MACUCC Treasurer's Report to Annual Meeting (2011) with related budget documents

6/18/2011

The Massachusetts Conference of the United Church of Christ recorded a pre-audit surplus of $41,238 for the year ended December 31, 2010. The 2010 results benefited from a change in the sharing ratio with the National setting of the United Church of Christ. As approved at the Annual Meeting in October 2009 (effective in 2010), the Conference now retains 45% of Basic Support, an increase from 40% in recent years. This had a favorable effect on income by $91,600. Without this change, there would have been a significant deficit for the year. Also, the 2010 outcome was achieved as a result of cost and spending savings in amounts greater than shortfalls in anticipated income as compared with budget and prior year.

  2010 2009
Basic Support (OCWM), retained $824,546 $824,546
Fellowship Dues 992,149 1,031,900
Annual Fund 21,900 20,240
Income from Endowment 119,711 129,003
Other Income 48,942 58,257
Conference Center Income 24,424 56,017
Use of Restricted Gifts 444,771 507,770
Total: $2,476,443 $2,552,041
The table at right summarizes the Conference’s income sources for the past two years:

Total income for 2010 declined from the prior year despite greater retention of Basic Support, which resulted from the change in the sharing ratio with National. Every other area of income was down or flat with prior year. Total Basic Support, better known as Our Church’s Wider Mission (OCWM), was $1,832,324, a decrease of 2% from the prior year and 3.5% below the budget of $1,900,000, as many churches continue to struggle with their own local financial challenges related to the economy and decreased endowment values. OCWM represents voluntary direct contributions from our local churches in support of the work of the Conference and the National setting of the United Church of Christ. The $824,546 at right reflects the 45% retained by the Conference. The other 55% was sent on to the National United Church of Christ for national and global ministry and mission. In October 2009, the Annual Meeting changed the 2010 sharing ratio to 55% (previously 60%) to National and 45% (previously 40%) retained by the Conference.

Fellowship Dues of $992,149, which churches pay on a per-member basis, were down 4% in 2010 from 2009, and were 4% below the budget of $1,026,900. The decline is even more significant after considering the 2.3% dues rate increase that had been implemented. Reported membership of our local churches continues to decline. Also of concern is the soft collection rate (the amount of dues collected versus the amount of dues available to be collected) which continued to hover around or just below 80% for the third straight year, compared with 83.6% in 2007 and 93% in 2000. Conference staff continues to be in communication with Association Treasurers to address how the collection rate can be improved, as well as collection of unpaid prior years’ dues. In addition, we are exploring the practicality of dues being billed and collected directly by the Conference, rather than through Association Treasurers. We are also pursuing the concept of fee for services (such as search and call) for those who do not pay dues.

Endowment income and other income declined due to market decreases in our investment portfolio balances over the three year averaging used in this calculation and lower interest rates on invested cash balances. Conference center income declined as Pilgrim Day Camp utilization was less in 2010, presumably as families struggle with their own finances. The Use of Restricted Funds
was below prior year and budget as was spending related to these programs.

On the expense side, in 2010, we experienced $35,700 in savings in the personnel budget due to elimination of one support position, less utilization of temporary help, and a transitory staff vacancy. Program cost savings were $97,400 spread over several areas and were accomplished by diligent efforts by the staff, and increased fees for services connected with Conference programs. The Conference staff is increasingly adept at producing quality programming at lower costs. Institutional cost savings of $41,200 came from continued efforts at equipment and software cost reductions amounting to $16,200 and annual meeting costs $21,000 favorable to budget as there was increased attendance income and fewer outside costs for speakers, travel and other costs. Also, we received $5,400 for search and call work with non-UCC churches. These under expenditures balanced the income shortfall and we ended the year, as noted, with a surplus of $41,238.

Based on 2010 results, the Board revised the 2011 budget by lowering the retained portion of Basic Support by $31,400 and Fellowship Dues by $5,300. Endowment and miscellaneous income combined were decreased, by $11,400 and the Annual Fund was decreased by $10,000. Net conference center revenue was decreased by $23,400. Use of Restricted Funds was increased by $93,600. The result is an overall increase of $12,100 in income.

On the expense side, appropriate adjustments were made to costs, without affecting current staffing levels, to maintain the balanced budget approved by the Annual Meeting in 2010. Personnel costs were decreased $17,900 while program costs were increased $30,400 due to greater use of restricted funds, and thus reducing the need for current operating funds. A major portion of those adjustments means that more programming is being funded by restricted monies that will be exhausted sooner.

