Council on Finance & Administration Tennessee Annual Conference: - - PowerPoint PPT Presentation

Council on Finance & Administration Tennessee Annual Conference: John Pearce

Council on Finance & Administration Team

Karen Barrineau Davis Chappell William McAlilly – Bishop Jim Allen – Treasurer Phil Jamieson – UM Foundation Scott Aleridge – District Superintendent Melinda Britt – Dir. of Connectional Ministries Lynn Taylor – Retired, former Dir. Missional Alignment Shelly Curtis – Asst. Treasurer John Pearce - President Terry Hundley - Vice President Paul Purdue - Secretary Rashad Bailey Deanna McCulley Jim Hughes Drew Shelley Dale Sims Barbara Pate Jay Voorhees

Today’s Message

• Transparency: No secrets/no surprises – it’s your money
• Change: Change is hard, but the pace of change will continue to increase
• Apportionments: New model, but collection trend is a concern
• Reserves: How is our balance sheet helping us?
• Alignment: How do we align our processes with the Memphis Conference?
• Connectional Ministry: Collaborative and transparent process for budgets
• Direct Bill: First year results and movement along the path to 100% billing
• Retirement of Jim Allen and nomination of Larry Davis
• Help for local churches
• Help for Wesley foundations and other ministries
• Health plan improvements

2019 Financial Highlights

• 2019 Budget
• 2019 Apportionments Received
• 2019 Invested Reserves

Tennessee Conference United Methodist Church 2019 Budget

Category: Apportioned Amount 89.62% Budget Other Income Use of Reserves Actual Total Cost % of Total Pensions: 800,000 716,960 52,000 2,595,048 3,364,008 18.63% Clergy Health: 4,016,960 3,600,000 455,000 429,932 4,484,932 24.83% General Church: 2,698,231 2,418,155 2,418,155 13.39% TN Conference Ministries: 6,219,480 5,573,898 1,952,815 267,900 7,794,613 43.16% TOTAL BUDGET 13,734,671 12,309,012 2,459,815 3,292,880 18,061,707

2019 Apportionments Received

• Churches Paid 100%
• Churches Paid 50%-100%
• Churches Paid 1%-50%
• Churches Paid Zero
• Total Churches

Number Amount Paid % of Total

• 355

$10,437,236 87.9%

• 74

$1,110,316 9.4%

• 72

$322,618 2.7%

• 60

$0

• 561

$11,870,170

• 86.5% of $13,717,572 Apportioned
• $438,842 short of $12,309,012 needed
• 2018: 89.3% & $57,863 short

Who Paid Apportionments - 2019

• Brentwood

$1,195,705

• Franklin First

$ 659,802

• West End

$ 455,771

• Murfreesboro

$ 350,821

• Belmont

$ 264,350

• Hendersonville

$ 257,611

• Cookeville First

$ 243,060

• Calvary

$ 235,848

• Hermitage

$ 226,784

• Madison Street

$ 194,917 Top 10 (34.5%) $4,084,669

• (15) $100K-$200K

$2,153,946

• (27) $50K-$100K

$1,901,889

• (31) $25K-$50K

$1,053,280

• (418) $1-$25K

$2,676,386

• (60) $ZERO

Total Apportionment Giving

• (561)

$11,870,170

Who Did Not Pay Apportionments - 2019

• 15 Churches Underpaid by > $25,000

$600,719 32.2%

• 131 Churches Underpaid by < $25,000 $702,262 37.7%
• 60 Churches Paid Zero

$562,091 30.1%

• 204 Churches Underpaid for Total of

$1,865,072

• 35 Churches Overpaid by

$17,670

Invested Reserves 12/31/19

• Net Assets:

37,893,018

• Invested in Fixed Assets:

(7,502,153)

• Designated for Pensions:

(15,933,744)

• Designated for Healthcare:

(1,359,240)

• Designated for Congregational Devel:

(2,449,102)

• TN Conf Camping Fund:

(1,045,190)

• Designated for Conf HQ:

(625,634)

• Closed Church Fund:

(3,263,108)

• DS Parsonage Fund:

(691,703)

• Cabinet Reserve Fund:

(1,031,068)

• Board of Ordained Ministry:

(303,964)

• Other:

(3,688,112)

2020 Financial Highlights

• 2020 Budget
• Direct Bill of Health Care and Pension Costs
• Rebate of 25% of 2020 Pension Payments to Local Churches
• Apportionment Collection Thru August 31
• Paycheck Protection Program Loan
• Treasurer Jim Allen Retirement – Nomination of Larry Davis

