TREASURERS’ CONFERENCE AUTUMN 2018 supporting the mission and ministry of the Diocese of Rochester www.rochester.anglican.org

Budget 2019

WHERE OUR MONEY CAME FROM

WHERE THE MONEY IS SPENT

The Context New Finance Strategy, agreed by March ‘18 Synod Increasing costs of compliance Parish Offers not increasing in absolute terms over last 5 years Plan to break-even ‘within three years’ Key assumptions re. clergy numbers and Parish Offers ‘Indicative Offers’ – now in a period of consultation

Budget ‘19/Forecast ‘18 £M Budget 2019 Forecast 2018 Total expenditure 12.86 12.64 Transfer from DPA (re parsonage repairs) --- (0.25) Estimated capitalisation of property costs Additional reductions in costs (0.20) Pension costs provided (0.77) Diocesan Expenditure 11.64 11.37 Parish Offers 9.45 9.22* Other income 1.50 1.55 Transfers 0.09 Diocesan Income 11.04 10.77 Budget Deficit £0.60M * Budgeted £9.74M (i.e. £0.52M variance)

Budgeted SOFA ‘19 Surpluses due to realised returns on property £M SOFA 2019B SOFA 2018F Unrestricted General Fund (0.60) Other Funds (1.13) 0.30 Realised Property Gains 4.61 5.36 Surplus 2.88 5.06

Budgeted Cashflow ‘19 Improving cash-flow due to surplus sales of property £M Cashflow 2019B Cashflow 2018F Cash b/f 9.81 6.71 Operating Surplus/(Deficit) (0.60) Pension Deficit Funding (0.77) Interest on Pension Deficit 0.09 Net Projects Inflow/(outflow) (0.85) (0.92) Major Property Proceeds 11.59 7.96 Major Property Additions (4.08) (2.66) Closing Cash 15.19 Impact on return of cash movement 0.03 --- Cash C/f 15.22

5 Year Financial Projections Breakeven achieved in 2021 £M 2019B 2020P 2021P 2022P 2023P Surplus/(Deficit) on Unrestricted General Fund (0.58) (0.49) ---- 0.10 0.25

Indicative Offers

SUPPORT COSTS FOR A PARISH (2019 Values) Cost of a Full-time Incumbent £41.0K Diocesan Parish Support Costs per Benefice £9.6K £50.6K Average contribution required to cover costs of Future Ministry, Wider Diocesan Mission and National CofE £13.3K Net average contribution required to support parishes unable to cover fully the cost of a Full-time Incumbent and Diocesan Parish Support Costs £7.1K Average contribution required from parishes £71.0k

CHALLENGES WE FACE! Understanding and operation of the Parish Pledge system Local support for the mission of the church Increasing awareness of the wider context Diocesan support structures Supporting Parishes in Mission Planning and Stewardship

PROPOSAL FOR INDICATIVE OFFERS Indicative Offers for each Deanery and Parish Formula: Cost of ministry provision (£41K for a full-time incumbent) plus £9.6K per benefice for Diocesan Parish Support Costs plus 50% of Residual Net Income System of appropriate follow up and support Establishing a ‘Common Fund’ Common Fund … recognising we all share in the responsibilities to fund mission and ministry across the Diocese

Indicative Offer calculation diagram

Calculation Example - 1 St. Mary’s on its 2017 Parish Return has an income of £110,000 and expenditure of £35,000. It has a full-time incumbent. It is a one parish benefice. Net Income in 2017 would be £75,000 (i.e. £110,000 less £35,000). This is then inflated by 2.5% for 2 years, i.e. making it £78,797 for 2019. Its Indicative Offer for 2019 would be £64,699; i.e. (£41,000 + 9,600 = £50,600) + £14,099 (50% * (£78,797 - £50,600 = £28,197)).

Calculation Example - 2 St. Stephen’s on its 2017 Parish Return has an income of £70,000 and expenditure of £35,000. It has a full-time incumbent. It is a one parish benefice. Net Income in 2017 would be £35,000 (i.e. £70,000 less £35,000). This is then inflated by 2.5% for 2 years, i.e. making it £36,772 for 2019. The parish is invited to aspire to pledge at least £50,600. The first calculation of Indicative Offer however be would set at £36,772.

