Treasurer

Treasury  department 2013

Verlon W. Strauss, Treasurer; Stephanie Matye, Administrative Assistant; Stephanie Sitanggang, Junior Accountant for A/P – Cash Receipting; Rita Lualemaga, Payroll Clerk; Janelle Muthiah, Secretary; Susan Knapp, Accountant; Yolanda Bendrell-Perez, Church Receipting Coordinator; Kim Oceguera, Junior Accountant for Payroll; Kim Brown, Administrative Assistant / Moving Coordinator; Jose Ruiz-Lopez, Business Accounting Analyst; John Easton, Accountant; Lori Lorbeer, Secretary; Tim Rawson, Associate Treasurer; David Anderson, Controller; Steve Case, Assistant to the Associate Treasurer; Lisa Anderson – Student Worker for Church Receipting; Mavin Torres – Student Worker for Church Receipting

This financial report focuses on the years of 2008, 2009, 2010, 2011 and 2012.

Purpose Statement

The treasury department provides financial services in support of the overall mission of the conference i.e., its churches, schools and various support endeavors. Specific activities include budgeting, receiving, investing, paying, billing, reconciling and reporting financial activities to the oversight committees and boards. In addition the department handles, church and school audits, represents collective church and school insurance needs, conducts two annual church treasurer training seminars, provides assistance in church and school property acquisitions, reviews and approves construction projects, and assists in loan processing and conference investments.

Reporting and Audits

Included in this section are the required audited financial statements for the past five years from 2008 through 2012. The audits were performed by Ahern, Adcock, Devlin, LLP (AAD) a Riverside public accounting firm. The General Conference Auditing Service provided policy audits for the same years. For the years ended 2008 and 2009, AAD gave a qualified opinion on the audited financial statements. AAD has determined that real property held in revocable trusts be recorded at fair value at the date of donation. SECC had been taking a conservative approach to the recording of these assets on our books due to the uncertainty of the future actual gift outcome. AAD researched opinion is that the title to the assets is to be transferred to SECC at the time the trust was opened. Consequently, the conference received a qualified opinion for the years ended 2008-2009. For the 2010 audit and forward, this issue of recording was cleared up and an unqualified opinion was received.

SECC 2008-2009 Audit   SECC 2009-2010 Audit   SECC 2011-2012 Audit

Conference Income

Conference income consists of tithe, offerings, fee income, planned giving income and investments and rental earnings from conference quasi-endowments.

Tithe

During the past five years the conference has experienced a roller coaster ride in regards to tithe.
The bar graph in Figure 1 reflects the annual tithe received over the past six years. Included in the graph is a sixth year to give a sense of just what has happened, since 2007 was our high point in tithe receipts. Figure 2 reflects both the gross and net tithe for the six year period, or $286,356,345 and $219,904,075 respectively. In 2011, which showed a 4.5% increase, we had one extra week for the year for a total of 53 weeks. Note that even with the last two years showing tithe increases, we are still not back to the levels we were seeing in 2007.

Treasury Figure 1

Treasury Figure 2
Other Income

In addition to the net tithe, non-tithe sources of revenue for the conference include:

  • Annual offerings
  • Fee income such as Pine Springs Ranch Christian Youth Camp and Retreat Center fees, transportation and moving department billings, insurance and auxiliary payroll billings
  • Planned giving, i.e., trust maturities gifts and other similar gifts
  • Conference endowment and quasi endowment investment earnings

A five-year history of these various income sources are reported in Figure 3.

Treasury Figure 3

SECC has been blessed with the Stahlheber gift as well as many other smaller gifts. Annual income from the Stahlheber gift, proceeds from the San Pasqual sale, (established as various conference quasi-endowments), together with other gifts, have formed the basis for the conference quasi-endowment earnings. Annual yields from these invested gifts enable the conference to maintain the comparatively higher number of pastors, teachers and subsidies to churches and schools on tithe. As reported at the presessions, Figure 4 outlines the annual contributions that have flowed to conference operations.

Treasury Figure 4

2008-2012
Stahlheber                          $13,200,000
San Pasqual                       $671,456
Other –Operating               $469,650
TOTAL:                               $14,341,106

Investment Risks

Investing conference quasi-endowment funds in the marketplace incurs risks, the same risks experienced by any other person or group. However, risk can be reduced through appropriate diversification because the various asset types respond to the business cycle and market in different ways. For example, when stocks as a market class in response to market conditions are not doing well, bonds generally perform well.

Failure to appropriately diversify by simply investing all funds in income-type instruments incurs the risk of low real returns. Maximizing real returns requires investing in harmony with professional guidelines and denominational policy in a well-diversified strategy as directed by a carefully delineated investment policy. Such policies consider time horizon, investment objectives, risk tolerance and defined fund purposes with professional management and appropriate oversight. Annual variances in the distribution of earnings to churches and schools are a direct result of market and asset class performance variances. Even with the most careful oversight and well written policies, any funds invested in the marketplace are subject to risk. This is clearly identified in Figure 5 which represents a 6 year trend of the conference investments in the marketplace. What careful oversight will do is help through these types of swings and if we maintain the course, over time the funds will come back and provide a steady return.

