2017 Finance and Proposed Budget

Treasurer’s Report to Convention

Summary of the Financial Position of the Diocesan Corporation

Report on the Corporation Sole

Summary of the Financial Position of the Corporation Sole

2018 Proposed Diocesan Budget

2018 Narrative Budget Poster

2018 Proposed Assessment Formula

2018 Proposed Salary Resolution and Mandatory Minimum Compensation

2018 Congregational Grade Structure

Treasurer’s Report to Convention

The Diocese, with input and oversight from of the Executive Council and its Finance Committee, has continued to focus on improvements to the financial affairs of the Diocese during the current year. An overriding goal continues to be the achievement of increased transparency in all financial affairs and financial reporting of the Diocese.

The financial statements of the Diocese have been audited by the audit firm of Hood & Strong. A copy of the complete financial statements and the independent auditors’ report are available on the website of the Diocese.

In the pages following this letter I have included a summary of the financial statements of the Diocese for the year ended December 31, 2016.

Financial Results for Calendar 2016

The financial books and records of the Diocesan Corporation are composed of five separate funds: 

  1. the Operating Fund
  2. the Custodial Fund
  3. the Endowment Fund
  4. the Deferred Gifts Fund
  5. the Expanding Horizons Campaign Fund (a new fund for 2016)

The Diocesan Corporation in total experienced an increase in total net assets of approximately $8.2 million during 2016. This increase was primarily due to gifts and pledges to the Expanding Horizons Campaign.

The Operating Fund of the Diocese (which reflects the operating income and expenses of the Diocese) incurred a deficit of $81,371 in 2016, primarily due to unanticipated legal expenses relating to a lawsuit filed by the Diocese to protect the assets of Episcopal Senior Communities. The primary sources of revenue for the Operating Fund are assessment income, gifts and the annual income distribution from the Endowment Fund.

In late 2016 the Executive Council, upon the recommendation of the Diocese Investment Committee, approved the transfer of the Diocese’s endowment funds to the Endowment Portfolio of the Domestic and Foreign Missionary Society of the Protestant Episcopal Church (“DFMS”), which is the endowment fund of The Episcopal Church. This endowment fund adheres to the social responsibility guidelines of The Episcopal Church, and more specifically, to the mandate of Resolution C045, “Environmentally Responsible Investing”, passed by the 78th General Convention of The Episcopal Church. The decision to transfer the endowment funds to the DFMS Fund was the result of a robust discussion and study by the Diocese Task Force for Socially Responsible Investing.

At the end of 2016 the Diocese had outstanding loans to various parishes, missions and Diocesan organizations of approximately $2.8 million under its program of providing financial assistance for Diocesan organizations seeking assistance for capital improvements to their properties. The Diocese continues to provide both payroll and personnel benefits services to related churches and organizations within the Diocese, a service that is offered in very few other Episcopal dioceses. At the end of 2016 the Diocese had receivables of approximately $1.3 million for payroll/benefit advances under this program.

2017 Forecast and 2018 Budget

The Operating Fund is currently expected to operate at a small loss in the current 2017 year, primarily as a result of continuing litigation expenses relating to Episcopal Senior Communities.

The proposed assessment rate for 2018 continues to be the lower assessment rate approved by Convention in 2011, with a top rate of 17% (versus a top rate of 20% in previous years).

The Program & Budget Committee and the Executive Council have recommended a 2018 Operating Fund budget that will result in a balanced budget for the year with a small surplus. A copy of this proposed 2018 budget is included in the following pages.

Please note that for the duration of the Expanding Horizons capital campaign, the salary and benefits of the director of development are being charged to the capital campaign fund and do not appear in the operating budget. Because of staff focus on the capital campaign, we have likewise discontinued the line item for current gift income for the duration of the capital campaign.

This budget currently reflects a cost of living increase for salaries estimated at 3.0% and an expected increase in the cost of medical benefits estimated at 8.0%. The actual cost of living increase as measured by the San Francisco Consumer Price Index for All Urban Consumers for the year ending June 30, 2017 was 3.5%, and in keeping with prior years’ practice, the actual percentage increase as of June 30 is submitted to Convention for its approval as the recommended COLA for 2018 salaries.

Financial Policies and Procedures

The Finance Committee of the Executive Council holds monthly teleconference meetings to review the financial affairs of the Diocese. Its monthly discussions include a review of the year to date operating financials, the aging of receivables from the parishes and missions, and the line of credit loan facility available to parishes and other Diocesan institutions. A summary of these meetings is then presented at each month’s Executive Council meeting. 

Three other committees of the Executive Council also have significant involvement in the financial affairs of the Diocese:

  • The Program and Budget Committee prepares the recommended Operating Fund budget for the coming year, which is then presented to the full Executive Council and subsequently to Diocesan Convention.
  • The Investment Committee has oversight responsibility for the investments of the Endowment Fund.
  • The Audit Committee is charged with the responsibility of ensuring that the financial affairs of the Diocese are audited by an independent auditor and that appropriate accounting policies and internal controls are established and followed.

