Conservative Investing Helps Church Weather Economic Downturn
Wage, hiring freezes help keep operations within budget
BY ELIZABETH LECHLETNER, Adventist News Network.
eventh-day Adventist world church financial leaders will continue what they call a cautious and conservative approach to managing church funds in the wake of the global recession.
While a market recovery beginning in March and some economic indicators suggest the financial system is finally trending upward, the church should not base its budget on the assumption that the pattern will continue uninterrupted, General Conference treasurer Robert E. Lemon told members of the General Conference Executive Committee on on October 12. .
Mission offerings have held steady since dropping early in the year, but tithe returns from North America -- which account for 45 percent of the world church's budget -- continue to decrease, reflecting rising unemployment figures. "When people don't have an income, they don't return tithe," Lemon said.
Because church financial officers are uncertain when tithes and offering rates might rise in US dollar terms, the budget delegates approved for 2010 does not factor in an assumed increases in tithes and offerings, as is typically the case, Lemon told delegates. It reflects a US$1.6 million decrease in tithes and offerings when compared to the 2009 budget, he said.
Church officers also voted to use $2.79 million from the church's working capital to balance the 2010 appropriations budget.
FROM THE TREASURY: From left: Juan Prestol, undertreasurer, George Egwake and Roy Ryan, associate treasurers, give a treasury report during an Annual Council business session, October 12, 2009. [Photo: Rajmund Dabrowski/ANN]
Tithe to the world church's headquarters for 2009, when compared to last year, dropped 3 percent or $1.4 million for North America as of August, and 9.7 percent, or $1.1 million, for the church's other world divisions as of and July, Lemon reported. Tithes and offering rates are actually up in most of the church's other regions in local currencies, but when converted to a stronger United States dollar, show a decrease, he added.
Similarly, mission offerings for North America are down by 4.6 percent or $700,000, with other church regions reflecting a $2 million, or 8.6 percent, decrease.
Much of the October 12 financial report focused on how the church's investments -- both in equity markets and in less volatile fixed income holdings -- fared during the recent global downturn.
Most of the world church headquarters' investments sustained the global financial downturn "fairly well," Lemon said. For the period of January 1, 2008 through August 31 of this year, church headquarters earned a net return of $2.8 million on its approximately $290 million in investments.
Had all the church headquarters-owned funds been placed in a savings account earning the typical interest rate of one-half of a percent during the same period, rather than invested in the market, "we would be at the same place as we are now," Lemon said.
By transferring more of its investments to fixed-income holdings, the church reduced its exposure to drastic market fluctuations, said associate treasurer Roy E. Ryan. Even if it means earning less interest, the church's immediate goal is to protect its capital, he said.
While current market indicators are encouraging, the church should still exercise caution in budgeting and appropriating funds, Lemon said. If interest rates -- currently at historic lows -- increase, the church should expect to see short-term negative effects on the value of its fixed income investments, he explained.
Despite the current economic situation, the world church's headquarters is operating at $2 million below its $37 million budget, due to continued cutbacks, including wage and hiring freezes and travel restrictions, Lemon said. Such "judicial" use of funds positions the church to maintain its appropriations to world regions and avoid lay-offs even amid a "turbulent" economy, he said.
During the financial report, delegates also heard an update on the so-called "extraordinary tithe," a one-time donation of about $102 million to the Adventist Church two years ago. Investment activity over the past two years added almost $5 million to the principal, financial officers said. Of the almost $80 million allocated, less than half has been distributed, said church undertreasurer Juan Prestol, stressing that the church is applying the funds "cautiously." $14.7 million is reserved for future allocations, leaders said.
TREASURER'S REPORT: Robert Lemon, treasurer for the world church gives his report. [Photo: Rajmund Dabrowski/ANN]
GC associate treasurer George Egwakhe updated delegates on progress made on a new extension to the world church headquarters that will house a studio for the church's official television network, Hope Channel, offices, and storage space. Of the $5.1 million budgeted for the project, $2.6 million has been spent to complete 52 percent of the project. Leaders said they expect production in the new building to begin in January.
Later in the day, delegates reviewed church appropriations, agreeing to distribute more funds over the next five years to unentered areas and church institutions that support outreach.
Geoffrey Mbwana, East-Central Africa Division president, said he appreciated the move to "reprioritize" appropriations. "This is the right thing to do with church funds and I'm happy we're taking steps to rationalize how and why we distribute resources," he said.
Delegates also added to the budget several increases in appropriations for various church entities and institutions around the world. Delegates agreed to use $350,000 to help finance Global Mission employees' salaries. They also voted to approve a one-time appropriation of $150,000 to aid the Adventist University of Africa in meeting requirements for its charter.
Responding to the report, delegates seemed to echo Lemon and other church financial officers' attitude of cautious optimism.
While members in the church's Trans-European Division (TED) are feeling the effects of the economy, the region has not yet needed to introduce cutbacks, said TED treasurer Johann E. Johannsson. "In most countries -- at least in local currencies -- tithe is still increasing," he said.
North American Division treasurer Tom Evans said while he has concerns about the current economic situation, "it doesn't keep me up at night." Evans said he once oversaw a building project that started with no money. "I've seen the Lord do what was thought impossible before," he said.