1. CONNECTIONAL MINISTRIES REACHING FURTHER WITH THE GOSPEL BY SHARING THE LOAD

2. Apportionment Process Agenda Current process overview Current participation / results Observations / concerns Church financial health Plan principles / goals Draft revised plan Key disciplines required

3. Existing Covenant Funding Plan and Apportionment Process -4-3-2Year "0" 1 Basis Years Current Year Budget Year Jan - May JuneJan. (Typical)Jan - Feb (Typical) Churches' Average Net Operating Budgets*Expense BudgetAnnualDistrictCCF&A for Year DevelopedConference Apportionment Reviews and Conference Total Approval Reviews Held Approves of Net Operating Budgets*Expected % Receipts with those Districts' on Apportionments Churches that Proposed Estimated Request them Reductions *Net Operating Budget equals District Allocations Total church expenses less for Apportionment Missions, Capital expenditures Reduction Set (including mortgage payments), (Part of % Expected Apportionments and a portion of not to be received) Clergy housing & support costs

4. Existing Covenant Funding Plan & Apportionment Process Results (All figures in $K) Year:20122013201420152016 Total Expense Budget 5,0945,0994,9534,7374,635 Total Apportioned 5,750 5,6505,4505,350 Approved Adjustments 97140145 Anticipated Apport. – Exp. 656651697713715 Actual Apport. – Exp. 927960886TBD

5. Existing Covenant Funding Plan & Apportionment Process Results Year: Number / % of Churches Paying: 2012201320142015 > 97% of Apport.327 / 76%322 / 74%325 / 75% 6% – 97% of Apport.76 / 18%82 / 19%70 / 16% 0% - 5% of Apport.28 / 6%29 / 7%40 / 9% No. of Churches Granted Adjustments 2124

6. Current Situation Observations / Concerns Approximately ¼ of churches in Conference are unable to pay their full apportionment Approximately ¾ of that number do not request apportionment review Paying little or no apportionment undermines the local church sense of Connection to the Conference Most churches paying nothing are not requesting review Most churches granted relief pay the reduced amount

7. Current Process Observations / Concerns Base apportionment calculation changes slowly due to delayed 3 year base Decision to request review is left to the local church Review “requires” submission of appreciable paperwork Review is perceived by some as punative Process is supposed to be short term – 3 year or less duration – but underlying cause, e.g. debt, may not be

8. Church Financial Health (All numbers %) HealthyStressedExtreme Pastor & Staff Expense< 505560 - 65 Facility Expense (Utilities, Insurance, Maintenance, and Mortgage (unless Mortgage is funded separately from general church budget)) < 253030 - 35 Total Staff & Facility Expense (Defined as FIXED COST) < 758595 Apportionments10 - 15 ?? Program & Mission> 10 ??

9. Principles Apportionment Review Process Must: Take into account both short term and longer term situations Be fair, realistic, compassionate and understandable Require some contribution from all churches Require annual District Committee review of all churches that pay less than 100% of their unreduced apportionment

10. Revised Apportionment Process Goals of Change To recognize that a churches’ failure to pay apportionments is very often a sign of a difficulty more significant than just a short term problem or cash shortfall To include all churches not paying full apportionments, recognizing the importance and desire of churches to participate in the Connectional Ministry To simplify the Apportionment Review Process and Requirements To provide guidance to the District Apportionment Review Committees (DARC’s) relating appropriate adjustments to individual church’s specific financial situations

11. District Apportionment Review Committee Convened and chaired by the District Superintendent Shall have at least 5 members (in addition to the D.S.) comprised of essentially equal lay and clergy Shall include the District Lay Leader and at least one member of the Conference Council on Finance and Administration

12. Apportionment Review Process Churches Nominated for Review All churches that paid less than 100% of their unreduced apportionment in the prior year Any church requesting review Other churches nominated by the District Superintendent

13. Apportionment Review Process Revised Annual Schedule Conference calculated apportionments for the coming year are issued in August, following June Annual Conference Reviews should be scheduled in the September – December period, with results reported to CCF&A by 12/31 CCF&A will review the impact of adjustments as part of its Jan – March Funding Plan development If reduction (in relief granted) is needed, CCF&A will advise Districts by 3/31

14. Information Required Conference Business Office will provide the calculated current and coming years’ apportionment and the previous year’s record of: ◦ Total Staff Expense - $ & as % of Total Exp. ◦ Total Facility Exp. - $ & as % of Total Exp.  (Taken together = Fixed Cost $ & % of Total Exp.) ◦ Total of All Expenses (including Missions, Apportionments & Debt Service*) ◦ Calculated and adjusted apportionment and amount paid ◦ Membership and average attendance * If Debt Service is funded separately from general church budget, it should be excluded from Facility Expense and Total of All Expenses

15. Information Required Local Church will provide ◦ A statement of the church’s mission and vision for the future – how it is reaching out to its community ◦ Treasurer’s report showing actual income and expenses vs. budgeted expenses for January 1 st through July 31 st of the current year ◦ Budgeted income and expenses for the current year ◦ Total dollars in savings accounts, investments and/or endowments, including building funds, along with a statement of any restrictions on the use of these assets.

16. Specific Guidelines Churches that paid $0 the prior year will apportioned at least 10% of their calculated apportionment ◦ Consideration should be given to the church’s Fixed Cost as a % of Total Expenses

17. Specific Guidelines Churches that paid $0 the prior year will apportioned at least 10% of their calculated apportionment ◦ Consideration should be given to the church’s Fixed Cost as a % of Total Expenses, e.g.: Fixed Expense % of Total Expense 75% 95% Initial % of Calculated Apportionments to Pay 40% 10%

18. Specific Guidelines (Continued) Churches already paying part of their apportionments should be encouraged to increase the % they are paying. ◦ Consideration should be given to the church’s Fixed Cost as a % of Total Expenses, e.g.: Fixed Expense % of Total Expense 75% 95% Increased % of Calculated Apportionments to Pay 20% 0%

19. Specific Guidelines (Continued) Churches requesting adjustment that paid 100% the prior year will need to provide a full picture of the cause of the need for adjustment – increased cost or reduced income – and their total asset, income and expense picture and outlook. A face- to-face discussion with the committee is required.

20. Key Disciplines Required Building and staffing decisions are the major cause of increasing fixed costs. By giving heavy weight to Fixed Cost in dealing with apportionment adjustments, the proposed procedure assumes strong discipline on the part of the local churches, the District Boards of Church Location and Building, and the Cabinet.

21. Key Disciplines Required (Continued) Specific guidance: ◦ Assumption of new debt must include consideration of the subsequent impact on Fixed Cost and Apportionments. If building rehabilitation is essential but not affordable, Discipline ¶ 213 should be considered. ◦ Churches with excess staff costs (> 55 - 60% of total cost) should seek reduced staffing. The guaranteed appointment system may postpone this in the 2015 – 2021 period, which is part of the reason for this revised procedure. The Cabinet must continue to bring the Conference into balance in this area.