The proposed 2012 budget reflects anticipated income of $2,507,200 and expenses of the same amount, thus a breakeven net result. Preparation of this budget was highly challenging for the Board of Directors. Over the past 20 years, membership in the Conference has decreased 35%, the number of churches in the Conference has gone down 16%, and the Conference portion of your giving to Basic Support and Conference Dues has gone down 18% (in inflation adjusted dollars). The coming year is expected to continue those trends.

Income is expected to decrease $68,100 in aggregate in 2012, principally due to $61,900 of lower use of restricted funds. An increase in use of the Lilly Endowment of $64,000 will offset decreases in all other areas of restricted funds. Those decreases are largely due to the use of such funds to balance the 2011 budget. We chose to budget 2012 total OCWM at $1,800,000 (the same as the revised 2011 budget) or 2% below the actual level realized in 2010, in part with the hope that, as the economic situation becomes steadier, the ability of some local churches to increase or resume giving could occur. However, our share of this income will be increased as we propose to shift the sharing ratio from 55/45 to 53/47, thus increasing our retained share by $36,000. The Conference's other major source of income, Fellowship Dues, assumes that our churches will more fully meet their covenantal responsibility to contribute per-member Dues than has generally been the case in recent years. The percentage of current dues owed, based on reported membership, which was actually paid in 2010 was about 79.5%. As recently as 2000 it was 93%. For 2012, and the budget assumes a rate of 82%. However, the budget also assumes that reported membership will continue to decline at a rate of 4% per year. Conference staff will be working with Association Treasurers to achieve this objective, and perhaps to assume responsibility for the billing and collection process for dues. The Dues for 2012 will remain at $17.20 per member.

Conference center revenue is expected to grow $13,600 as we implement better utilization of the Framingham facilities based on a recent consultant’s study. Miscellaneous income and endowment income are expected to remain essentially flat. While the endowment value has improved over last year, it is still below that of 2008, which reflects general market conditions.

The expense side of the proposed 2012 budget shows an overall decrease of about 4.3%. The total net decrease of $103,900 in expenses includes $19,100 in the personnel budget, representing a proposed decrease of 1.1%. The reduction includes ending the employee status of the Associate Conference Minister for Evangelism, but retaining $15,000 in the program budget to engage him in a consulting capacity with the Conference. Otherwise there is a 2% increase in the Personnel budget with the intent of granting modest pay raises to staff, in part to offset their increased cost of medical insurance.

Program spending is budgeted to decrease $94,200 which reflects the lower funding available from restricted funds. In addition, we are decreasing our support for the Massachusetts Council of Churches by $24,300, to $30,000, and eliminating funding for the Hispanic Ministry Coordinator as of January 1, 2012. Over the past 11 years, the Conference has provided over $500,000 to support Hispanic Ministries. This commitment has exhausted the Conference’s Church Development Fund and our Church Revitalization Fund.

Institutional costs are projected to increase $1,700. These costs are basically fixed, but we continue to seek savings. Overall, the 2012 budget is a breakeven at the bottom line.

The Board of Directors has been actively considering alternative methods for funding Conference activities. A conversation will be commenced at the Annual Meeting regarding a possible new funding structure for the Conference. We look forward to your consideration and comments as to how we can best match our funding sources to our mission. Already, we are seeing increased fee income for services connected with Conference programs.

The Conference has commenced a Sustaining Pastoral Excellence Capital Campaign to fund a special endowment in support of the Sustaining Pastoral Excellence Program. Personnel have already been hired and volunteers enlisted to aid in this campaign. Each member of the Board of Directors has already made a financial commitment to this campaign. In addition, several churches have declared interest in conducting “wrap around” capital campaigns. Several other churches have made pledge commitments. This fundraising effort is a commitment the Conference made in connection with previous grant money from the Lilly Foundation and is needed to continue to fund the Pastoral Excellence Program after the Lilly funds cease in 2013. To provide initial financial support of the campaign, in May 2010, the Board of Directors authorized an internal loan, of up to $250,000, be made to the campaign from the proceeds of the sale of Warner Farm. This will finance start up costs and cash flow requirements over the first three years of the campaign. The loan is due to be repaid in 2015.

As always, the Board deeply appreciates the support it receives from local churches and from many individuals within the Conference. We are confident, with the blessing of God, and the guidance of the Holy Spirit, that the Conference, the churches, and the people of the Massachusetts Conference of the United Church of Christ will continue to nurture local church vitality and the covenant among our churches.



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