Quarterly reportback on Diocesan Finances - Saturday 23rd April 2016 AGENDA 1.Welcome and apologies from the Bishop and Dean who are attending the Consecration service for the Bishop of Zululand, and David Butcher who is abroad. 2.Welcome and introduction of Diocesan staff 3.Update on developments since 28 th November 2015 meeting:Peter Goldhawk a)Departure of Rodney Taylor, return of David Butcher in a temporary capacity b)Tax challenge from SARS for 2005 to 2014 c)Audits completed for 2011 and Taxation update – to 2013 thus farSidney Place 5.Financial results for Q1 2016Sidney Place 6.Contributions notified for 2016 thus farSidney Place

Quarterly reportback on Diocesan Finances - Saturday 23rd April 2016 AGENDA - continued 6.Reportback on audits of Diocesan accountsPeter Goldhawk 7.Independent verifiersPeter Goldhawk a)Appointments and roles b)Report back on meeting with verifiers 8.My Anglican online accounting software Peter Goldhawk 9.General 10.Closure and grace

Quarterly reportback on Diocesan Finances - Saturday 23rd April 2016 AGENDA 1.Welcome and apologies from the Bishop and Dean who are attending the Consecration service for the Bishop of Zululand, and David Butcher who is abroad. 2.Welcome and introduction of Diocesan staff 3.Update on developments since 28 th November 2015 meeting a)Departure of Rodney Taylor, return of David Butcher in a temporary capacity b)Tax challenge from SARS for 2005 to 2014 c)Audits completed for 2011 and Taxation update – to 2013 thus farSidney Place 5.Financial results for Q1 2016Sidney Place 6.Contributions notified for 2016 thus farSidney Place

Update on developments since meeting on November Rodney Taylor left on 15 th January 2016 Extraordinary meeting of DFB with Bishop Steve 26 th January: Confirmed appointment of David Butcher as Interim Administrator Agreed to outline of programme to get on top of administrative matters Commenced discussion about job requirements of Diocesan Secretary New Diocesan Secretary to be recruited later in the year 2. Letter received from SARS on 10 th February 2016 giving us 21 days to respond re: Amending the constitution of the church Submitting income tax returns for 2005, 2006, 2013 and 2014 Payment of R4.8 million of tax assessed for 2009 – 2012 … failing which tax exemption would be withdrawn – would impact: Donations tax exemption (parishioners could be taxed on their contributions) Bequests in favour of the church not deductible for Estate Duty Skills Development Levy payable for church staff

Update on developments since meeting on November 2015 contd. 1. Rodney Taylor left on 15 th January Letter from SARS on 10 th February Audits 2011 onwards: Peter Goldhawk continued to work on getting the arrear audits completed: 2011 was completed by KPMG 2012 has been signed off by ECOVIS ARB 2013 close to being completed Major problems encountered with financial records post Rodney’s departure have required many hours of work to enable audits to proceed. The first quarter has been extremely challenging but solid progress has been made albeit at the cost of not getting on top of all the issues that were originally on the “to do” list. They will happen – but slightly later than originally envisaged.

Quarterly reportback on Diocesan Finances - Saturday 23rd April 2016 AGENDA 1.Welcome and apologies from the Bishop and Dean who are attending the Consecration service for the Bishop of Zululand, and David Butcher who is abroad. 2.Welcome and introduction of Diocesan staff 3.Update on developments since 28 th November 2015 meeting a)Departure of Rodney Taylor, return of David Butcher in a temporary capacity b)Tax challenge from SARS for 2005 to 2014 c)Audits completed for 2011 and Taxation update Sidney Place 5.Financial results for Q1 2016Sidney Place 6.Contributions notified for 2016 thus farSidney Place

Update on Taxation Assistance from Deloitte on how to proceed was sought and received SARS letter of 10 th February was responded to within the deadline. We have been exempted from submitting a tax return for 2005 and 2006 SARS have agreed to constitutional amendment being processed at Provincial Synod We have lodged a formal objection to the SARS assessments for 2009 – 2012 We have paid the tax and interest that we believe is due for 2009 – 2012 (R2.2 million) SARS have agreed to 2013 tax return being submitted by 29 th April 2016 – on target SARS have agreed to 2014 tax return being submitted by 30 th May Income tax return for 2015 will be completed on time in second half of this year. We are getting on top of tax issues thanks to Billy Joubert, Santha Moodley and Tammy Arendse at Deloitte, Terry Chamberlain (especially!) and David Butcher in the Diocesan Office, and Peter Goldhawk. Once SARS has issued revised assessments, tax payable will be recovered from parishes that had commercial income.