Treasury Figure 5

Working Capital and Reserves

Ideally the conference should have sufficient cash reserves to finance operations without having to borrow during months that typically have lower tithe or months with a high cash flow need. The conference should also have sufficient funds for emergencies for a period of 90 to 120 days. Our working capital, stated as a percentage of the North American Division’s recommended working capital policy, has been very volatile over the past five years. Figure 6 displays the percentage of required combined cash reserves from 2007-2012.

Treasury Figure 6

Currently the conference operating reserve funds, excluding an emergency provision of $1,150,000 for natural disasters, is approximately $14,000,000. With the changes that occurred in our economy over the past five years, the conference used some of the capital reserves that were on hand in order to balance the operating budget. Figure 7 shows the 6 year history of our reserves. Even though the conference has used some reserves, we still show a significant balance and we feel that adjustments have been made to ensure our long term viability.

Treasury Figure 7

Use of Net Tithe and Non-Tithe Resources

The conference received $236,854,991 in gross tithe from 2008-2012. Approximately 23% of the tithe was shared with the national and world church for furthering church mission outside of SECC. An additional 10% of the gross tithe was given in support of the retirement plan of the North American Division.

Treasury Figure 8

The table in Figure 9 reflects the five-year combined conference gross tithe, net tithe and non-tithe sources of revenue and their percentage use. Also Figure 9 represents the combined five-year distribution by function for both tithe and non-tithe funds. The bar chart of Figure 10 visually displays the distribution of conference resources from the combined net tithe and non-tithe sources on the basis of transfers to specific activities and functions as reflected in Figure 9.

Treasury Figure 9b

Treasury Figure 10

Bond Lending Pool

The expansion and capital growth within our churches and schools in Southeastern has been tremendous during the past 5 years. The graph in figure 11 shows how the gross asset costs of all the land, land improvement, building and building improvements and equipment has grown.

Treasury Figure 11

A majority of this increase has been accomplished through financial arrangements either through the two Pacific Union lending pools or through the conference using the bond fund pool. As may remember, commencing in early 2007 and after consultation with financial officers of fellow institutions and with authorization from the Pacific Union and North American Division, the conference developed a bond fund pool that funded on June 26, 2008, made up of approximately $20,000,000 in taxable bonds and $32,000,000 in tax exempt bonds. The advantages of this bond fund pool was to obtain lower interest rates for churches and schools through bond funds and longer payback periods, resulting in significantly reduced annual debt servicing costs. These bond funds have all been distributed to various churches and schools during 2008-2011 and repayment has begun.

With the volume of projects increasing, the overall level of debt from all lenders for the conference churches and schools has increased sharply over the past five years. Figure 12 shows the increase in property secured loans from December 31, 2007 through 2012. We are showing 6 years so that you can see the increase that occurred from the last session to now.

Treasury Figure 12

The overall increase in property expansion of 24% is small in comparison to the increase in debt of 128.5%. However, the total debt to gross net assets is 29%, which still is low when comparing to most lending organizations.


Treasury Department Activity

One of the most significant departments in Treasury is the Payroll department. Everyone enjoys being paid as well as being paid on time. Kim Oceguera is the lead individual in payroll and she is assisted by Rita Lualemaga on a part time basis. It is not an easy task to process payroll for over 1,000 employees every two weeks, but Oceguera has made the process go smoothly. You may not know, but the conference is the employer of most of the individuals who work in all the churches and schools. If you look at Figure 13, you can see the volume that takes place not just every other week but at year end as well.

Treasury Figure 13

Another significant department is Church Receipting. Yolanda Bendrell-Perez is the lead individual for this department and she is able to use several part time employees to help. The conference provides the service of issuing the year end contribution receipts for all churches. What this means is that each month we input all the tithe envelopes from each church. With over 170 churches and groups, this is no small task. Figure 14 shows just how many envelopes are processed each year along with the number of contribution receipts given out over the past five years.

Treasury Figure 14

The last area of Treasury that I want to identify is the accounting group. Led by David Anderson, controller, and a staff of four others, Steve Case, Jose Ruiz, Susan Knapp and Stephanie Sitanggang they are responsible for the day to day accounting operations. This includes paying vendors for various supplies and operating expenses, billing for payroll, church remittance and general charges to all church and schools, reconciling the various bank accounts and many other tasks. One other significant task that takes place is the recording of all new property and building acquisitions as well as all remodels and upgrades for all churches and schools. There is a variety of activity that takes place to keep all the engines running and this group of staff is doing an outstanding job in making that happen.

Treasury Goals 

The goals for this past quadrennium have included:

  • Survive the current economic downturn measured by maintaining an audited combined working capital requirement of not less than 110% while implementing appropriate cost-of-living raises for employees.
  • Improve conference-wide debt to equity ratio by 5%.
  • With the conference Executive Committee and Pastoral Advisory, continue to support and facilitate the work of the conference Resource Committee and consider how best to refocus conference resources for kingdom growth.

Goals for the Next 5 Years

  • Increase reserves by developing a balanced budget
  • Look for opportunities to decrease costs as it relates to the bonds. There are several annual costs associated with having bonds and it may be possible to eliminate or reduce these costs through other funding mechanisms.
  • Continue to find ways to increase funding for ministry programs. Funding has been reduced over the past years to deal with the economic downturn and we need to find ways to increase the funding.
  • Give back the remaining 2.2% of the 5% pay reduction that was put in place in July of 2009.