced challenges for many, including our congregations. However, through the first quarter of 2010, the US economy continued to expand. Equity markets advanced 6.3% in March and year-to-date returns of 5.9% moved firmly into positive territory. Investor confidence and persistent low inflation appears to be the primary driver for the continued strength in the equity markets. Investors also seem to be looking past concerns that withdrawal of various federal government stimulus programs will dampen the economy’s upward course.
Other measurements of economic activity, such as consumer spending, have exceeded expectations. The housing sector, aided by tax rebates for first time buyers is showing signs of improvement. During the more difficult times of the recession, credit availability was limited but improved conditions are now being realized in this area.
Recent data continue to affirm that inflation remains under control. The consumer price index (CPI), a measure of inflation, was flat in February as energy costs declined. The core CPI which excludes food and energy prices, rose a modest 0.1%.
The one area that lags all of the optimism is unemployment. Historically, payroll data is the last thing to improve coming out of a recession. This time is no different. Even though in March we saw 162,000 jobs added, the biggest gain in three years, the unemployment rate remained steady at 9.7%. One third of the new jobs came from the government’s hiring of temporary census workers. For now, companies are content to see rising top line demand translate into bottom line profitability until they get confirming indications that the recovery is for real. Only then will they begin to add to their employment base.
In 2007 EPA initiated the apportionment formula. This formula (Schedule A) is used to calculate the amounts for the Connectional Ministries Fund (CMF), World Service Fund (WSF) and General Church Fund (GCF). The apportioned amounts for each church are derived from data in the church annual statistics report. The statistics report is required to be completed by the General Church. The calculation uses a three year average of the adjusted gross total paid. For 2010, the apportionment is calculated using the average for calendar years (2006-2008). A factor of 9.5% is then applied to the three year average.
Please reference (Schedule B) for the results of apportionments for years 2007-2009.
Connectional Ministries Fund (CMF)
In 2009, the conference apportioned a total of $4,100,668 for all 455 churches. The amount received from all churches was $3,643, 745, or 89% of the total. This percentage was more than the amount paid in 2008 of 86% but less than the 2007 percent paid of 91%. In 2009, 357 churches or 78% paid CMF 100%. This left 98 churches or 22% of the total that did not pay CMF 100%. The total amount unpaid was $456,923.
World Service Fund (WSF)
In 2009, the conference apportioned $1,605,501 for WSF for all churches. The amount received was $1,372,469, or 85% of the total. For years, 2008 and 2007 the percent paid was 85% and 89%, respectively. In 2009, 326 churches or 72% of the total paid WSF 100%. This left 129 churches or 28% of the total that did not pay WSF 100%. The total amount unpaid was $233,032.
General Church Funds (GCF)
In 2009, the conference apportioned $1,368,900 for GCF for all churches. The amount received was $1,159,831, or 85% of the total. For years, 2008 and 2007 the percent paid was 84% and 90%, respectively. In 2009, 326 churches or 72% of the total paid GCF 100%. This left 129 churches or 28% of the total that did not pay GCF 100%. The total amount unpaid was $209,069.
Ten Year Revenue and Expense Analysis – All Funds
Now we will turn to an analysis of church giving or revenues versus various obligations or expenses of the EPA conference. There are thirteen funds that appear on the church remittance forms, as shown on Schedule B. We will begin by looking at the three funds reviewed above, CMF, WSF and GCF.
In the apportionment review above for CMF we analyzed the results of church giving compared to the amount apportioned. In this analysis, (Schedule C), we compare church giving to the EPA conference expenses, for each year 2000 to 2009. For the ten year period, there was a surplus of $40,033. Revenue from church giving during this time ranged from $3.3 million in 2000 to $3.6 million in 2009. The conference budget for 2010 approved by the 2009 annual conference is $3,641,618 (Schedule C-1).
WSF and GCF
Schedule C also shows the ten year picture of church giving for WSF and GCF compared to the amounts requested by GCFA for these funds. For the ten year period, total receipts from churches for WSF was $11.5 million or 87% of the total requested by GCFA of $13.2 million. For this same period, total receipts from churches for GCF was $10.2 million or 82% of the total requested by GCFA of $12.4 million. On Schedule C-1, the 2010 amounts requested by GCFA are shown; WSF is $1.4 million and GCF is $1.3 million.
The pension funds on the church remittance forms are for CRSP Defined Benefits (0016), CRSP Defined Contribution (0017), Direct Bill (0018) and Comprehensive Protection Plan or CPP (0020).
In 2004 a new clergy pension plan was adopted. This new plan, Clergy Retirement Security Program (CRSP) went into effect January 1, 2007 replacing the Ministerial Pension Plan (MPP) that was in place since 1982. CRSP provides clergy with a secure monthly benefit as well as an account balance of accumulated investment funds. The Clergy Retirement Security Program consists of two elements:
The direct bill on the church remittance form is comprised of Pre-1982 Pension Plan, Retiree Medical Insurance and Administrative expenses of the EPA Board of pension and Health Benefits. Due to the market downturn in 2008, EPA assets for the Pre-1982 Fund, held by the General Board of Pensions and Health Benefits (GBOPHB) declined by seven million dollars to $15.1 million. The EPA funding ratio dropped from 67% to 48% and the amount of the unfunded liability increased by five million dollars. In addition, the annual payment contribution for this fund will increase by $1.1 million in 2011.
