There have been a number of posts concerning the finances and leadership of the Episcopal Church. As the chair of the finance committee and a member of the audit committee, I want to address what I understand to be the key issues and the steps we are taking to address them.
The first issue is the money we have borrowed to pay for the renovations to the Church Center and the purchase of a parking lot as a future site for the national archives.
When those needs arose, the staff and Executive Council chose to borrow a combined $47 million dollars from our $50 million line of credit. The terms allowed us to pay as much or little principal as we chose - and we have made primarily interest payments and only about $500,000 in principal payments over the past six year. I and other members of finance and audit committees as well as previous members of those committees with extensive financial expertise whom we have asked to advise us, believe that a loan of that amount should not be made with a line of credit. It is not a standard financial practice to use a line of credit for major capital expenditures. The purpose of a line of credit is to cover cash shortfalls for small amounts of time and is normally repaid as soon as possible (generally within a year).
In retrospect, this loan was undertaken at the time when banks encouraged all of us, individual homeowners and organizations, to over-extend ourselves and to take on loans that were not adequately secured. I believe that is what happened to us. But now the time has come for us to put our financial house in order.
It was entirely appropriate and necessary for us to do the renovations at Church Center and some of the costs were a result of the need for asbestos abatement and not optional. Concerning the proposed future site of the Archives in Texas, (the parking lot) some of us were convinced that the availability of the parking lot was a good purchase at the time, especially since the Archives had been asked to vacate the space to the Seminary of the Southwest, the current home of the Archives. The parking lot is a functioning enterprise and its income is sufficient (at the currently low interest rates) to make interest and some principal payment. If interest rates increase, as well they may, this situation would change. In any case, we need a new site for the Archives and the current parking lot is one option for that.
I and others believe we now need to obtain mortgages or private financing, using the properties as collateral, just as most of us use our homes as collateral for our mortgages. With interest rates at record low levels, we believe we should secure loans and make both interest and principal payment to service our debt - preferably paying principal at an accelerated rate, so less of the church's funds goes towards interest payments and we can again be debt-free.
Several posts have suggested a conflict between the Treasurer, Kurt Barnes, and me. That assessment diminishes the importance of the issues before us undermines the commitment both Kurt and I feel for this Church. We simply have a difference of opinion as to how we should address these questions. Kurt, and others, including members of the staff, want to have the maximum amount of flexibility so if there is a shortfall in income from the dioceses, they can use more of the line of credit to fund the operations of the church and Church Center programs and pay less or no principle. That is understandable - the staff of an organization normally wants this kind of flexibility to do the work they have been given to do.
On the other hand, I believe that we should pay our debt first and make whatever cost reductions are necessary to allow us to do so. That is also understandable - the role of the finance committee is to look at the big picture and the long view.
Another recent thread that has been on the HoB/D list is reflections on the decline in members. I share these concerns. If we project the decline in members and income into the future, it is clear that we can not maintain the size of the operations we currently have. We have lost about 1/3 of our members in the last 50 years - but we have a structure that has stayed pretty much the same. We need to "right-size" our structures and reduce about 1/3 of our costs. That includes General Convention, Committees/Commissions as well as Church Center programs. And it probably also will mean combining dioceses, reducing the number of bishops and committees, on the diocesan and parish levels as well. I believe these are the points Bishop Jefferts Schori was making in her comments to Executive Council.
If we begin to make those structural and organizational changes expeditiously now and focus whatever savings we can generate on our true "mission" of building the church (by which I mean, making disciples for Christ), we can turn this matter around. I keep a copy of Claude Paine's book, "Reclaiming the Great Commission" on my desk to remind me of our mission. (after all, my wife is a priest!)
If we all continue to focus on our dwindling resources, we will simply continue down an unhealthy slope. While the most current manifestations of this have focused on declining membership and finances, it is, at the end, really about vision. The system we are now in is producing what it is designed to produce. I believe we need to challenge what we are doing, change direction and ultimately change the system. That will need the hard work of many, so I hope others will do their part.
I expect these comments will generate resistance - especially from those who now have the most power and resources in the system. I hope they and we all can stop, listen to what God is saying to us and refocus on what our Book of Common Prayer says so well about God's church (i.e., God's people) existing to be the arena by which God restores all people to God and each other in Christ. If we are not about doing that, we have truly lost our way!
Chair of the Finance Committee of Executive Council
ANGLICAN CURMUDGEON has another excellent analysis on Executive Council here called "Cracks at the Top." In his post he writes:
We find out that in approving a reduced budget for 2011, the Council approved the Church taking out a new loan of up to $60,000,000, and securing its note by mortgaging its headquarters at 815 Second Avenue, as well as by pledging unrestricted endowment funds.
