With eleven-twelfths of the year's income and expenses booked, the picture of ECUSA's finances is becoming clear. ECUSA is no longer fulfilling its mission as a church. Its mission operations have been scaled back severely. The greatly reduced expenses help keep ECUSA's deficit from being so large -- and they help bury the unbudgeted drain caused by 815's subsidies to the dioceses engaged in litigation over property. Meanwhile, ECUSA is able to show an operating "surplus" in part because -- are you surprised? -- its revenues from the Government are up.
I went on to show, using November's year-to-date totals, how ECUSA had managed to bury a huge $1.8 million cost overrun in its litigation costs by slashing its budget for mission and evangelism, and (as of November) was even managing -- with the help of increased grants from the government -- to show a supposed $1.4 million operating surplus.
Well, no longer. It turns out that ECUSA's practice is to budget monthly amounts simply by dividing the yearly projections by 12. This makes it look as though revenues and expenses will be booked at a uniform pace from month to month, when in reality they can fluctuate widely. Thus to recap, after eleven months, here is what had been booked and spent as of the end of November 2009:
2009 Total Rev. to Date (11/09): $ 50,688,591
2009 Total Exp. to Date (11/09): $ 49,271,519
Operating surplus to date (11/09) $ 1,417,072
And now compare the final figures for the entire year (admittedly still preliminary, but not likely to change by much, if at all):
2009 Total Rev. to Date (12/09): $ 55,604,883
2009 Total Exp. to Date (12/09): $ 57,313,166
Operating loss to date (12/09) ($ 1,708,283)
That is, of course, a huge shift in just thirty days -- a shift from a $1.4 million surplus to a $1.7 million loss requires a net operating loss of $3.1 million in December alone. And yet the projected 2009 loss was $2,788,466, according to the budget; so at the end of the year, ECUSA is able to say that it lost more than $1 million less than was expected.
But what is the use of monthly budget-to-actual comparisons when they can be so misleading? How can a going concern tell when its various departments are toeing the line, or not, when such gigantic swings in your "budget"-to-actual comparisons occur? (For example, the above figures show that more than $8 million of 2009 expenses were booked in December alone -- that is one-seventh of the year's total spent in just one month. It could indicate the bureaucrat's favorite game: hurry up and spend all the money in your budget, or you won't be given that much to spend next year. Or it could reflect a slowdown in financial reporting by the departments, because of fear of showing negative results. But whatever it reflects, it is not healthy.) One would think that, by now, ECUSA's Finance Office would have the data to tweak its monthly projections based on years and years of experience. Evidently not -- so let us, with that sobering realization, soldier on through the year-end figures.
Here is a comparison of the biggest expense items that ran over the yearly amounts budgeted for them. The actual figure spent is given first, in bold type; then the amount budgeted for that item for the year is given in italics; and the overrun is then given in bold italic type.
Legal Assistance to Dioceses (paying for the cost of dozens of major lawsuits):
$2,346,347 $100,000 ($2,246,347)
Episcopal Migration Ministries (resettling refugees):
$10,509,755 $9,135,867 ($1,373,888)
(This last item is not as bad as it looks, however, because it was more than offset by a huge increase in government reimbursements for EMM's expenses, as we shall see below.)
$1,419,368 $1,295,461 ($123,907)
ECUSA's downsizing has, paradoxically, run up its costs for facilities management (probably trying to rent out all the empty space at 815 -- it certainly is not the cost of all those empty churches, because ECUSA lets the Dioceses absorb that cost):
$2,768,451 $2,694,494 ($74,957)
And -- not a good sign -- the office of the Chief Operating Officer even ran over budget:
$515,196 $473,157 ($42,039)
And one item the COO did not budget for was the "Provision for Redundant Employees." Since there was nothing in the budget for this, and the actual item resulted in $41,337 in unbudgeted costs, there was an overrun of $41,337 in that department. "Human Resources" was put under strain as well, and came in $22,144 over budget; and "G[eneral] C[onvention] Publications" overspent its allotment by $39,411. All the remaining budget overruns together (seven items) account for a further $68,148 in losses.
We thus have a grand total of $2,658,290 in unbudgeted cost overruns, before taking into account the results of refugee (Episcopal Migration Ministries, or EMM) operations. Here the increase in both governmental reimbursements and non-governmental donations helped offset the program's cost overruns, as follows:
EMM Revenue - (1) Government, (2) Non-Government, and (3) totals for both:
(1) $10,105,390 $8,987,367 $1,118,023
(2) $ 620,226 $ 421,000 $ 199,226
(3) $10,725,616 $9,408,367 $1,317,249
That surplus over budget made up for EMM overruns (4), allowing EMM to show an operating surplus (5), although not as big as had been initially projected:
(4) $10,509,755 $9,135,867 ($1,373,888)
(5) $ 215,861 $ 272,500 ($ 56,639)
For those who are new to these ECUSA numbers, I shall repeat what I said in my earlier post with regard to ECUSA's taking money from the United States Government (actually, the Department of Health and Human Services' Office of Refugee Resettlement):
ECUSA? Getting federal money? Yes -- the Government is the second largest source of ECUSA revenues, after diocesan contributions, and is now even greater than ECUSA's income from investments. They are called "EMM Revenues," for "Episcopal Migration Ministries." Essentially, the Government pays ECUSA to assist in finding homes for refugee families. ECUSA is one of ten official [actually, now nine] "resettlement agencies" recognized by the federal Government, and accounts for settling between 2500 to 3500 individuals per year via a network of thirty offices in twenty-six of the 96 domestic dioceses.