Example of PBO tax Parish income Parish A Collections Dedicated Giving Donations Rent from church hall1 000 Hall expenses -200 Net income from hall 800 TOTAL INCOME (pre-tax) % of total income300 Calculation of tax Net profit from hall800 Less 5% of total income-300 Taxable amount500 Tax due at 28% of the taxable amount 140

Example of PBO tax in the Diocese Parish income Parish AParish B Total for Diocese Collections Dedicated Giving Donations Rent from church hall1 000 Hall expenses -200 Net income from hall 800nil800 TOTAL INCOME (pre-tax) % of total income Calculation of tax Net profit from hall800 Less 5% of total income Taxable amount Tax due at 28% of the taxable amount

Example of PBO tax in the Diocese – contd. What tax does Parish A pay? By belonging to the Diocese, there is a saving on the tax that has to be paid by parishes that have trading profits as part of their income. That saving gets split 50/50 with the Diocese in exchange for the massive amount of work involved in producing a consolidated set of financial statements and a consolidated tax return. This revenue will go towards paying of the debt of the DFB. Stand-alone tax R140 Less Diocesan level taxR 42 Tax saving (half shared with Diocese) R 98 (half of which is R49) Parish A pays “Diocesan level” taxR42 plus Half the tax saving, thanks to DioceseR49 TOTAL TAX PAYABLE by Parish AR91 Parish pays only R91, not the R140 that would have been due if it were a stand-alone entity. The Diocese will advise parishes of amounts of tax due by them – never more than if they had been operating as individual PBO’s, and usually substantially less.

Quarterly reportback on Diocesan Finances - Saturday 23rd April 2016 AGENDA 1.Welcome and apologies from the Bishop and Dean who are attending the Consecration service for the Bishop of Zululand, and David Butcher who is abroad. 2.Welcome and introduction of Diocesan staff 3.Update on developments since 28 th November 2015 meeting a)Departure of Rodney Taylor, return of David Butcher in a temporary capacity b)Tax challenge from SARS for 2005 to 2014 c)Audits completed for 2011 and Taxation update – to 2013 thus farSidney Place 5.Financial results for Q1 2016Sidney Place 6.Contributions notified for 2016 thus farSidney Place

How did DFB fare in 2015? Preliminary figures from David Butcher show a bottom line that is R1.3 million worse than forecast in November (deficit R22,000) 2015 R Parish Contributions6,813,479 Additional contributions of R1,000 per month736,357 Cash management and fees 476,358 Other income 1,125,695 Total income 9,151,889 Total Bishop 1,392,998 Diocesan Administration 2, Diocesan Ministry 1,501,111 Post retirement medical and pension augmentation 1,861,097 Training clergy 1,195,566 ACSA - Common Provincial Fund 1,702,371 Total Outreach costs 99,296 Provision for Taxation 84,100 Total expenses 10,416,545 Net deficit in ,264,657 Income R400k lower – can’t find credit for interest suspension on DFB debt Diocesan ministry costs R367,000 higher (Legal R100k, Audit R80k, Interest R137k, Stipend subsidies R92k) Retired Clergy R294,000 higher Training costs R106k higher Figures are not reliable – await completion of audits for a definitive position

Results for 3 months to 31 March 2016 Income ahead of budget thanks to trading income and parishes without clergy Actual Budget Variance INCOME Parish Contributions Organisations Contributions Income Cash Management Administration Fee Deposit Fund Interest on DFB debt suspended Profit On Sales Additional Contributions Sub Total Recovery from Parishes without clergy Payroll Levy Rental Received Total Income

Results for 3 months to 31 March 2016 contd. Spending over budget: mainly interest and training subsidies ActualBudgetVariance TOTAL INCOME (from prev. slide) EXPENSES Total Bishop Diocesan Administration Diocesan Ministry Retirees' medical aid & pension Training clergy ACSA - Common Provincial Fund Outreach Interest paid Provision for Taxation TOTAL EXPENSES Net Surplus Mainly insurance Subsidies of clergy in training in parishes