The new loan is necessary because the Church has already borrowed $46.1 million, the note for which falls due at the end of this year. Of that amount, nearly $10 million was used to acquire land for a new site for the Episcopal Archives in Austin, Texas, and the balance was used for improvements at 815 Second Avenue -- a good part of which has now been rented out to third-party tenants.
The Church has bought raw land when it does not yet possess the additional money required to construct a building on it, and the raw land itself is not financeable -- that is, since it is non-revenue producing, it cannot be used to secure a loan. Other income-producing assets of the Church must be pledged in its place. The $10 million property will just sit there, incapable of being developed for the time being, because, according to the last resolution adopted by the Executive Council on the subject,A diversity of individual gifts is needed for the next phase of oversight and effective completion of the many tasks that lie ahead for the successful raising of funds; relations with development partners, neighborhood businesses, governmental agencies; finalizing design; and, the selection of appropriate consultants and construction contractors. The number of members is not as critical as the skills available; individual members may possess several of the desired skills.The $37 million spent to refurbish the headquarters on Second Avenue obviously will not finance all of the new borrowing the Church now needs to make as a result of the past decisions made by its leadership. It is left to Mr. Kurt Barnes, the Church's Treasurer, to (a) decide how much he can borrow on behalf of the DFMS (the Church's corporate arm), up to $60 million; and (b) how much of that amount he can finance with a mortgage on the building at 815, and how much additional the DFMS can put up in unrestricted trust funds.
Curmudgeon goes on to review what has happened since Katharine Jefferts Schori assumed the Presiding Bishop's role:
Look at what has happened, due to threats of and resorts to litigation, just in the space of a few years on Jefferts Schori's watch:
- For the first time in its 221-year history, the Church has mortgaged its prime property to help pay for lawsuits;
- Church leadership (and the lack thereof) has caused the DFMS and its treasurer to play fast and loose with the stated purposes for drawing on donor trust funds to finance diocesan litigation;
- The Church has loaned more than a million dollars of its sorely needed funds to groups with no ability to repay such amounts, even if they finally prevail in the pending lawsuits;
- The Church has gone to inordinate lengths to prop up groups as Potemkin dioceses, just so they can serve as plaintiffs in the lawsuits, while having little potential to remain viable on their own;
- General Convention, 815 and the Executive Council are all running in different directions, with no regard for the limits imposed by the Constitution and Canons; and, last but not least,
- The Church is in a deadly, downward spiral of declining membership, declining revenues and greatly increased debt.Prolonged litigation is one of the most toxic forms of stress to which humans can subject themselves. The constant worry of what future decisions by distant and poorly informed judges will bring eats away to the raw nerves, while the outlays required leave no resources for survival in tough times. It is time to remember the words of St. Paul:6:5 I say this to your shame! Is there no one among you wise enough to settle disputes between fellow Christians? 6:6 Instead, does a Christian sue a Christian, and do this before unbelievers? 6:7 The fact that you have lawsuits among yourselves demonstrates that you have already been defeated.
The rest of his post is a must-read - and I might add a prayerful must-read. It is fascinating that it is taking women leaders to confront Bishop Schori (at least publicly) with the exception of Bishop Lawrence of South Carolina. I am not so sure this is as much about gender (though that does seem to be playing a role) as to the tensions between the ordained and the laity. What it does seem reveal however is the real tension between the hired "clergy" and the laity who financially support the whole operation.
MONDAY UPDATE FROM ENS: Here is the report of today's work from the Executive Council meeting - click here. What is rather fascinating is the difference between the ENS report and the official "message" from the Executive Council. It doesn't even sound like the same meetings. It sounds like all sunshine and light reading the Executive Council "message," but here is what ENS is reporting:
During the course of the discussion during the FFM committee sessions on Oct. 24, Episcopal Church Treasurer Kurt Barnes reported that the Mission Funding Office, created by General Convention in 2003 and chartered by Executive Council in February 2005, has received $355,000 in "actual cash through the door." Its initial fund-raising goal was $250 million and has grown to nearly $375 million as other projects were assigned to the office, according to conversations during the committee's sessions. The General Convention-adopted budget for 2010-2012 allocated the office (in lines 185-196 here) $1.5 million in operating expenses.
The approved 2011 budget also includes payments of $1.1 million in interest and $1.2 million in principal towards a $37 million loan used for Church Center renovations authorized by council in 2004 and completed in 2007.
By way of a related resolution proposed by FFM, the council approved borrowing of up to $60 million to refinance $46.1 million in debt that comes due at the end of this year. The $37 million renovation loan makes up the bulk of that amount. In addition, close to $10 million was spent on property in Austin, Texas, as a potential site for relocating the Archives of the Episcopal Church. The resolution said that the borrowing authority is also meant "to provide continuing working capital and liquidity."
"To the extent that we are not paying debt, we are borrowing money to do the ministry of the church," he said.
The resolution calls for mortgaging the Episcopal Church Center in Manhattan and securing the rest of the borrowing with unrestricted endowment assets. The current debt is in the form of a line of credit.
Finances for Ministry initially discussed the borrowing authority during an Oct. 23 session that grew somewhat heated when Barnes objected to Glover having appointed a subcommittee to look into the refinancing possibilities and the borrowing philosophies behind them. Barnes said he was told that the subcommittee was to be a council of advice for him, but said "the council of advice never invited my opinion, so I don't feel it's a council of advice.
He said that the subcommittee's report did not take into account the work that he and Margareth Crosnier de Bellaistre, the church's director of investment management and banking, had been doing for many months to explore refinancing options and solicit proposals from lenders. "It acts as if we've been asleep," Barnes said of the report.
"The way it was approached, my staff and I absolutely felt that our intelligence or ability was always being challenged," Barnes said. "We give 10 hours a day to this church and then we have other people who say, 'but you don't know what you're doing.' That's our problem and if we have misread it, then I am sorry.
Glover said that the finance office staff had misread the subcommittee's intent. He said the group, made up of former members of the Joint Audit Committee of Executive Council and the Domestic and Foreign Missionary Society and those with expertise in the area, was in fact offering advice and contacts, not implementing policy. He said the need for the subcommittee grew out of the audit committee's concern about the level of debt the church has and about the payment coming due at the end of the year.
Read the rest here - it isn't pretty. Bishop Schori points to something wrong in the system but doesn't seem able to take responsibility for her own lack of leadership. Now they are going to mortgage 815. And still we don't know how much is being spent on litigation.
In an interesting development, the Executive Council is suddenly abandoning the embryonic shadow diocese being created in the Diocese of South Carolina. Instead, Jim Simons is going to take Mark Lawrence to lunch and swap stories over old times, metaphorically speaking. "There are canonical limits to how her (the Presiding Bishop) office and the Executive Council can intervene. So much for more lawsuits - fascinating! In fact, Bishop Schori told Jim Simons that "the more bridges we can build, the better."
TUESDAY UPDATE: The Anglican Curmudgeon comments on the development of the The Executive Council punting the request of the embryonic SC shadow diocese to launch an investigation and thus get the ball rolling as Schori has in other dioceses that aren't marching to the NPR Tune. Curmudgeon writes:
do not assume that the complaint by the Episcopal Forum has been "denied" -- the Executive Council has nothing to do with any such complaints. The Presiding Bishop may have decided to refer it to the Title IV Review Committee, or she may have not. If she didn't refer it, it will end there. But if she did -- and look with whom we are dealing -- then all the proceedings will remain under wraps until that Committee decides whether or not to bring a presentment, or to charge Bishop Lawrence with "abandonment of communion."
If it does the latter, then Bishop Jefferts Schori is required by Canon IV.9 to obtain the consent of the three most senior bishops in the Church before she declares him "inhibited" -- but she ignored that requirement twice before, in the cases of Bishops Cox and Duncan. However, Bishop Lawrence will not, I predict, stand idly by and allow the PB to ignore the Canons. We should know by January or February just how far this is going.
Guess Jim+ and +Mark won't just be swapping old stories and singing Dylan tunes after all.
In addition - without comment - the Executive Council "Adopt a revised whistleblower policy for DFMS employees (GAM008)." What's up with that? What is the story here? What exactly is going on? And why release the sunshine and roses "message" that seems to bear no connection to what actually took place at the Executive Council. From that message we are lead to believe they spent most of the time eating and looking at the Utah foliage.
Anglican Curmudgeon digs deep and asks some good questions in his post today. The Executive Council of The Episcopal Church is meeting in Salt Lake City and the Presiding Bishop's remarks were indeed - at best - peculiar. Just exactly who or what is she talking about? Is she indeed talking about the Executive Council itself - it does seem as though she is calling into question the role of The Executive Council. ENS reports:
[The Presiding Bishop] urged the council to claim its "rightful function" to help the whole church focus on the "big-picture, long-distance view, not just bean-counting."But is it not the focus of the Executive Council to provide oversight to the budget and be the governing authority of General Convention between conventions? What is this phrase of "committing suicide by governance" she is throwing in the direction of the very body that is charged with oversight? Is she attempting to distract the Executive Council away from their duties and charge? ENS writes:
"The budget needs to be managed, personnel need to be treated justly; that's not our primary focus, those are vehicles for mission," she said. "We do have the capacity to think bigger and more strategically for life in the future."
ENS also writes:Presiding Bishop Katharine Jefferts Schori challenged the Episcopal Church's Executive Council Oct. 24 to avoid "committing suicide by governance."
Jefferts Schori said that the council and the church face a "life-or-death decision," describing life as "a renewed and continually renewing focus on mission" and death as "an appeal to old ways and to internal focus" which devotes ever-greater resources to the institution and its internal conflicts.
"However, I think we're in some danger of committing suicide by governance by focusing internally rather than externally," she said. "Dying organisms pay most attention to survival. Our Haiti initiative is a positive counter-force to that. It's an example of what's possible when we turn outward rather than inward."But isn't that the responsibility of the Executive Council - to provide oversight to the internal workings of the church? What is happening inward - especially with the call of major cuts in the budget, so much so that the budget cuts of General Convention 2009 (which were saved for last and were intensely painful to the staff) are not enough and more cuts will be done. There is a call to raise money for Haiti (how does $10 million sound?) as if to be a diversion to what appears to be serious issues in the internal governing of The Episcopal Church.
And who is raising concerns that would cause such language as "committing suicide by governance?"
Jefferts Schori said, there is what she called "a sometimes rather adversarial attitude" in the council that is the result of "confusion about roles."
"Sometimes committees try to do the work of staff," she said. "Council sometimes forgets that its job is about policy-making and accountability, and we live with the challenge of having 40 people challenged to make decisions together. There's a reason why Jesus called 12 disciples, it's a manageable group for conversation."One did not know that governing councils need to be small enough so that they can be managed. Managed by whom?
The Audit committee also met in executive session and discussed the retention of a law firm to deal with issues raised by the audit. A report should be made at this council now underway. But what are the results of the audit? And what issues are so severe that that a law firm (and its costs) is being retained?
ENS reports that the Executive Council:
met in executive session to receive an audit committee report. At their June 16-18 meeting, the council also met in executive session and later approved a request (via Resolution FFM022) from the Joint Audit Committee of Executive Council and the Domestic and Foreign Missionary Society to retention McDermott Will & Emery as outside legal counsel to assist in the evaluation of employment and personnel practices and provide an update to council at this meeting.What issues would warrant the retention of yet another law firm?
And speaking of legal costs - why do we still not have an official accounting of all the costs associated with pursuing a litigation strategy against dissent, as opposed to allowing individual dioceses to pursue less expensive and less draconian methods of negotiation? Anglican Curmudgeon estimates that the legal costs are $21.65 million so far - enough to take care of Haiti two times over with some cash to spare.
Read more of Curmudgeon's analysis here. As we also attempted to decipher the Presiding Bishop's remarks, it does seem clear that that she is questioning some kind of internal dissent within Executive Council (and not just of course within the ranks of what are now the Anglican Church in North America dioceses and parishes), but within the Executive Council. Is she looking for a more "manageable" group of people (say, like the so-called Standing Committee of the Anglican Communion which has also lost substantial members for it's attempts at "managing conversation")? What of a public accountability to the litigation costs - one does wonder whether these questions are finally being raised within Executive Council itself as they face cutting the budget even more than was done at General Convention? What of the Presiding Bishop's remarks about "bean counting," when such oversight is the distinct responsibility of Executive Council? Who will count the beans if they don't?
It is not wise to rock a boat when it's name may be the Titanic.
Does this not seem like a strategic game (euphemistically called "mission") where outwardly a manageable group projects to the outside world that all is well and no one is afraid? Does this sound familiar? What if internal questions are indeed being raised and individuals serving on the Executive Council do admit to serious concern that the current trajectory of this particular denomination is in a spiral downwards? Why the silence on the mounting litigation costs?
Is there not a concern that one will be shown the door one way or the other if such questions are raised - and hence the odd remarks from the Presiding Bishop - (that they are unmanageable, that they are committing "governance suicide") and in doing so will they not too as be shown - one way or the other - the door as one particular journalist was this past week at NPR?
Read the Anglican Curmudgeon here and the ENS report here and here.