Tennessee Conference United Methodist Church 2020 Budget

Category: Apportioned Amount 89.45% Budget Other Income Direct Bill Use of Reserves Actual Total Cost % of Total Pensions: 265,817 237,773 48,000 722,551 2,167,652 3,175,976 18.15% Clergy Health: 725,548 649,003 495,785 1,584,088 1,584,088 4,312,964 24.64% General Church: 2,729,222 2,441,289 2,441,289 13.95% TN Conference Ministries: 5,920,484 5,295,873 1,981,427 294,268 7,571,568 43.26% TOTAL BUDGET 9,641,070 8,623,938 2,525,212 2,306,639 4,046,008 17,501,797

Direct Bill of Health Care & Pension Benefits

• As of July 31, 2020
• 188 churches billed >$1,000

$1,377,768

• 125 churches billed <$1,000

$33,875

• 245 churches billed ZERO

$0

• Collected 98.6%
• Equitable comp provided help to a few churches
• Projected full year billing - $2,419,959

2019: Direct Billing of Health & Pensions: WHY

• Fairness to the 340 smaller churches that pay (twice?) with no participant
• Fairness to the 54 larger churches that pay extra
• Risk of reliance on collection of apportionments for clergy benefits
• Current method is not sustainable in the changing landscape of UMC
• Need to more fully understand the increasing cost of healthcare
• Pay for benefits in same manner as salary
• Allows cabinet to understand which churches can fully fund a full elder
• TN Conf is one of few remaining conferences to apportion benefits

Direct Bill of Health Care & Pension Benefits

• 2020 healthcare cost billed at 50% of cost (about $6,600)
• 2021 healthcare cost billed at 75% of cost (about $10,170)
• 2020 pension cost billed at 25% of cost
• 2021 pension cost billed at 50% of cost

2020 Pension Rebate

• In 2019 WesPath provided a “premium holiday” of $591,802
• In 2019 our pension reserves earned a substantial amount in the stock

market, more than we expected

• The TNAC cabinet expressed to CFA a desire to help our local churches

financially because many were struggling during our COVID year

• CFA proposed to rebate each church that paid in to the pension plan

(25% level) the full amount they paid in 2020. Estimated $704,000

• Pension Committee approved
• 313 churches will receive a credit on their billings totaling $704,000

2020 Apportionment Collections

• As of August 31, 2020 (8/12 of year)
• # of Churches

Status Paid amount (Behind)/Ahead

• 195

ZERO $0 ($742,733)

• 94

8/12 $2,203,257 $0

• 105

Overpaid $746,319 $101,878

• 163

Behind $1,615,617 ($1,221,319)

• Totals

$4,565,193 ($1,862,174)

2020 Paycheck Protection Program Loan

• Jim Allen, with the approval of CFA and trustees successfully applied for

a PPP loan for the conference

• PPP loans were guaranteed by the SBA and intended to prevent layoffs
• On April 21, $938,500 was deposited into TNAC bank account
• Based on SBA rules and legislative changes, we expect that 100% of this

loan will be forgiven before the end of this calendar year.

• In accordance with the SBA rules, TNAC has used this money to fund

payroll costs over a 24 week period

• Some belongs to the foundation, some was used to help with camping

payroll this summer, some was used to create an opportunity to help with equitable comp for churches struggling with payroll.

Retirement of Jim Allen Treasurer of TNAC

• Jim Allen has announced he will retire as Treasurer effective Sept 20, 2020
• BOD says, annual conference, on nomination of CFA shall elect a treasurer
• Personnel policies provide for CFA & Pension Cmt to determine candidate
• In light of plan to unify with Memphis and consolidate our Admin

Services/Treasurer’s offices we, with the permission of the Memphis CFA, are nominating Larry Davis, the current Memphis Conference treasurer to serve in the additional role of the Tennessee Conference treasurer until December 31, 2021

• We expect to partner with Memphis Conference to secure a treasurer for

TWK Conference effective 1/1/22 during 2021

• See CFA action items to elect Larry Davis as treasurer

2021 Financial Plan Highlights

• New Apportionment Formula Based on Revenue as reported on Line 52(t)
• f annual statistical report with a 20% cap on first year change
• 2021 budget regarding districts and campus ministries
• New health care plan financial issues
• Pension plan financial issues and reserve forecast
• Misc. resolutions:
• Cabinet reserve fund
• Travel reimbursement
• Housing Allowances
• District superintendent pay
• 2021 budget recommendation and approval

2021 New Apportionment Formula

• At 2019 AC you approved a new, revenue based apportionment formula

that uses line 52(t) of the annual statistical report as the basis for

• apportionment. We called it Connectional Commitment and it asked

local churches to pay 11% of line 52(t).

• This was for the new TWK Conference which does not begin until 2022
• CFA is proposing to use this formula for the TNAC in 2021, with a cap of

20%, increase or decrease, versus what was paid in 2020.