Calculation Example – 2 cont’d But should income the following year be increased by £10,000 and expenditure remain the same, then all things being equal (i.e. without applying inflation) the Indicative Offer would be increased by £5,000 to £41,772. Each extra pound of net income, the parish retains 50% (i.e. 50p in the pound) and increases their offer the following year by 50p in the pound.

FAQs How does the calculation exactly work? Why is capital expenditure excluded? Why are donations to Mission and Charities excluded? What about income for Preschool and Playgroups? What is the distinction between restricted and designated funds? What is the process for 2019 offers? What if we question our own PCCs calculation? Why are we being asked to maintain our offer if our Indicative Offer is lower?

Timetable Consultation Process 23 June 18 Diocesan Synod 5 Sept 18 Deanery/Parish Consultation W/c 10 Sept 18 Deanery/Parish Indicative Offers Published 2 Nov 18 Close of consultation 2 Mar 2019 Diocesan Synod for Approval

Technical Update

Funds General Fund (unrestricted) Designated Funds (unrestricted) Restricted Funds Endowment Funds Permanent Expendable Funds are the way in which Charity Law requires Charities to track money given by donors or from other sources. This is so that people can be confident that the money they give is not misused or wasted but used properly. Encourage giving 4 types of fund When income is received or money spent the fund must be clearly specified. Restricted and endowment funds must be shown separately in the annual accounts.

General Fund Money given for normal every day church activities Donor does not specify what if should be used for Can be used for purposes agreed by the PCC Examples Collections at services General donations Gift days for general work of parish Most of the money received by the PCC will fall under this category. Funds are unrestricted in that they can be used for any purpose to further ministry and mission as agreed by the PCC. Any income generated on assets in the unrestricted general fund will be unrestricted income.

Designated Funds Allocated for a particular purpose by the PCC Can only be used for that purpose But can be moved to other general funds if the PCC so decides Examples Church Repair Funds (CRF) held by Diocese. Church Hall Fund Organ Fund Money given to the General Fund but PCC decides to allocate funds for a particular purpose in the future. Still unrestricted so can be moved to other general funds and can either be re-designated or undesignated as the PCC decides.

Restricted Funds Funds given to the PCC for a specific purpose. Can only be used for that purpose. Income generated will also be restricted to that purpose unless the donor has specified otherwise. Examples Collection for a particular purpose. Fundraising event. Legacy with a specified purpose. Restricted by the donor for a particular purpose and cannot be changed unless consent to variation of purpose has been given by the donor. If an appeal for a particular purpose any funds raised in excess of what is needed must also be used for that purpose or returned to donors. Get power beforehand to use excess for general/other purposes. Where special collection sent straight to another charity (e.g. Christian Aid) then not funds of PCC and not included in church accounts.

Endowment Funds Funds given for longer term retention Restricted Fund Capital maybe permanent or expendable Made with specific instruction for capital and income Examples Capital gifts or grants Legacies Capital money or asset given to the Church made with specific instruction. Permanent endowment – only income can be spent as specified by donor. Capital has to be held permanently. Expendable – donor has authorised spending of the capital. Trustees have discretionary power when to spend but must be used in accordance with donor’s instructions.

Governance Code

Annual Report and Disclosures Brief statement explaining use of Governance Code NB The Essential Trustee CC3 Board effectiveness – if a Trustee has served for more than nine years, their reappointment is explained in the Trustee Report Diversity – the Board publishes an annual description of what is done to address diversity of the board and performance against diversity objectives

Accounting and Reporting SORP Information Sheet – April 2017 N.B. aggregate disclosure of total amount of donations received, without conditions, from PCC Bulletin 2 – w.e.f. accounting periods beginning 1 Jan 2019 Little impact on Parish accounting Comparatives on all financials Statement of Public Benefit – see RDSBF accounts

Digital Giving Video on how they can be used in your church please click here. 

Information

Information ACAT Training for new Treasurers and Independent Examiners Drop-ins re Indicative Offer Calculations Monday 29 October; Tuesday 30 October 2018 October count into the 2018 Statistics for Mission Return 2018 Parish Return 31 May Training offered in early 2019 Reconciliation to published Report and Accounts – independently examined

Questions