At last week's Province I Synod Pre-Convention meeting, I presented the draft proposed budget for 2013-2015. Present with me were Province I's Executive Council members, members of Program, Budget and Finance, PB&F Chair Diane Pollard, the President of the House of Deputies, the Secretary of General Convention, and Del Glover, Chair of Executive Council's subcommittee on finance. In the course of my presentation and the subsequent question and answer period, it became clear that there are some internal inconsistencies and at least one error in the draft proposed budget.
The draft proposed budget is balanced at $104.9 million. However, there is an internal inconsistency related to the Development Office. The amount proposed as income for the Development Office is $3.7 million and the amount proposed for expense is $2.5 million. If the the two numbers are brought into alignment, either by decreasing income or increasing expense, then the budget will be unbalanced by about $1.2 million.
There is also an apparent inconsistency in the sum of the amounts proposed for Grants and Covenants. The total listed is $15 million. Adding the internal line items results in a sum of something less. When I do the math it's about $14 million, but it's not clear at this time if the active spreadsheet would correct this seeming error in the pdf copy of the draft proposed budget.
Finally, the amount of $286,438 for Formation and Vocation is an error. Although Executive Council was clearly reducing the amount for this part of the budget, the actual number was lost in the complex process of combining the 15% and 19% cases the Executive Council used to build the draft proposed budget. The budget was adopted and Executive Council adjourned before the error was discovered. Questions have been asked regarding what the "real" number might have been. Council members at the Province I Synod suggested something in the range of $1.9 million. Other knowledgeable persons suggested $1 million. PB&F will need to address this matter at General Convention. Restoring funds to Formation and Vocation will require taking funds from other places.
Diane Pollard and I are both very aware of the concern many have about errors in the draft budget. However, we want to emphasize that this is the Draft Proposed Budget that was submitted by Executive Council in January to the Joint Standing Committee on Program Budget and Finance. This draft budget cannot be changed until the General Convention meets in Indianapolis in July. In July the budget will be changed not only to reflect the numerical corrections, but it will also be changed to reflect General Convention Committee decisions, hearing discussions and other input that has and is being received.
We encourage your participation in the Provincial Synod meetings that are being conducted at this time as well as the hearings at General Convention, the House of Deputies online forum, and our blogspot which can be found at http://jscpbf.blogspot.com. Thank you to all for your continued support.
Steve Lane and Diane Pollard
JSCPB&F
Comment on Executive Council Draft Budget 2013-2015 – Investment Income
ReplyDeleteIn studying the Executive Council’s Draft budget for the triennial 2013-2015, and having heard a presentation with respect to the budget at the Province I Synod meeting of New England dioceses’ deputations, I am concerned by what may be a faulty assumption with respect to Investment Income (line 5). The comment states it assumes a “5% dividend payout”.
In the economic and investment climate experienced for most of the past 4 years I would be astonished by ability to confidently assure such a generous dividend payout. When I raised this concern at the Province I meeting last week I was informed the investment fund had enjoyed an annual total return of 8% during the current triennial. Frankly, I am very skeptical of that assertion.
Before the Program, Budget and Finance Committee concludes its work on this Draft Budget I ask that the Executive Council confirms it has received a presentation that will be distributed to all of the deputations, of the underlying data demonstrating there can be confidence the budget can rely upon a “5% dividend payout”.
I am not unfamiliar with the management of investment funds; I have not seen any reputable funds able to sustain an annual total return of better than 5% without materially increasing the “risk profile” of the instruments in which such a fund invests. The endowment funds of the Episcopal Church are “OPM” – other peoples’ money – and must be administered and managed first, and foremost, to protect and preserve capital; only after that objective is assured, as far as humanly possible, can efforts be made to “maximize” total return.
- Alan M. Shaver, Deputy from the Diocese of Maine
Comment on Executive Council Draft Budget 2013-2015 – Investment Income
ReplyDeleteIn studying the Executive Council’s Draft budget for the triennial 2013-2015, and having heard a presentation with respect to the budget at the Province I Synod meeting of New England dioceses’ deputations, I am concerned by what may be a faulty assumption with respect to Investment Income (line 5). The comment states it assumes a “5% dividend payout”.
