On November 16, 2005, the Lake Union Conference (Lake Union) executive committee held their final meeting for the calendar year. During this meeting the committee reviewed the financial performance for the Lake Union, year-to-date as of September 30, 2005. It is in the context of this meeting that this financial review is written.
As an opening note for this report, I would like to register the fact that the administrators of the Lake Union truly believe Jesus is soon to return. Consequently, we are intentional about using the resources God entrusted us with to advance our common mission. This mission includes, but is not limited to, proclaiming to all peoples the everlasting gospel in the context of the Three Angels’ Messages of Revelation 14:6–12 and leading them to accept Jesus as their personal Savior.
In reviewing the financial health of any organization one of the most important reports is the Statement of Position or Balance Sheet (see Graphs A and B). The Statement of Position, as of September 30, 2005, reveals both strength and stability. The current ratio (measuring the strength of an entity to meet current indebtedness) is 6.96:1 for 2004 and 13.98:1 for 2005.
Cash and securities increased $1,028,683 in 2005 due to an overall tithe increase for 2005, together with a zero balance for remittances receivable (tithe from conferences payable to the Lake Union). The 2004 remittance receivable balance of $419,162 represents two months (September and August, 2004) of tithe in arrears due from the Lake Region Conference (LRC). It is the commitment of current LRC administrators to keep current with future tithe remittances.
Other receivables decreased by $240,849 in 2005 due primarily to an insurance settlement paid to LRC in 2001 and the receivable to the Lake Union was cleared in December 2004. The receivable balance of $329,784 for 2005 consists of an appropriation advance to LRC and Lake Union information systems support fees due from Atlantic and Columbia Unions.
Current liabilities decreased by $298,691 in 2005 due primarily to payments made to the General Conference (GC) and North American Division (NAD) in association with an insurance settlement paid to LRC in 2001 and the payable was cleared in December 2004. The current liability balance of $353,453 for 2005 consists of appropriations/trust funds payable to LRC.
In Malachi 3:8–10, God promises a special blessing to all who are faithful in returning tithe. As a result of our members' faithfulness in returning tithe across our union territory, we have a year-to-date tithe gain of 4.63 percent (see Graph C).
During this past quinquennium, the tithe percentage retained by the local conference has increased from 70 percent to 75 percent, excluding retirement funding. This change was adopted by the NAD in support of an increase in funding for local conference programs. During this same quinquennium, tithe funding to the Lake Union has decreased from ten percent to nine percent. We budgeted to receive $6.2 million, year-to-date as of September 30, 2005, total income, tithe and non-tithe. Our actual receipt of total income was $6.5 million.
This income was used for ministries and programs that have a direct/indirect benefit on the local conferences/institutions within our union territory (see Graph D). In an effort to give greater understanding of the funding support given by the Lake Union, each operating program referenced within the prior graph includes the following ministries:
Church—ministerial scholarships, general evangelism, summer youth camp ministries, Hispanic church building programs/scholarships, and conference church building programs
Education—conference academy educational programs and Andrews University appropriations
Publishing—Dollars allocated during 2005 will be used for the final dissolution of the HHES (Union Publishing) program. Beginning with the 2006 budget year, appropriations will be given directly to the local conferences from the Lake Union for publishing ministries.
Special—Lake Union Software development/support (LUCIS), religious liberty, and women's ministries
Other—Lake Region capital reversion, inner city programs, and non-tithe appropriations to conferences
Support—auditing cost for conferences/subsidiaries, Lake Union Herald, and general administration
Another important financial health indicator associated with our year-to-date financial review includes a careful comparison of actual expenses versus budget (see Graph E). In the aggregate total, actual expenses of $6,533,088 are under total budgeted expenses of $6,627,259 by $94,000. The variances of actual to budget include the following:
Church programs are over budget by $14,900 due primarily to Share the Light convention costs that are up-front costs that will straddle two years. Total cost will be within budget over the two-year time span.
Education programs are under budget by $190,600 due to teacher graduate school expenses incurred but not billed, and also teachers convention cost for 2006 and global mission educational initiatives have been budgeted for 2005 for an actual expenditure to be made in a succeeding year.
Publishing programs are under budget by $38,300 due to costs that are on hold until the month of December 2005 to fully allocate budgeted dollars as part of the final dissolution cost for HHES.
Special programs are under budget by $96,400 due to LUCIS staffing that was budgeted at five FTEs (full time equivalents) while actual for 2005 totaled three FTEs.
Other programs are over budget by $100,200 due to retirement funding cost for each Lake Union worker and special auditing cost specific to LRC that are over budget.
Support programs are over budget by $24,700 due to GC Session cost and union-wide local conference/subsidiary auditing cost that are over budget. Over budget cost for the GC Session are anticipated as funds are allocated in the years prior to the GC Session for expenditure during the year of the GC Session. Overall the net increase to our fund balance as of September 30, 2005, is better than budget by $416,300.
During the final quarter of 2005, all variances to budget continue to undergo a critical review with a full report and justification to the Lake Union executive committee for all programs that are over budget.
The final financial health indicator as a part of our year-to-date financial review would require a look at the percent of working capital as required by NAD working policy (see Graph F). Working capital is defined as fifty percent of the latest fiscal year’s unrestricted income, long-term payables, capital additions, and temporarily restricted net assets. NAD policy requires a minimum of 100 percent working capital for the sound and effective operations of organizations. The Lake Union had 79.1 percent of working capital in 1997 as compared to 148.5 percent of working capital as of September 30, 2005.
God truly blessed the financial operations of the Lake Union over the past quinquennium, and its administrators and staff are committed to the mission of this Church and Conference. Our prayer and desire is to do all we can to hasten the soon and second return of our Lord and Savior, Jesus Christ, through the effective and prudent use of the resources entrusted to us. May God find each one of us to be faithful as we commit ourselves to Him in service until the end of time.
Glynn Scott is the Lake Union Conference treasurer.