• 11% in 2021 equals 99.8% of 2020 apportionment
• Model is based on 85% of revenue (no capital or endowment income) vs

61% of expenses in prior model, so more consistent application

• See CFA action items for this new formula

2021 District and Campus Ministry Budgets

• District Budgets:
• We made progress in aligning the nine Ddstrict budgets
• DS salary equalized: Chip, Scott, Donna, Pat, and Alan all get a pay cut
• Travel costs were fine tuned
• Memphis districts will move accounting to Treasurer’s office like TN did in 2019
• Campus Ministry Budgets:
• With help of Angella Current-Felder and Jefferson Furtado, CFA is recommending

that employees of the TNAC Wesley Foundations be moved onto the conference payroll and that the conference Treasurer’s office manage and disburse the funds provided by the conference to each Wesley Foundation. Larry Davis will work with each campus minister to ensure this is supportive of their ministry.

• The Conference needs to provide resources to help campus ministers implement

effective fund-raising processes to be less dependent on apportionments.

2021 Health Plan Financial Issues

• With the WesPath Flex Plan the cost of health care for each church will be the

same, about $13,560 regardless of whether the pastor is a single plan participant

• r needs to cover his/her spouse and children and regardless of which conference

he/she is appointed to.

• Because of some residual reserves from prior years, in 2021 the conference will

bill only 75% of the cost to the local churches and 100% of the health care cost for plan participants not appointed to a local church.

• Plan participants may chose a high deductible (with an HSA) for no additional

monthly premium or pay a monthly premium with a lower deductible. For the first time in years, participants with children and/or a spouse will have access to affordable health care.

2021 Pension Plan Financial Issues

• With our significant conference pension reserves, on top of fully (over) funded

pension plans, CFA is recommending, with the approval of our Pensions Committee, that local churches will be billed for 50% of the cost of pensions for their appointed participants, and that we use those reserves to pay 100% of the pension cost for plan participants not appointed to a local church for 2021.

• After the use of these reserves in 2021, as well as 2020, we have forecasted that

the TN Conference will enter the unification with the Memphis Conference on 1/1/22 with pension reserves of about $12 million which is above our $10 million target.

Cl Clergy P gy Pensions F Five Y Year A Activity Re Reserve Floor Target = $10,000,000

• Beginning
• Direct Bill
• Earnings
• WesPath Holiday
• Expense
• Other Income
• OAS Support
• Apportionment
• Rebate
• Net Change

12/31/17 12/31/18 12/31/19 12/31/20 12/31/21 16,971,995 17,196,158 15,175,620 15,933,744 13,071,768 602,227 1,408,000 2,303,100 (142,714) 2,782,065 300,000 1,000,000 585,925 591,802 (3,242,007) (3,184,769) (3,204,276) (3,175,976) (3,289,448) 52,700 28,576 48,000 10,000 (153,546) (157,105) (170,000) (185,551) 1,163,070 821,866 717,062 237,773 0 (704,000) 224,164 (2,020,538) 758,124 (2,861,976) (1,056,999) $12,014,769

2021 TN Conference Budget

Tennessee-Western Kentucky Budget 2021 Summary Revised Date: 8/20/2020 Tennessee Memphis Combined Net Surplus (Deficit) 212,497 212,498 Revenue: 11% of Line 52(t) 9,451,962 6,185,130 15,637,092 Reserve for Non- Collection (1,890,392) (1,975,697) (3,866,089) Net Revenue 7,561,570 4,209,433 11,771,003 Collection Ratio 80.00% 68.06% 75.28%

Pension Expense: Estimated Costs 3,474,999 1,594,646 5,069,645 Direct Billed to Local Church 50% (1,408,000) (1,594,207) (3,002,207) Paid with Reserves (2,056,999) (2,056,999) Other Income (10,000) (439) (10,439) Net Expense Health Care Expense: Estimated Costs 4,014,260 3,085,136 7,099,396 Tail Coverage Old Plan 498,703 498,703 Estimated Prior Year Surplus (745,318) (745,318) Participant Receipts (705,120) (705,120) Direct Billed Local Church 75% (2,305,200) (2,192,000) (4,497,200) Other Income (2,562) (2,562) Paid with Reserves (757,325) (890,574) (1,647,899) Net Expense

General Church Apportionments: 1,892,545 1,351,946 3,244,491 SEJ Apportionments: 15,470 13,252 28,722 District Budgets: 1,723,070 1,363,883 3,086,953 Equitable Comp: Equitable Comp 475,000 Unrestricted Reserves (240,000) Net Equitable Comp 235,000 150,000 385,000 Annual Conferences: 145,500 90,000 235,500 Conference Journal: 14,500 3,000 17,500

