29th August 2022

Memo to Church Council

GWUC -Financing Considerations and Modelling for Congregation Meeting – 11th September 2022.

There has been considerable work undertaken through DavidMorgan via his modelling and across the members of FinanceCommittee over the last week or two following receipt of AlaneeHearnshaw’s Letter of Resignation at the August Church Council meeting with an agreed final date of 31 October 2022.

In addition, to the recent work and discussion John Snare indicated a desire to have an agreed format to proceed considerations for the Congregation Meeting.

Historical Matters and Succession.

Finance Committee presented several scenarios when seeking to establish a framework some two plus years ago as to our ability at that time to extend Alanee and fund the succession planning arrangements and transition of Rev Neil Peters into retirement, with a date of January 2024, since being formalised.

In relation to Alanee at that time, we recommended a term of 3 years, with an option of a further two by mutual agreement by the parties. This served several purposes, but financially we committed to fund our 2 x FTE for a new Minister of the Word and the revised Pastor role for Alanee. This was against Finance Committee assurances that we could fund these and other members of our team for a maximum period of 5 years given our changing demographics, reducing offering and direct giving receipts and the increasing reliance upon rental receipts to cover all other church operating expenses.

To date, Alanee has almost completed 2 years of that contract and as such we maintain the ability of that earlier commitment. This would assume a continuing ability to fund 2 x FTE with full Salary and Ministerial Benefit frameworks for a maximum of 3 further years from February 2023, assuming all other matters remain current.

This would see a new Minister of the Word and provide a short period of overlap, whilst also ensuring that we can and could fund Alanee for that agreed period.

Concurrently, Finance Committee again repeated our regular advices that our revenue and giving offering from our congregation continues to decline by 1.5-2.0% per annum whilst our expenses, predominantly through Staff and on costs, are projected to increase by 3% per annum. In real terms this gap translates to approximately $20,000-25,000 per annum.

To date we have run small deficits and relied upon maximising increasing rental receipts which in 2023 are planned to be approximately $82,000 but this will likely maximise our revenue potential from this source. As further rentals would impact space availability for congregation based activities.

Through the pandemic we liaised with Presbytery and reduced our contribution for Mission & Service from a suggested (requested) annual figure of $58,000 to $48,000 as a consequence of our Revenue pressures. Church council requested that Finance Committee review this situation and if possible make an upward adjustment. This will likely result in us increasing our 2022 figure to $54,000 in November 2022.

You are also aware that we have almost expended our Deferred Maintenance Reserve to complete necessary upgrades through carpet, air conditioning and other items. That Reserve will now be further exhausted as we refresh and update the two manses in late 2022 and then early 2023 as is required by Synod and Presbytery procedures.

In 2022, we expected to present a small deficit of some $7,000-10,000 which continues our run of operating deficits over several years. With Alanee departing end of October we will have some savings through November and December, but not significant balances which materially impact our finances. It needs to be remembered that Alanee is taking some leave prior to her departure that will need to be funded. These reserves will be further reduced if other temporary resources are sourced to support the ministry team efforts.

Finance Committee has been consistent in presenting to Church Council that whilst our finances remained sound, and we can cover the immediate plan requirements, we are already living beyond our means and eating into our Surplus accumulated over many years.

We are faced with challenges, and we can see no reason to expect any change in our financial direction of deficits because our material offerings through, open plate, envelopes and direct giving are insufficient to meet the operational plan expenditures and contractual staffing commitments.

There has been no planned giving programme or changes for approximately 10 years, although a number of our congregation members have made personal adjustments. There has been a reluctance by some to suggest this course of action because many of our members have reached the life stage of fixed incomes and pension streams.

The Challenges Going forward!

Whilst we remain supportive of the funding table agreed to earlier, it is necessary to define and explain that this never committed GWUC to this funding volume beyond the commitment to Alanee, because we were aware of the risk and challenges associated with that or a similar commitment. Indeed, Finance Committee has had apprehension as to the ability to retain our income with an ageing congregation as well as diminishing numbers.

We believe the challenges are now well defined.

We run the risk of exhausting our Financial Reserves earlier should we consider and commit to a new FTE appointment commencing some time in 2023/24 for a 5 year period. Yes, there may be savings in Staff costs until an appointment is finalised and put in place.

However, the incremental reduction in our offerings and giving will not diminish over this period. The incremental addition to rental income is expected to slow because we have less ability to rent our premises due to the congregational needs of those rentable spaces.

In simple terms our income is constrained even further, whilst the costs will reflect a short term saving but they will by definition incorporate an annual increase of say 3% or possibly more due to inflationary pressures we read of every day.