Results for 3 months to 31 March 2016 In Summary: Income R84,000 ahead of budget due to additional commercial income and vacant parishes levies more than expected, offset by parish contributions R150,000 under budget Expenses R128,000 over budget due to insurance premiums, subsidies of stipends paid to clergy in training at parishes, interest on debt – offset by lower post-retirement costs. Surplus for quarter of R94,000 is R44,000 under budget Warnings: No account has been taken of parishes running at a loss that may default on their debt. Dealing with this issue is a work in progress. Accuracy of budgeting seems poor – may need to re-forecast in June

Quarterly reportback on Diocesan Finances - Saturday 23rd April 2016 AGENDA 1.Welcome and apologies from the Bishop and Dean who are attending the Consecration service for the Bishop of Zululand, and David Butcher who is abroad. 2.Welcome and introduction of Diocesan staff 3.Update on developments since 28 th November 2015 meeting a)Departure of Rodney Taylor, return of David Butcher in a temporary capacity b)Tax challenge from SARS for 2005 to 2014 c)Audits completed for 2011 and Taxation update – to 2013 thus farSidney Place 5.Financial results for Q1 2016Sidney Place 6.Contributions notified for 2016 thus farSidney Place

Parish Contributions for 2016 The meeting on 28 th November 2015 between Rectors, Churchwardens and Treasurers agreed that all parishes should commit in writing by mid-January 2016 their contributions based on the following: - Parishes that gave less than 10% of their income in 2015: 10% of income - Parishes that gave more than 10% of their income in 2015: same percentage in 2016 as in 2015 By 11 February, only 8 parishes had responded. By 20 th April, 47 parishes had responded; 25 had not.

Contributions for 2016 as at 20 th April 25 Parishes that have not responded (72 parishes on the list) RegionParishRegionParish 1RABIE RIDGE7DIEPKLOOF St James 2KAGISO St Bartholomew7ORLANDO ST JOHN 2KAGISO St Thomas7ORLANDO ST MARY 2KRUGERSDORP8DOBSONVILLE 2MUNSIEVILLE8JABAVU 3DOORNKOP8PIMVILLE 5BEKKERSDAL9ALEXANDRA 5EMDENI9EAST BANK 5PROTEA SOUTH9FERREIRASTOWN 5SENOANE9HILLBROW 5SIMUNYE9YEOVILLE 5TLADI10BRIXTON 10NEWCLARE These parishes contributed R last year – but some did so by borrowing from the DFB so the figure is not all true giving and needs to be discounted.

Contributions for 2016 as at 20 th April Offers in order of decreasing size IndividualCumulative ParishAnnual (R)% of total 1ORCHARDS % 2BRYANSTON %27.9% 3SUNNINGHILL %37.2% 4ROSEBANK %45.2% 5PARKTOWN %52.2% 6CATHEDRAL %58.4% 7PARKVIEW %63.7% 8LINDEN %67.9% 9RANDBURG %70.4% 10MEADOWLANDS %72.8% 11BEDFORDVIEW %75.2% 12WELTEVREDEN PARK %77.5% 13FLORIDA %79.6% 14HALFWAY HOUSE %81.7% 15ORLANDO HOLY CROSS %83.4% % Half the income from 5 parishes

Contributions for 2016 as at 20 th April Offers in order of decreasing size - page 2 IndividualCumulative ParishAnnual (R)% of total Carried down % 16NORTH RIDING %84.9% 17CORONATIONVILLE %86.3% 18FOURWAYS GARDENS %87.6% 19PARKHURST %88.6% 20ORANGE GROVE %89.6% 21HOUGHTON %90.5% 22BOSMONT %91.3% 23MZIMHLOPHE %92.0% 24SOPHIATOWN %92.7% 25AUCKLAND PARK %93.4% 26MALVERN %94.1% 27BRAMLEY %94.7% 28RANGEVIEW %95.2% 29MOROKA %95.8% 30WESTONARIA %96.2% %

Contributions for 2016 as at 20 th April – page 3 IndividualCumulative ParishAnnual (R)% of total Carried down % 31RANDFONTEIN-St.John %96.7% 32DIEPKLOOF St Stephens %97.1% 33MAYFAIR %97.4% 34JEPPE %97.8% 35DISCOVERY %98.1% 36KHUTSONG %98.4% 37ROODEPOORT %98.6% 38MOHLAKENG %98.8% 39TOEKOMSRUS %99.0% 40CARLETONVILLE %99.2% 41FOCHVILLE %99.4% 42WEDELA %99.6% 43BEZVALLEY %99.8% 44NOORDGESIG %100.0% 45PHAKAMANI %100.0% 46KENSINGTON nil 47PROTEA Glen nil Total contributions notified by 20 April %

