The Executive Council of the Episcopal Church (USA) has commended the staff at Church headquarters (815 Second Avenue in New York) for producing an operating "surplus" of some $2.4 million for calendar 2014. A resolution adopted at the Council's latest meeting last week took note of the “consistent, visionary leadership” of Chief Operating Officer Bishop Stacy F. Sauls and Treasurer and Chief Financial Officer N. Kurt Barnes.
The commendation would appear to be premature. The "surplus" claimed exists only if one ignores the full operating statements of the Church, which include in particular the numbers for its Episcopal Migration Ministries ("EMM") -- the arm of the Domestic and Foreign Missionary Society (the incorporated part of the Church handling all money and finances) which provides government-subsidized services to international refugees admitted for resettlement in the United States.
Working through 30 partner organizations in some 22 states, EMM helps the United States government relocate approximately 5,000 new refugees in the United States each year. In exchange for its services provided to the new immigrants -- helping them blend in and become productive members of American society -- the government reimburses EMM for what it spends on relocation services. The reimbursement includes staff and overhead costs, as well as all out-of-pocket expenditures.
Because EMM income is unrelated to regular income of the Church, it is reported in its own section at the end of the monthly operating statements, after the accounting for the usual Church revenues and expenses. And for budgeting purposes, the Church projects EMM reimbursements to be equal to EMM expenditures -- so the numbers should be a wash.
But they are not -- this is the government, remember? Its reimbursements can lag greatly behind expenditures, so that the Church is actually in the position of having to front money for EMM operations which it expects (eventually) to receive back. It's almost like having to invest "working capital" into a business before it can become profitable.
With this background, anyone can now evaluate the strength of 815's "surplus" claim by examining its preliminary 2014 year-end profit-and-loss statement here. According to that statement:
(A) Total ordinary income for the year (line 15) was $ 40,685,373;
(B) Total ordinary expenses for the year (3d page) were $ 38,278,771; producing a nominal
(C) "Budgetary surplus" for the year (A - B) of $ 2,396,602.
But now add in the EMM figures (bottom of the third page):
(D) 2014 EMM reimbursements received were $ 13,322,419; while
(E) 2014 EMM expenditures amounted to $ 16,811,183; for a net
(F) Annual EMM operating deficit of $ 3,488,763, which more than wipes out (C) above, and leaves
(G) A net operating loss for 2014 of $ 1,092,161 !!
In other words, the Episcopal Church is in the hole to the tune of over a million dollars for calendar 2014.
Notice how the budgeted 2014 numbers for EMM were to equal each other: $15,931,732 of reimbursements was supposed to equal $15,931,732 of expenses. That, however, is not how things actually worked out.
The Church spent the money for EMM in 2014; any money spent in excess of actual reimbursements had to come from the Church's other pockets. And by the time the government reimburses the EMM deficit of $3,488,763 later this year, the Church will already be spending money on EMM in 2015. It will most likely never catch up -- because, as I say, of the long time it takes the government to process claims for reimbursement.
Because of that reality, it looks as though the Church, in order to avoid having to draw down its trust funds excessively to finance EMM operations, pretty much has to find the necessary funds from elsewhere in its operations. So had it not been able in 2014 to increase its rental incomes, and save money on refinancing its loans and in other ways, the operating loss would have been far higher.
And that is my point in this first post on the Church's Finances -- there is no "surplus" for which the Episcopal Church may pat itself on the back. But there is still a lot more to say about EMM, and the Church's 2014 figures, as well. They will be the subject of my next posts in this series looking at the Church's Finances leading up to General Convention 2015.