July 2016 Financial Update

Dear Friends, below for your information is an overview of the EPA financial data for the period through July 2016.

Church Giving Report

Schedule 1 is the Church Giving Report. This report shows the amount of money that EPA has billed all of our churches and the amount of money that it has received from all of our churches. The report is divided into three sections: Apportioned Funds (funds that support United Methodist Ministries), Billed Funds (funds that pay for church and clergy benefits and insurance), and Health Savings (funds that pay for specific clergy and lay health benefits). (A description of each individual fund can be found by clicking the link to the Budget Narrative documents.)

Overall, EPA will bill $17.2 million to its churches in 2016, $10.6 million for benefits and insurance, and $6.6 million for Conference and Denomination ministries. Of this amount, the EPA churches have paid $8.2 million to the Conference through June 2016, 48% of the total amount due for the year. The Connectional Ministries Fund received $1.7 million, or 45% of the annual billed amount. On a straight-line basis, we would hope to receive 58% of the annual amount over a seven-month period in order to reach our annual target.  The gap between CMF funds billed and CMF funds received increased to a 13 percentage point margin in July (58% – 45%) from an 11 percentage point margin in June (50% – 39%). This means that the Conference fell further behind its budget for collecting funds in July that support its local EPA ministries.

While this is typical for summer collections, with vacations and time away from home affecting church attendance and giving, our Conference still has to pay for the ministries that support our Methodist work. On the bright side, the CMF collections through July 2016 exceed those from a year earlier by $58,000., highlighting the challenging year EPA had in 2015.

In the Billed Funds area, contributions toward Retired Clergy and Health Obligations and Property and Liability Insurance were each short by approximately $250,000. (up from $200,000 in May and June), and clergy Group Insurance (medical) was short by $119 thousand (a fall from $100,000 in June, but in line with $120 thousand in May). These shortfalls create additional financial strain on the Conference’s ability to pay for these clergy and church benefits in a timely manner.

The shortfall in collecting these funds is a serious financial issue. When the collections do not meet the amount needed to pay for these coverages, the Conference must use cash resources from other sources or draw on its reserves to make these payments. A drop in giving at this level puts pressure on the Conference’s financial management plans. This in turn is pushing the EPA leadership to consider measures such as increasing remittance charges, cutting programs, or reducing districts in order to pay for the insurance and benefits we have in place for the churches, clergy and laity.

At year-end 2015, the Conference had to ask the EPA Board of Pensions for an “advance” on its $325,000 December 2016 contribution to make sure that the Conference could meet its December 2015 pension payments to the General Board. The Conference has also gone to the Board of Trustees and the Council on Finance and Administration to ask for a withdrawal of approximately $253,000 in reserves to help pay for clergy and church benefits and insurance. In July, 175 churches have paid 58% (the current amount due) or more toward their remittance statements so far in 2016, DOWN from 188 at the end of June, and still below the 220 figure EPA reached in April. We are down to 29 churches that have paid $0 toward their remittances through July 2016, down from 30 at the end of June as another church made their first payment toward their remittances in 2016 in July.

A shout-out from the Treasurer to Kennett: Church of the Open Door (SE), Springfield C.C. Hancock (SE), Iona: Zion (NW), and Peach Bottom: Mt. Zion (SW) who have paid over 66.7% of their total remittances due for all of 2016 by July 2016. This means that these churches are essentially one month ahead on making their remittance payments for 2016 – Thank You for faithfully supporting your Conference obligations!

In 2015, 275 churches in the Conference paid 100% of their remittances. But this means that approximately 140 churches did not pay their full amount of their remittances. A list of all churches with the percentage of their 2015 remittance payments was published in the Spring issue of the NewSpirit Digest. Some churches are facing challenges and are working diligently with their District Superintendent and financial staff to create plans for the success and sustainability of their ministry. We wholly support these efforts and want to work with our membership to help these efforts succeed. Please continue the regular dialogue with your District leadership and use the Conference programs and resources to support your ministry.