Episcopal Residence: Total Cost 25,700 Paid by GCFA (10,000) Net Cost 7,850 7,850 15,700 Episcopal Office: Total Cost 316,474 Paid by GCFA (75,471) Net Cost 159,062 82,941 241,003 Treasurer's Office / OAS: Total Cost 473,089 232,153 705,242 Transfer to Pensions TAC (185,551) (185,551) Net Cost 287,538 232,153 519,691

Liability & WC Insurance 75,000 15,000 90,000 CF&A 14,560 14,560 Chancellor 10,000 10,000 Conference Office Center 20,500 20,500 Conference HQ Building Total Cost 73,216 71,000 144,216 Use of HQ Reserve (73,216) (71,000) (144,216) Net Cost General Conf Delegate Expense 17,453 15,000 32,453 Archives & History 50,388 25,958 76,346

Total Connectional Ministries: 2,725,696 813,390 3,539,086 Communications: 60,434 33,526 93,960 DISCOVER AND SEND Disaster Response: 13,200 6,800 20,000 Global Ministries: 1,000 1,000

New Church Development: Income (18,742) (18,742) Admin Expense 37,000 37,000 Plant Church Grants 651,400 200,000 851,400 Missional Salary Support 192,000 192,000 New Initiatives 300,000 300,000 NCD Staff Health & Pension 41,250 41,250 New Church Devel Reserves (1,010,908) (392,000) (1,402,908) Net Expense Congregational Transformation 9,000 9,000 TOTAL DISCOVER AND SEND 23,200 6,800 30,000

EQUIP Next Gen Discipleship: Income (185,000) Expense 285,000 Net 100,000 100,000 Disability Concerns: 500 500 Safe Spaces: 7,656 3,944 11,600 Spiritual Leadership Development: 2,500 2,500 Discipleship Team: 22,500 22,500 Board of Laity: 17,952 9,248 27,200

Higher Education & Campus Ministry 776,158 276,723 1,052,881 Camping Ministry Admin (74,500) (74,500) Beersheba Income (360,800) (360,800) Beersheba Expense 500,300 500,300 Lake Shore Income (1,330,600) (1,330,600) Lake Shore Expense 1,436,600 1,436,600 Cedar Crest Income (340,000) (340,000) Cedar Crest Expense 480,000 480,000 Net Camping Ministry 205,000 106,000 311,000

Board of Ordained Ministry Income (168,350) (168,350) Expense 357,300 116,750 474,050 Net 188,950 116,750 305,700 TOTAL EQUIP 1,298,716 535,165 1,833,881

CONNECT Covenant Entities Project Transformation 33,000 17,000 50,000 Martin Methodist College 500,000 500,000 Miriam's Promise 100,000 100,000 Fam Services of West KY 8,000 8,000 Hannah's Hope 20,000 20,000 UM Neighborhood Centers 25,000 25,000 Reelfoot Rural Ministries 80,000 80,000 New Ideas 19,800 10,200 30,000 Total Covenant Entities 652,800 160,200 813,000 Ethnic Local Church Concerns 29,000 29,000

Church & Society 16,200 5,000 21,200 Health & Welfare 1,947 1,003 2,950 Religion & Race 5,250 5,250 Status & Role of Women 1,000 1,000 TOTAL CONNECT 706,197 166,203 872,400 CMT SALARY POOL 637,149 71,696 708,845

2021 CFA Action Items:

• 1. In light of the retirement of Jim Allen, effective at the end of this annual

conference session, CFA nominates Larry Davis to serve as Tennessee Conference treasurer from September 20, 2020, through December 31, 2021, as explained in additional detail in the CFA report posted to the conference website.

• 2. CFA moves for the approval of the proposed 2021 Tennessee

Conference Budget posted as 2021 Summary Budget for TN-Western Kentucky Conference on the conference website.

• 3. CFA moves for approval of the income-based apportionment method

funding model described in detail in the CFA report disseminated in advance of annual conference, with a 20 percent cap on increases or decreases from 2020 church apportionments.

2021 CFA Action Items Cont’d:

• 4. CFA moves that the Tennessee Cabinet be authorized by the annual

conference to use the Tennessee Cabinet Reserve Fund in accordance with its written process, in its sole discretion, in an amount up to $250,000 for calendar year 2021. Any amount above $250,000 within the calendar year shall require consultation with, and agreement of CFA.

• 5. CFA moves that the approved travel expense for staff and members
• f councils, boards, committees, and other entities of the

conference be reimbursed at the rate set by the entity, not to exceed the maximum mileage amount allowed by the Internal Revenue Service for business travel.

• 6. CFA moves that the housing allowance designated for clergy

conference staff pursuant to Internal Revenue Code Section 107 be approved for 2020-2021 as printed in the conference journal.

• 7. CFA moves that the base compensation for the district

superintendents for 2021 be set at $101,600 exclusive of the housing allowance.

2021 CFA Action Items Cont’d: