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UM Global Agencies Amass $100's of Millions in Excess Funds

(dollar figures extracted from the 1996 United Methodist Treasurer's Report)

The 1996 United Methodist Treasurer's Report contains certain items which are most significant, especially in light of the continuous demands made upon the local church to pay 100% of its apportionments. The need for the apportionments to be paid 100% was in order that the General Church might supply more missionaries, feed more starving children and reach more persons with the message of Jesus Christ. In exercising responsible stewardship within their local churches, pastors and lay people have the right to expect the church boards, agencies and educational institutions which are the beneficiaries of our giving to likewise exercise responsible stewardship. Thus you might find reason to be dismayed with the items mentioned below, which are extracted from the 1996 United Methodist Treasurer's Report.

Currently, GCFA has an approved policy that agencies retain a minimum of 25% of annual operating budget in reserve. Current levels of reserves (net assets) held by many agencies are excessive to the point of embarrassment to the General Church. The high levels of such reserves and the positive assets revealed by current audits of the General Church's financial statements have caused one auditor to remark that if The United Methodist Church were a corporation, "we would declare a dividend."

High levels of net assets raise serious questions about the stewardship practices of United Methodist general agencies. Stewardship entails more than the safeguarding of net assets. It also concerns the best use of such assets. Jesus' parable of the rich man who stored up riches in new barns (Luke 12) comes to mind. It is natural to question whether the accumulation of excessive net assets does not come at the expense of current investment in the mission of the Church. Unless the maintenance of high net asset levels compared to annual revenues are pursuant to explicit future needs, many within the Church will conclude that the wealth of the agencies is the goal.

It is difficult to support good faith appeals to local churches to pay World Service and other apportionments when the agencies are perceived to be more wealthy than the churches. Furthermore, it is misleading to promote apportionment giving as missional when substantial amounts of revenue are being retained in marketable securities, employee loans, and other investments at the agencies. It is also detrimental to donor morale when apportionment revenue becomes a minor funding source for an agency. When investment gain and income exceeds apportionment revenue, donors may feel that their giving is immaterial.

If the accumulation of net assets by general agencies allows for investment gains and other non-apportionment income streams to fund the majority of the agency's operations, the agency's financial reliance on connectional accountability is diminished. Unless the General Conference intends to create self-funded endowments for the general agencies, the desirability of such endowment is in question.

Among the findings uncovered in a recent independent analysis of the 1996 Treaurer's Report:

  1. The World Division of the General Board of Global Ministries is the largest of the pre-1997 divisions making up the GBGM. Its total net assets as of 12/31/96 were $170,648,809. This is 3.3 times its annual $52 million revenue. Excluding the permanent reserve of $60, 328,349, the total of unrestricted and temporary reserves are $110, 320,460. There are some non-liquid type items in the reserve balance ($374,019 in fixed assets, $37.2 million in the Collins Forest and $13 million in accrued post retirement benefits), yet the liquid reserves are close to $100 million. This level of net assets represents an increase of $21,272,306 (14.2%) over the prior year, an increase of $96,742,517 (131%) over the past four years. The World Division holds $132,279,906 in cash and marketable securities alone as of 12/31/96, over 31 times the annual World Service Fund income.

    Perhaps the single most conclusive evidence that the net asset balance is excessive is that of total revenue in 1996 of $51,979,213, only $4.3 million comes from the World Service apportionment while close to $25 million comes from investment income and gain on investments. The World Division comes close to being self-funded. Its net assets based on 1996 levels represent 40 years worth of World Service Fund income.

  2. The National Division of the General Board of Global Ministries had total net assets of $41,447,922 as of 12/31/96, $22 million of which is in non-permanent reserves. Cash and marketable securities of $28,421,558 produced investment income and gain of $4,199,521, almost the same amount as the $4,254,659 received from the World Service Fund. Total net assets as of 12/31/96 represent over 9.7 years of apportionment income.

  3. The total of net assets for the largest divisions of the General Board of Global Ministries (World, National, Women's, and MPS) as of 12/31/96 are $335,102,291. The net assets of these divisions have increased 61% in the past four years. $93,620,694 of all this total is permanent reserve, leaving $241,481,597 in unrestricted and temporarily restricted net assets. $30,767,890 is received by these divisions from the World Service Fund and Women's Division allocations. The total non-permanent reserves represent 7.8 years worth of apportionment/allocation income. If net assets for these four divisions has to fund its apportionments and allocations, it could do so for over 11 years exclusive of any earnings on its investments.

  4. The General Board of Church and Society had net assets as of 12/31/96 of $15,622,476. The GBCS's total reserve represents 5.8 years of World Service Fund allocation at current levels. The net assets total has increased 42% over the past four years. The cash and investments of $12,400,027 produce $1,935,412 in rental and investment income while the World Service apportionment income is $2,702,701. Thus, the reserve balances are functioning as an endowment for the Board.

  5. The General Board of Higher Education and Ministry had net assets as of 12/31/96 of $75,807,672. of which $74,543,718 were not permanently restricted. This is an increase of $8,032,630 (11.9%) over the prior year. Total revenues are $30,382,329 of which $21,298, 639 is from the World Service and Ministerial Education Funds. The GBHEM could continue at current levels for 3.6 years without these two apportioned income items. Evidence of excessive reserves is indicated in that the GBHEM has designated $31,547,806 of its reserves "for loans and scholarships," yet only has $8,510,539 in student loans outstanding and spends $2.8 million on program services for the Office of Loans and Scholarships. There seems no logical connection between the designated reserve and the actual level of loans and scholarships. This appears to indicate that the Board sees these designated reserves as an endowment.

  6. The General Commission on Archives and History is a smaller agency which nonetheless has accumulated over one year's worth of net assets. Total net assets are $818,602. Over the past four years, the net assets have increased by 41%.

  7. The General Board of Discipleship is the one agency included in the comparison which has less than one year's revenue in net assets (it has 93% of annual revenues in net assets). It is included for comparative purposes. Note that GBOD's investment income and gain is less than 3% of its annual revenue and is only 13% of apportionment revenue. However, even GBOD has experienced a 35% increase in net revenues over the past four years. At that rate, it is accumulating net assets in excess of revenue growth.

As you can imagine, these figures are most upsetting. Remember, however, that they are extracted from the 1996 Report of the Treasurer, an official publication of The United Methodist Church. Therefore, the facts and figures quoted above are correct. Persons not familiar with discernment of complicated financial reports could not derive the information quoted above from the normal cursory glance most of us give to such reports. Because the Treasurer's report is so complicated this information does not filter down to the local church. However, with the release of these very simple statements which un-complicate the treasurer's report, the local church will become informed.

Official GCFA Report of Excess Funds

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