EPA Ministry Budget

Schedule 2  and Schedule 2 – Cost Centers show the EPA Ministry Budget for 2016. In 2016, EPA has a Connectional Ministries Fund budget of $3.2 million to invest in our Conference ministry programs. As noted above, EPA churches have contributed $1.7 million for CMF in 2016, $36 thousand below its year-to-date estimated contribution rate BUT $78 thousand above the amount collected through June in 2015. The ministries spent $1.8 million, which was $120 thousand below the expense budget, and was $107 thousand above the amount that the Conference collected, giving the CMF budget a negative year-to-date cash flow. Four of the five areas covered by CMF were under budget as of the July 31 report date, with the budget for Trustees and Administration exceeding budget by $13,524 as the expenses for Annual Conference that I have been writing about were finally booked in July. The expenses for Annual Conference came in at approximately $250 thousand, which is $32,000 over budget, as the Lancaster Marriott facility was used in preparation for the July Northeast Jurisdictional Conference. Overall, the Trustees and Administration budget is well within its annual budget allowance and we expect that it will finish this year within its budget parameters. In 2017 and 2018, we’re back to the Oaks Exposition Center for our Annual Conference, maybe with pink table coverings in our meeting space, per a special request.

You may note that in the second column of this schedule, 2015 Actual Results, we are showing a surplus of $329,575 and 0 contribution to Resolution 2012-21 Pre-’82 Pension. This is because we are working on completing the 2015 annual audit to confirm the figure, and will then transfer this amount to the Pre-’82 account with the approval of the Conference Council on Finance and Administration.

Resolution 2012-21 and the Pre-82 Pension liability

The top section of Schedule 3 shows the Conference Reserves as of July 30, 2016. Good investment markets in July helped increase the balances in the Conference Reserve fund by $15 thousand to $514 thousand at 7/31/2016, up from $499 thousand at 6/30/2016 and the Board of Trustees Reserves to $241 thousand from $234 thousand as well. The Board of Pensions Reserves increased by $100,000 t0 $3.6 million in July 2016, as these funds are invested long-term to meet the insurance and benefit needs of our Conference clergy and employees.

The next section shows the 2016 data for our work on Resolution 2012-21 and the Pre-82 Pension liability. The most recent valuation from the GBOPHB (as of January 1, 2015) shows that EPA’s unfunded Pre-’82 pension liability is $6.9 million. This is a significant improvement from an unfunded status of $16.2 million in 2011 and $23.2 million in 1996. The EPA churches and members should be very proud of the way that it has addressed this obligation and taken action to mitigate it. That said, there is more work to do.

As of July 31, 2016, the Conference Budget Surplus investment account had a balance of $1.316 million, up $37 thousand from June 30, 2016. This is real money that the Conference has contributed into the account from expense cuts in its finance and administrative areas. Proceeds from Church Sales have come in below target with a total amount realized of only $282 thousand, BUT due to the good investment markets in July, this account value is up $8 thousand from $274 thousand at June 30, 2016. The Fulfilling Our Covenant Campaign has been successful, with a total of $2.916 million collected and $388 thousand returned to church campaigns. But we still need to collect on a substantial amount of the $3.9 million in outstanding pledges to successfully complete the campaign. We look forward to working with you to make this happen and remember – there is still time to make and fund new pledges!

Conclusion

In conclusion, we have lost some ground in July as collections for the month fell below budget targets, increasing the cash flow gaps to their widest point this year. It’s also important to remember, the Billed Funds that the Conference is paying for are YOUR church property insurance, clergy medical insurance and retirement benefits that are purchased on behalf of all EPA churches. The pressure on the Conference’s financial management activities is causing EPA leadership to look at options for increasing collections, increasing bills, and reducing expenditures while fulfilling our mission to create more disciples of Jesus Christ. Thank you for your faithful support and continued efforts to succeed in our mission.

Jim Cruickshank, EPA Conference Treasurer