2014 Finance and Proposed Budget

Treasurer’s Report to Convention

Summary of the Financial Position of the Diocesan Corporation

Report of the Corporation Sole

Summary of the Financial Position of the Corporation Sole

2015 Proposed Diocesan Budget

2015 Narrative Budget Poster

2015 Proposed Assessment Formula

2015 Proposed Salary Resolution and Mandatory Minimum Compensation

2015 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, 2013.

Financial Results for Calendar 2013

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

  1. the Operating Fund
  2. the Custodial Fund 
  3. the Endowment Fund 
  4. the Deferred Gifts Fund. 

The Diocesan Corporation in total achieved an increase in total net assets of $2.1 million during 2013. This increase was almost entirely due to the growth and investment returns from the investments of the Endowment Fund. As noted in last year’s convention reports, at the beginning of 2012 the management of the endowment’s invested funds was transferred to The Investment Fund for Foundations (“TIFF”), a nonprofit investment organization that serves only foundations, endowments and other nonprofit entities.

The Operating Fund of the Diocese (which reflects the operating income and expenses of the Diocese) had a small deficit for the 2013 year. The primary sources of revenue for the Operating Fund are assessment income, gifts and the annual income distribution from the Endowment Fund.

At the end of 2013 the Diocese had outstanding loans to various parishes, missions and Diocesan organizations of approximately $3.1 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 2013 the Diocese had receivables of approximately $1.7 million for payroll/benefit advances under this program.

2014 Forecast and 2015 Budget

The Operating Fund is expected to operate at close to a break-even position in the current 2014 year, consistent with the approved 2014 operating budget.

The proposed assessment rate for 2015 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 2015 Operating Fund budget that will result in a balanced budget for the year with a small surplus. A copy of this proposed 2015 budget is included in the following pages. This budget currently reflects a cost of living increase for salaries (estimated at 3.0%) and an expected increase in the cost of medical and other personnel benefits (estimated at 10%).

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, Matthew Dutton-Gillett, Shelton Ensley, Joe Jennings, Clay Jones, Jim McConnell, Patricia Pearson, Tom Robertson, Mauricio Wilson, Jim Forsyth, 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 continued to experience financial constraints over the past year as a result of the recent economic downturn. While there is an expectation that these trends will reverse in the not too distant future, 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

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Summary of the Financial Position of the Diocesan Corporation

 

 

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Report of 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.

During 2013 the Corporation Sole received insurance proceeds relating to the 2012 fire damage at Good Shepherd Church in Berkeley, and is using these proceeds for the necessary rebuilding and repairs to the church. The Corporation Sole had no other income or expenses for the year. The balance sheet of the Corporation Sole as of December 31, 2013 (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

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Summary of the Financial Position of the Corporation Sole

 

 

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2015 Proposed Diocesan Budget

 

 

2015 Proposed Diocesan Budget

11/6/14 — Diocesan Budget
(Corrected for two calculation errors in column G, fixed expenses, on lines 52 and 56. Errors only affect the total for column G, fixed expenses, on line 180, and don’t affect column I, Total Budget.)

 

 

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2015 Narrative Budget Poster

 

 

Click to download (reduced to 8.5"x11") — 6 MB

 

 

 

 

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2015 Proposed Assessment Formula

  1. 5% assessment on the first $68,733 of a parish or mission’s operating income for 2013 as defined on Line A of the 2013 parochial report
  2. 17% assessment on all such income above $68,733, provided that:
  3. No parish or mission shall have an increase over 2014’s initial assessment (before appeals) of more than 50% or $17,500, whichever is less.

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2015 Proposed Salary Resolution and Mandatory Minimum Compensation

2015 Proposed Salary Resolution

Resolved, That effective January 1, 2015, 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 3.0% as reflected in the 2015 Mandatory Minimum Salary Schedule shown below.

Resolved, That Years of Experience be defined by Credited Service with The Church Pension Fund.

2015 Mandatory Minimum Compensation Including Self Employment Tax

Resolved,

1. That any deviation below the Mandatory Minimum Compensation 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 above schedule.

3. The Personnel Practices Committee strongly urges all churches, wherever possible, to increase the clergy and lay staff compensation 3.0% for 2014 to accommodate for inflation.

4. That the minimum transportation allowance be $0.56/mile for congregation-related travel and is to be adjusted in accordance with IRS published rates for 2015.

5. That associate clergy minimums are based on cleric’s Years of Service at two grade levels below actual congregation classification.

Note: The compensation increase is based on the 3.0% annual increase in the Consumer Price Index for All Urban Consumers in San Francisco, Oakland and San Jose as of June 30, 2014.

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2015 Congregational Grade Structure

 

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