Contributions fall short by R800,000 Budgeted contributions R Contributions offered (as at 20th April) R Budget shortfall R Non-responsive parishes - estimate R Estimate by S Place of contributions shortfall R As of 23 rd April, DFB has not had sight of these figures. Estimates by S Place are unofficial R511,000 in 2015, but many borrowed the money

Why is there a budget shortfall? Parishes that have offered a meaningful increaseIncrease over 2015 MZIMHLOPHE149% NORTH RIDING124% SOPHIATOWN108% WESTONARIA108% ORLANDO HOLY CROSS90% DIEPKLOOF St Stephens87% WEDELA87% NOORDGESIG80% KHUTSONG40% FLORIDA37% BEZVALLEY33% BOSMONT30% RANDFONTEIN - St. John25% AUCKLAND PARK19% MALVERN17% It seems that most parishes have disregarded the 28 th November decision to contribute 10% of their income. Only 15 parishes have increased materially:

27 non-compliant parishes impede planning Region Parish 2016 Contributions 2015 Financials 2016 Budget 2015 Communicants 9 ALEXANDRA No Yes 5 BEKKERSDAL NoYes 10 BRIXTON NoYes 2 COSMO City No Yes 7 DIEPKLOOF St James No Yes 8 DOBSONVILLE NoYes 3 DOORNKOP No 9 EAST BANK NoYesNoYes 5 EMDENI No Yes 9 FERREIRASTOWN NoYes 9 HILLBROW NoYes No 8 JABAVU NoYes 2 KAGISO St Bartholomew NoYes 2 KAGISO St Thomas NoYes No 2 KRUGERSDORP NoYesNo 2 MUNSIEVILLE No Yes 10 NEWCLARE NoYes 7 ORLANDO ST JOHN NoYes 7 ORLANDO ST MARY NoYes No 8 PIMVILLE NoYes 5 PROTEA SOUTH No 1 RABIE RIDGE NoYes No 5 SENOANE NoYesNo 5 SIMUNYE NoYesNoYes 5 TLADI No 1 WEDELA Yes No 9 YEOVILLE NoYes

Where to from here with the budget (especially given the looming shortfall) 1.Once the arrear tax and audit issues are out of the way, the budgeted expenditure needs to be examined and a revised forecast made for The 25 laggards need to submit their offers – Archdeacons to assist Diocesan Office to get the figures urgently 3.Parishes that have still not submitted 2015 financial statements and 2016 budgets must be chased up. These were due by 22 nd March 2016 (a week after the latest permitted date for Annual Vestry Meetings) 4.Diocesan office needs to produce a schedule of contributions as a percentage of each parish’s income. Those under 10% should explain why. 5.Parishes not giving generously enough relative to their income will be recommended for attention in terms of Schedule L

Schedule L: Parish Contributions The contributions shall be divided into two types: (a)A parish contribution, which shall represent the amount needed to meet the stipends, the Diocesan portion of the pension contributions and such allowances as Synod may approve, of the clergy of that parish. Such contribution shall be paid by debit order on the 15th of each month and each parish shall ensure that sufficient funds are available to meet the debit order. (b)A parish contribution to the diocese, which shall be an amount volunteered by the parish to contribute to the estimated expenditure of the Diocese for the following year, other than as set out in paragraph (a) above. If the [Diocesan Finance] Board is not satisfied that the contribution volunteered by the parish represents a fair proportion of the income of that parish, it shall delegate representatives of the Board to meet with the Churchwardens and Parish Council of that parish to discuss the matter, and attempt to agree a contribution to the satisfaction of both parties. In the event of failure to reach agreement, the matter shall be referred to the Bishop whose decision shall be final, and subject neither to appeal nor review.

In conclusion First quarter hampered by SARS challenge and departure of the previous Diocesan Secretary. Nevertheless, tax returns 2005 – 2014 should be resolved by end of May Operations produced a modest surplus in first quarter, but less than budgeted for. Compliance by parishes with regard to giving 10% of their income, and submitting 2015 financial statements and 2016 budgets has been very disappointing. Parish contributions look set to fall R800,000 short of budget unless there is an intervention by DFB and Bishop. Good progress with arrear audits – details from Peter Goldhawk will follow now.