Thanks are due to the members of this year’s Program & Budget Committee, who worked diligently to prepare the proposed budget for the coming year. Members of this year’s committee were Roulhac Austin, Ron Johnson, Albe Larsen, Jim McConnell, Bruce Morrow, Wendy Olson, Kathy Trapani, Scott Whitaker, Matthew Woodward, Tom Ferguson, and Bob McCaskill.

Corporation Sole

All of the assets of the Corporation Sole except for its real estate holdings were transferred to the Diocesan Corporation in December 2009.  A separate report on the financial position of the Corporation Sole follows this report.

Other Matters

The Diocese and its member churches continue to experience financial constraints, and it is likely that we will continue to see many of our parish churches suffer from the strain of limited financial resources. This calls for the Diocese to be particularly mindful of its fiduciary responsibilities for the financial welfare of the Diocese and all of its churches and missions.

I want to express my thanks to Tom Ferguson, Jim Forsyth, Tanya Avrutin, Sarah Crawford, and all of the staff at Diocesan House for their hard work and assistance over the past year.

Respectfully submitted,

Robert McCaskill, Treasurer


Summary of the Financial Position of the Diocesan Corporation


Report on the Corporation Sole

In May 2008 the Special Convention of the Diocese adopted governance revisions stipulating that the Corporation Sole be merged or otherwise incorporated into the Diocesan Corporation to the extent feasible by January 1, 2011.  However, the Convention resolution also provided that in the event that such a merger or other incorporation would result in a loss of assets to the combined entity, the Corporation Sole shall continue to survive to the extent necessary to preserve its assets.

As previously reported to Convention, a conclusion was reached that all of the assets and liabilities of the Corporation Sole could be transferred to the Diocesan Corporation without significant costs except for the real property holdings of the Corporation Sole. Transfers of real property in California are subject to significant real estate transfer taxes; religious and nonprofit entities are not exempt from these transfer taxes.  In December 2009 all of the assets of the Corporation Sole other than its real estate properties were transferred to the Diocesan Corporation. 

The balance sheet of the Corporation Sole as of December 31, 2016 (shown in the following pages) reflects the 33 real estate properties which continue to be held by the Corporation Sole.

Respectfully submitted,

Robert McCaskill, Treasurer


Summary of the Financial Position of the Corporation Sole

 


2018 Proposed Diocesan Budget 

 

 
 
 
 
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2018 Narrative Budget

 

 
 
 
 
 
 
 

click to download

 

 

 

 

 

 

 


2018 Proposed Assessment Formula

  1. 5.0% assessment on the first $74,740 of a parish or mission’s operating income for 2016 as defined on Line A of the 2016 parochial report
  2. 17.0% assessment on all such income above $74,740, provided that:
  3. No parish or mission shall have an increase over 2017’s initial assessment (before appeals) of more than 50% or $20,000, whichever is less.

2018 Proposed Salary Resolution and Mandatory Minimum Compensation

Resolved, That effective January 1, 2018, the minimum annual compensation for clergy employed full time by the Diocese of California and by any parish or mission thereof shall be increased by 3.5% as reflected in the 2018 Mandatory Minimum Salary Schedule shown below.

Resolved, That years of experience be defined as years of credited service with The Church Pension Fund.

 

2018 Mandatory Minimum Compensation Including Self Employment Tax

Resolved,

1. That any deviation below these minimums will be permitted by the Bishop for serious cause, with the Bishop using the Personnel Practices Commission as a council of advice.

2. That employers of all clergy pay to each cleric 50% of the self-employment tax assessed on the cleric's base compensation as a portion of total compensation (7.65% of base compensation). This amount is included in the schedule above.

3. The Personnel Practices Committee strongly urges all churches, whenever possible, to increase the clergy and lay staff compensation by 3.5% for 2018 to accommodate for inflation.

4. That the 2017 minimum transportation allowance be $0.535/mile for congregation-related travel and is to be adjusted in accordance with IRS published rates for 2018.

5.  That associate clergy minimums are based on the cleric's years of service at two grade levels below actual congregation classification.

Note: The compensation increase is based on the increase in the Consumer Price Index for All Urban Consumers in San Francisco, Oakland and San Jose for the twelve months ending June 30th, 2017.

 

Resolution as passed at the 1999 Diocesan Convention:

Resolved: That the proposed salary standards for clergy in the Diocese of California, as reflected in the joint report of the Personnel Practices Committee and the Clergy Compensation Task Force, are approved and shall be effective on a voluntary basis for the years 2000-2004, and shall become mandatory for 2005 and later years.


2018 Congregational Grade Structure