From Finance Committee we are reticent to support or advocate the existing cost structure beyond the current commitment (3 years). We see no way of funding the ongoing increment if the 2nd FTE is committed from 2023 ( some date to be defined) through until 2028 ( on the basis of a minimum 5 year appointment). We are not in a position to provide Presbytery an absolute guarantee of funding for such a placement of that nature.

The Importance of Modelling – Highlighting the Challenge.

We are indeed fortunate to have the modelling skills of David Morgan and the accounting / financial and risk management skills of the Finance Committee.

The Modelling presented by David in his work to date, in taking our financial history and projections and presenting clear graphical presentations which we can work with, is important and relevant.

From those, David presents a definable challenge requiring additional revenue and whilst we may query the linear progressions, when our actions are more likely to be lumpy, we believe they clearly highlight a challenge to Church Council and Congregation as to the degree of risk and the challenge associated with deriving the additional funding. That said, the modelling does assume resource availability. A factor assumption that has not been included in the modelling.

Finance Committee believes we have an annual revenue shortfall of some $10,000-15,000 per annum if we sustain the planned existing staffing and cost framework. Rather than growing our giving we are witnessing an annual decline in giving revenue and we anticipate this increasing as we lose further members for a variety of reasons. Our programme initiatives have been unable to, or have not included as a deliverable, generating an appropriate revenue stream to meet the shortfall.

In earlier discussions with Glyn Howells, following receipt of Alanee’s resignation, I reiterated that we were financially sound, for the short term. That remains the case. However, as Treasurer it is important that I confirm that there are significant challenges over the period beyond the next 2-3 years and post the transition. We will have significantly reduced surplus funds and eliminated our existing Deferred Maintenance Reserve with required expenditure (subject to rebuilding the funds over the next 5-10 years). Although recently added to the assumptions in the modelling, all these financial assumptions above have excluded the fact that it is our view most likely that new FTE ministry resources will not wish to live on site in our manses, and we will then incur a further $30,000 - $37,000 manses allowance expense as well as having vacant manses to maintain. This amount would have to be added to the annual shortfalls referred to in this memorandum.

Alternative Staffing Scenarios and financial Impacts.

There have been several iterations as to scenarios that would enable us to consider and seek alternatives which present less financial stress and risk over the timeframe of say 5 -6 years given the likely time frame delays as to an appointee being sourced and available to commence.

It has been suggested as either a 0.5 or 0.7 FTE Pastor role (with or without the Manse allowances) however guidance received by us says that there are no trained Pastor resources available who can step up to the level of commitment we have received from Alanee, or who are trained in this speciality. The Synod of VIcTas, for a long time, has not trained youth workers.

We believe the only realistic course therefore is that of an Ordained MOW or Deacon role, which would by necessity expect a .7 or less placement and would attract all of the oncosts and allowances. Also, seeking 2 ordained resources at the same time may present us with a further challenge based on Presbytery pronouncements.

We recommend written advice from Presbytery be requested that they will allow that approach.

We haven’t undertaken detailed financial analysis because that would be driven and defined by the tasks and roles / functions to be committed to and the acceptance of a role offering less availability.

That framework would reduce our costs by $30,000-40,000 per annum and the analysis and challenges defined above go way. We could then confidently predict that we will not experience severe financial pressures.

From Finance Committee historical discussions, that was our envisaged initial impact when Alanee was extended, either after 3 years or after a complete 5 year term.

Summary and Recommendations.

Your Finance Committee as the steward of finances remains concerned as to our longer-term finances, unless a strategy to address those shortfalls is commenced at the same time as the FTE resourcing is progressed.

The immediate challenge here is to define what we want and need the roles to achieve and under what circumstances. Finance Committee are not privy to those discussions or the Strategic framework going forward.

We remain very concerned as to our ability to generate more revenue through offering and giving considerations with the current demographics. We have emphatically defined the reducing revenue and cost increase pressures. We cannot squeeze more out of our services and staff through tightening without reducing services to our congregation and the wider church mission. It requires a broader definition of desired and prioritised activities. We cannot see a way to sustain our Mission and Service commitments without this carefully planned revenue regeneration task.

The easier proposal is to refine and develop a function which can be offered and then with an appointment of, perhaps 0.6 FTE or 0.7FTE for say only 5 years. This can be substantiated financially and could or would be recommended by Finance Committee. If the financially view then changes in the future a change to those arrangements could be achievable.

Should Church Council want to do more, then they need to articulate the role and the costs and set the Financial Challenges to our congregation strongly attached to our already publicised, 4 Mission strategies. The Congregation needs to understand these challenges as our current revenues are diminishing.

Finance Committee is unable to contemplate the meeting of the challenge from our existing framework and responses so far.

KenCoutts

Treasurer and Convenor of Finance Committee.