The EPA Board of Pension and Health Benefits met with leaders of the Conference and members of GBOPHB to discuss options for paying the additional $1.1 million. The EPA BOPHB is a separate 501c3 entity with assets of $6 million. One option to pay the increased obligation of $1.1 million due in December 2011 would be to use the unrestricted portion of these assets, approximately $3 million to fund the increased liability.
The revenue and expense analysis for these funds is shown on Schedule D
We looked at the total of revenues and expenses from 2002 to 2009 and found that total receipts from EPA churches and staff for this period did not cover the total expenses. The difference is $528,670. The analysis for direct Bill is about a break-even.
We face the continuing challenge of providing affordable health care to clergy, retirees and staff. As you can see on Schedule E, the costs haveexceeded the revenue sources by $2.3 million for the past ten years. Insurance reserves were used to bring the deficit down to $900 thousand.
In 2010 we were faced with increasing the composite rate by $500 to $17,000 for each church. In addition, the contribution from clergy was increased from 3% to 5%. For local church lay staff the actual rates are charged to the church and the church decides the cost to the employee.
To minimize the rate increases that we have experienced over the past several years, a recommendation will be presented at annual conference to move to an HSA plan. Look for more information on this from the EPA Conference Board of Pensions and Health Benefits.
Property and Liability
The Conference Board of Trustees is responsible for securing the best group insurance at an affordable price. This includes both Property and Liability and Workers Compensation insurances for all conference agencies and local churches. Participation is mandatory by action of annual conference to ensure appropriate coverage and competitive premiums.
In efforts to mitigate increases in our insurance premiums, we asked all churches to complete a safety checklist. Many of our churches did complete these forms and have taken steps to make necessary building repairs. Also, we have arranged through our insurance underwriter, Philadelphia Insurance Company, for professionals to inspect all of our churches over the next three years. In some cases, these inspections will highlight the need for necessary repairs to be made. We ask for prompt responses to any safety issues identified. A safe environment is good for our people and also leads to lower premiums in the future.
The amounts billed and collected from churches over the past ten years (Schedule F) for property and liability insurance on church buildings totaled $24.6 million. This met the total liability.
The Conference Board of Trustees formed a Safety Committee in efforts to reduce the cost for workers compensation insurance. This committee is responsible for developing strategies to prevent workplace injuries. The committee is informed every time there is an accident reported to our insurance carrier, Eastern Alliance Insurance Group. We are trying to learn from these injuries to prevent them from reoccurring.
The amounts collected from churches for workers compensation insurance (Schedule F) over the past ten years totals $3.6 million and this was $100 thousand more than the total expense for this period of $3.5 million.
The conference operates a total of four camps at Camp Innabah, Gretna Glen, Pocono Plateau and Carson Simpson Farm. Metro Ministries, Inc., a separate 501C3 organization, owns and operates Carson Simpson Farm. The other three camps are owned by the EPA Conference. In 2009 there were 5,000 summer campers and over 20,000 retreat and day guests. Total revenues in 2009 were $2.4 million, $61 thousand less than total expenses for the three Camps. Carson Simpson reported a surplus of $32 thousand. In 2008, the cumulative deficit for the three camps was $172 thousand and Carson Simpson reported a surplus of $74 thousand. In addition to the operating budget challenges, the camps have a cash liability of $350 thousand that is owed to the conference (Schedule G).
Over the past several years the payroll expense for the camps was paid by the conference and not reimbursed. The total grew to over $750 thousand. A Blue Ribbon Committee of conference leaders was formed in 2009 to review this matter and to recommend ways this debt could be repaid. There was property at Gretna Glen that was sold in 2009 and the net proceeds of $350,000 were applied to the debt. An additional sum (reference schedule G) of $55,000 was also applied and the current balance owed the conference is $350 thousand.
The conference provides financial support to the camps for ministry and programming. In 2008 the amount was $308 thousand and in 2009 the amount was reduced 5% to $294 thousand. Given the pressures on the conference budget, the level of ongoing support to the camps from the conference will be decreasing.
Another area of concern is the fact that there are no appropriations in the current operating budgets for capital improvements. Given the size and age of the buildings this is a problem.
It was decided by the Camping Board to undertake a strategic review. A process was established to interview outside consultants to help with this endeavor. The Board selected C2Lead Inc., as the firm to facilitate the process. One of the partners of the firm is the Rev. Sharon Barley who is a local pastor in our conference.
FOR MORE INFORMATION ON THIS FINANCIAL OVERVIEW, contact Peter DiNofia, Treasurer/Director of Administrative Ministries, 610-666-9090, ext. 209 or email@example.com.