You can see the scope of the ORR's operations in its Annual Reports to Congress, linked from the site given above, of which the 2007 Report is the latest. (ECUSA's operations are shown in Appendix C. And from this handy site, USASpending.gov, you can obtain data about the top ten recipients of government money affiliated with the Episcopal Church.)
Now let's look at the drops in ECUSA's other sources of revenue, which have contributed to the annual shortfall. Here are the figures for contributions from the Dioceses for 2009, compared in the same three fonts to indicate actual amount, budgeted amount, and variance:
$ 30,215,942 $31,033,328 ($817,386)
And here are the same three amounts for 2009 investment income:
$9,510,159 $9,601,000 ($90,841)
All together, then, these two sources came in below budget by over $908,000. A shortfall in revenues from Episcopal Life came to almost $350,000; it is transitioning to an online format only. Episcopal Books and Resources (EBaR) brought in $188,295 less than expected, as did fees for ordination exams (down by $27,000 from budget). Rental of excess space had been conservatively budgeted, however, and generated nearly $235,000 more than had been expected ($1,034,919 -- but still less than 40% of the expense of Facilities Management; see figures quoted above).
Due to ECUSA's useless custom of budgeting items pro-rata through the year, we see that the month of December 2009, budgeted for a net operating loss of just $232,550, actually turned in a loss more than ten times as great, or $2,581,355, while still managing to come in overall at $1 million less than budgeted for the entire year. No wonder there is no one who has a grasp on ECUSA's overall financial picture -- for all the seeming detail that is made available each month, it is actually unusable, in the form in which it is presented, as a tool for financial management.
And that must explain how legal expenses (or, excuse me: "Assistance to Dioceses") could so mushroom out of control -- here is how they grew, month by month through 2009:
Jan 09: ($405,000) [Yes, that line item showed a net credit as of January!]
Feb 09: $378,941 [leaving a net credit remaining, YTD, of $26,059]
Mar 09: - [Zero spent in the month, so the credit of $26,059 YTD remains]
Apr 09: $262,384 [So we are back to spending on fees again, and the March credit is erased; YTD expenses are $236,325]
May 09: $605,995 [Now the expense has more than doubled; YTD total is $842,320]
Jun 09: $231,474 [And now the monthly amount goes down by more than 60% -- just before the start of General Convention 2009; but YTD is $1,073,794]
Jul 09: $399,841 [With GC 2009 over, the amount starts to climb again; YTD goes to $1.47 million]
Aug 09: Another zero month (many lawyers take vacations in August)
Sep 09: $257,005 (Ft Worth case heats up; Virginia case moves into appellate phase); YTD is now $1,730,640
Oct 09: Again no money spent (waiting for the courts to rule)
Nov 09: $165,577; YTD is $1,896,217
Dec 09: $450,219 (briefs filed in Virginia, San Joaquin and Fort Worth), producing the final year-end total of $2,346,347
Is this any way to run a church, let alone a railroad? I shall repeat what I said as I concluded my earlier post, edited slightly to take the year-end actual figures into account:
Overall . . . ECUSA's public finances are a disgrace. It is surviving only by slashing to the bone its entire raison d'être at the national level (remember, it created the "Domestic and Foreign Missionary Society" to be able to accept charitable gifts for its mission as a national religious organization). It is as dependent on revenues from the government each year as it is on income from investing all of the gifts made to it over the past one hundred and sixty years. . . .Meanwhile, the Executive Council allows the Office of the Presiding Bishop to dole out nearly $2.4 million in money to pay litigation costs that are not part of the triennial budget approved just seven months ago. (Yes, I know -- the budget approved by GC 2009 was for the 2010-2012 triennium. But the failure to take the overrun for the 2009 into account for that budget makes it suspect as well. For example, ECUSA has gone 2,346% over the $100,000 it budgeted for that category in 2009. And what does it have budgeted for that item in 2010? Less than one-half of what it managed to spend in 2009, or $1,000,000. Is it rational, when the lawsuits keep multiplying, to project that even less will spent on attorneys' fees?)
It is high time for the members of the Executive Council to demand accountability from the Office of the Presiding Bishop. If they will not do so, then it is up to individual congregations and their clergy to start demanding accountability. I have yet to hear from 815 any satisfactory explanation for how the Church can possibly employ the law firm of the Presiding Bishop's personal Chancellor for all of its litigation, without there being a conflict of interest when so many millions and millions of dollars of Church funds are at stake. Just who is in charge of seeing to it that the various legal bills are not overstated, or that work is being done which was properly authorized, or that legal strategies are being employed which correspond to the actual wishes (and interests) of ECUSA's members -- its 106 actual Dioceses?
How could anyone possibly go about determining just what those wishes and interests were -- since the deputies to General Convention shouted down a motion designed to produce some openness in this area? One would have to consult with each diocesan bishop and with each diocesan convention, before a true consensus could be achieved. And just to produce the kind of informed consent that is required by the bar's rules for attorneys to be able to represent so many clients with a conflict of interest would involve a series of consultations that boggles the legal mind.
I see nothing like this taking place, of course. And I draw the only conclusion that is possible under the circumstances: ECUSA is in an unhealthy state; it is in the hands of people who are following their own agenda at the expense of the overall health of the Church. The declining attendance numbers are only one outwardly visible sign of ECUSA's sickness; its budgets and its desperate financial measures are another. Maybe it can continue for a while longer -- perhaps even for quite a while longer, given its assets. But those currently in charge are bringing it down -- make no mistake. The longer that no one holds them accountable, the more the downward slide becomes difficult to halt. ECUSA is already living on borrowed time.