Quarterly reportback on Diocesan Finances - Saturday 23rd April 2016 AGENDA - continued 6.Reportback on audits of Diocesan accountsPeter Goldhawk 7.Independent verifiersPeter Goldhawk a)Appointments and roles b)Report back on meeting with verifiers 8.My Anglican online accounting software Peter Goldhawk 9.General 10.Closure and grace

27 non-compliant parishes impede planning Region Parish 2016 Contributions 2015 Financials 2016 Budget 2015 Communicants 9 ALEXANDRA No Yes 5 BEKKERSDAL NoYes 10 BRIXTON NoYes 2 COSMO City No Yes 7 DIEPKLOOF St James No Yes 8 DOBSONVILLE NoYes 3 DOORNKOP No 9 EAST BANK NoYesNoYes 5 EMDENI No Yes 9 FERREIRASTOWN NoYes 9 HILLBROW NoYes No 8 JABAVU NoYes 2 KAGISO St Bartholomew NoYes 2 KAGISO St Thomas NoYes No 2 KRUGERSDORP NoYesNo 2 MUNSIEVILLE No Yes 10 NEWCLARE NoYes 7 ORLANDO ST JOHN NoYes 7 ORLANDO ST MARY NoYes No 8 PIMVILLE NoYes 5 PROTEA SOUTH No 1 RABIE RIDGE NoYes No 5 SENOANE NoYesNo 5 SIMUNYE NoYesNoYes 5 TLADI No 1 WEDELA Yes No 9 YEOVILLE NoYes

FINANCIAL RESPONSIBILITIES OF WARDENS AND TREASURERS MEETING OF WARDENS AND TREASURERS – 23 APRIL 2016

Wardens – Extracts from Parish Governance Rules C1 – “officers of the Bishop and representatives of the congregation. As such they hold prime responsibility for the good governance of the Parish and are required to report on their stewardship in their report to Vestry” C2 – “The Annual Vestry cannot be held until the Annual Financial Statements for the preceding year have been completed and either professionally audited or verified by an independent verifier approved by the diocese” C9 – “In terms of Canon 29, Churchwardens … are responsible for the preparation of annual estimates of revenue and expenditure (budgets) and for the execution of Council’s policy on finance”

Wardens – Extracts from Parish Governance Rules C5 – “the Churchwardens, assisted by the Parish Council, are responsible for proper books of account to be kept for the Parish, which account for all income and expenditure and all assets and liabilities” C5 – “Before the Churchwardens can jointly vacate their office at the Annual Vestry Meeting of the Parish, they shall present audited or independently verified Annual Financial Statements to the meeting for adoption, having previously been approved by Council and signed by the Churchwardens”

Wardens – Extracts from Parish Governance Rules C2 – Vestry meeting responsibilities Presentation by Churchwardens of audited or verified annual accounts. Note: Accounts must be accepted by Vestry before moving on the next item of business. Report by Churchwardens on condition of Church property, …. Note: In addition, the churchwardens report shall include how they have fulfilled their duties in respect of the following:-  The provision and adequacy of computer, fax, internet, photocopying,and telephone services for the parish;  Adjustment of insurance cover for to ensure adequate cover for parish property;  An annual review of the Memorandum of Understanding between parish clergy and parish council;  Confirmation that proper records and inventories as required by the Canons and Rules of the Diocese have been kept.

Treasurers’ responsibilities The main responsibility of the Treasurer is to assist the Churchwardens in the exercise of their responsibilities. On a regular basis, the Treasurer must ensure:  All cash received is properly accounted for and banked on a timeous basis  Monthly accounts are prepared and submitted to the monthly Council meeting for consideration. The Treasurer should also ensure that the members of Council understand what is in the accounts so that they can make reasoned judgments

Treasurers’ responsibilities On an annual basis:  The Treasurer must prepare and present to Council a proposed budget for the forthcoming year which, after approval by Council, must be presented to Vestry for approval.  The Treasurer must prepare the annual accounts and present them to the auditor or independent verifier for examination and certification. Once completed, they must be approved by the Council for presentation to the Vestry meeting for approval.

Quarterly reportback on Diocesan Finances Saturday 23rd April 2016 AGENDA - continued 6.Reportback on audits of Diocesan accounts 7.Independent verifiers a)Appointments and roles b)Report back on meeting with verifiers 8.My Anglican online accounting software 9.General 10.Closure and grace

The end