In the economic and investment climate experienced for most of the past 4 years I would be astonished by ability to confidently assure such a generous dividend payout. When I raised this concern at the Province I meeting last week I was informed the investment fund had enjoyed an annual total return of 8% during the current triennial. Frankly, I am very skeptical of that assertion.
Before the Program, Budget and Finance Committee concludes its work on this Draft Budget I ask that the Executive Council confirms it has received a presentation that will be distributed to all of the deputations, of the underlying data demonstrating there can be confidence the budget can rely upon a “5% dividend payout”.
I am not unfamiliar with the management of investment funds; I have not seen any reputable funds able to sustain an annual total return of better than 5% without materially increasing the “risk profile” of the instruments in which such a fund invests. The endowment funds of the Episcopal Church are “OPM” – other peoples’ money – and must be administered and managed first, and foremost, to protect and preserve capital; only after that objective is assured, as far as humanly possible, can efforts be made to “maximize” total return.
- Alan M. Shaver, Deputy from the Diocese of Maine
Comment on Executive Council Draft Budget 2013-2015 – Funding a Development Office
ReplyDeleteIn studying the Executive Council’s Draft budget for the triennial 2013-2015, and having heard a presentation with respect to the budget at the Province I Synod meeting of New England dioceses’ deputations, I am concerned by lines 361 – 365, inclusive, that provide for a very large increase in funds allocated to a “Development Office”. The accompanying note states “Start-up funds will be provided by accessing endowment assets”.
Two major issues rise with respect to this proposal, both of which should be very carefully considered by the Program, Budget and Finance Committee:
• It is easy to be in favor of “development”, i.e., fund-raising. What is difficult is achieving it. If such a large financial commitment is to be made to this effort, the Committee should require very specific, achievable and measurable goals for what this investment is to return during the triennium. Without “benchmarks” it is very difficult to determine whether the investment is providing the kind of “return” needed and desired. Further, such metrics make it possible for Executive Council, during the triennium, to either “pull the plug” or to increase the allocation of resources, depending upon what is being accomplished. Convention should charge Executive Council with responsibility for regular, detailed and intentional oversight of the activities of such a Development Office, as measured against specific goals presented to General Convention in July.
• The statement that “start-up funds will be provided by accessing endowment assets” is troubling, first because it is unclear, and second because it will put further strain on the Endowment Fund. It is unclear because it is not stated whether such “start-up funds” will come out of either endowment principal, or an increased draw upon endowment income (which may well result in drawing down principal). In either event, the proposal contemplates taking precious endowment assets and spending them on an activity for which no goals for achievement have been stated. Generally, I am opposed to invading principal to pay current expenses; I am even more opposed when the purpose of those expenditures is stated so indistinctly.
- Alan M. Shaver, Deputy from Diocese of Maine
Dear Friends,
ReplyDeleteAs you work to complete the next triennial budget, I encourage you to consider the mission and ministry of the various affiliated organizations in the Episcopal Church who work collaboratively with Church Center staff as well as other individuals and organizations throughout the Church to enhance and support the ministries of our dioceses and congregations.
The Episcopal Church Foundation (ECF) is an independent lay-led organization that helps develop leadership and raise financial resources for Episcopal communities of faith. ECF fulfills our mission in a variety of practical and innovative ways, including consultative relationships that leave Episcopal communities of faith stronger and better resourced to pursue their mission and ministry. We train leaders and give them tools for success, then we help them manage the financial rewards of that success. ECF provides the following holistic and strategic fundraising and development services to dioceses, congregations and other Episcopal organizations: development audits and assessments, annual fund support, donor research, planned giving, capital campaigns and endowment management.
We also provide stewardship resources and work collaboratively with the Episcopal Network for Stewardship (TENS) and Laurel Johnston, the Stewardship Officer for the Episcopal Church. We are embarking on a new initiative called Strategic Solutions that helps Episcopal entities prepare for the challenges and opportunities of becoming the church of the future. While ECF does charge a fee for some consultations, many of our services are provided at little or no cost, including our web-based educational events on fundraising and leadership development and our dynamic interactive website - ECF Vital Practices (www.ecfvp.org).
We look forward to continuing our collaborations and partnerships by providing important resources in the critical areas of leadership and financial resource development.
Donald V. Romanik
ECF President