Section 8. Financial Reports. Report of the Treasurer Remittance Report Remittance Report

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1 Section 8 Report of the Treasurer 2014 Remittance Report 2015 Remittance Report Budget Principles, Assumptions and Notes 2016 Original and Revised Budget 2017 and 2018 Budgets 2014 Audited Financial Statements 2015 Audited Financial Statements

2 Section 8 Report of the Treasurer Treasurer Keith Myra Not surprisingly the various reports in this section are populated with lots of numbers! But numbers alone fall short in conveying the significant impact that funding provided through our budget has on all of our synodical ministries. Let me assure you that the financial support that you have provided through your benevolence and other offerings over the past biennium has had a very significant and meaningful impact on the synod s mission - ministries that include: developing and nurturing Capable Leaders (rostered and lay); building Effective Mission Partnerships with Lutheran and ecumenical partners to extend the outreach of our synod; supporting various forms of Vibrant Local Ministries in congregations, ministry areas and other expressions of the church; and administering our affairs effectively and efficiently by providing a Focused Framework. Many of these ministries are portrayed throughout the Bulletin of Reports. To your congregation and members: Thank you for your support of our partnership in mission! Key Initiatives In addition to the treasurer s usual activities, significant progress was made on several other key initiatives over the past biennium: A series of 14 worships for congregational treasurers and others involved in congregational finances was conducted in every area of the synod. In total, about 50% of congregations were represented. A workshop for interns was developed (this session includes information that pastors need to know about congregational finances) and is now conducted on an annual basis at the seminary. A Benevolence Task Force was established to determine direction and provide oversight for a number of benevolence-related issues. Refer the Report of the Stewardship and Resource Development Ministry Director for further details. The role of Assistant to the Treasurer has transitioned from one full-time position to two part-time roles, significantly reducing risk by improving back-up capability. In accordance with CRA requirements, the Registered Charity Information Return (T3010) for 2014 was filed prior to the June 30 th, 2015 deadline. Work on the 2015 return is currently in progress and will be filed after the audit is complete Financial Overview Note that numbers in this section are reported on cash flow basis (consistent with the operating budget). As such, they differ somewhat from those reported in the audited 8-1

3 financial statements. The synod ended 2014 with an operating fund deficit of approximately $33,000, an amount that was absorbed by small accumulated surpluses that have been held in reserve from prior years. Although total expenditures were well under budget, these savings were not sufficient to offset congregational benevolence offerings that were $73,000 (4.8%) under budget and that decreased 3.7% compared to those received during the prior year Financial Summary Actual Budget Variance Total Income $2,371,276 $2,524,977 -$153,701 Total Expenditures $2,404,464 $2,524,977 -$120,513 Surplus / Deficit -$33,188 $0 -$33, Income Summary Total income for the synod s operating fund in 2014 was approximately $155,000 less than budgeted, much of which was attributable to the $73,000 shortfall in congregational benevolence offerings mentioned above. In addition, because $69,000 of Canadian Mission budgeted expenditures weren t realized (for details, refer to explanation in the Expenditures Summary below), $49,000 of ELFEC grants weren t requested and ELCIC grants totaling $35,000 were transferred to designated purpose funds for use in a future year, rather than being brought into 2014 operating income as originally budgeted. INCOME Actual Budget Variance Benevolence Offerings $1,444,483 $1,518,000 -$73,517 ELCIC Grants $96,642 $131,600 -$34,958 ELFEC Grants $564,656 $613,875 -$49,219 Rent/Services $76,602 $76,602 $0 Registration Fees $140,383 $158,400 -$18,017 Donations $35,769 $18,500 $17,269 Other $12,741 $8,000 $4,741 Total $2,371,276 $2,524,977 -$153, Expenditure Summary Total expenditures were $120,000 under budget, $69,000 of which was attributable to the Mission Committee. This included $20,000 for a Compassionate Justice Initiative funding request that was subsequently withdrawn by the requesting congregation and half of an $80,000 grant to WLS thirdspace Community as this project commenced six months later than budgeted. Smaller under-expenditures were also realized in several other budget lines (refer to the Expenditure table below for details). In spite of income challenges, it is notable that the synod was able to meet in full its $356,000 commitment to the National Church, its $416,000 commitment to Waterloo Lutheran Seminary as well as allocate almost $180,000 towards various Youth and Young Adult Ministries initiatives in support of the synod s three camps; campus ministries in seven locations in Nova Scotia, Quebec and Ontario; and half a dozen other ministry programs involving youth and 8-2

4 young adults across the synod. As in previous years, synod staff compensation and administrative expenses were carefully controlled while ensuring that employees were fairly compensated. Synod office conferencing equipment was upgraded during the year to make meetings more efficient and to eliminate the need for some travel. As depicted in the following chart, a wide variety of synodical ministries were funded by congregational benevolence offerings and various other funding sources. It is important to understand that over $150,000 of expenditures associated with running the synod office were fully covered by income that the synod earns on invested funds that were generously donated by our parents and grandparents many years ago. As a result, the offerings that you give to benevolence are not used to pay for office infrastructure (e.g. utilities, maintenance, computer hardware/software/networking, office supplies, mailing, insurance, auditing, legal and other similar types of expenses). Expenditures Actual Budget Variance ELCIC $356,000 $356,000 $0 Waterloo Lutheran Seminary $416,000 $416,000 $0 Mission Committee $205,196 $274,225 -$69,029 Youth & Young Adult Ministries $178,714 $189,002 -$10,288 Candidacy Committee $11,686 $25,550 -$13,864 Professional Leadership Committee $388 $2,200 -$1,812 Stewardship & Resource Development $26,202 $27,750 -$1,548 Communication $20,377 $30,000 -$9,623 Ministry Director Programming $23,458 $12,300 $11,158 Office of the Bishop $32,680 $39,800 -$7,120 Salaries and Professional $695,512 $704,400 -$8,888 Office $151,831 $149,100 $2,731 Retreats and Conferences $35,333 $39,000 -$3,667 Synod Council (inc In Mission for Others) $34,458 $23,650 $10,808 Conference/Area Ministry Programming $16,418 $15,250 $1,168 Grants and Subsidies $69,673 $69,250 $423 Assembly 2014 $130,538 $151,500 -$20,962 Total Expenditures $2,404,464 $2,524,977 -$120,513 Other 2014 Financial Activities A $25,000 grant from the World Mission Gift / Bequest Fund was allocated for Rodny Said s education. Rodny, visiting Canada from our Companion Church, the Evangelical Lutheran Church in Jordan and the Holy Land, is currently studying at Waterloo Lutheran Seminary. Net proceeds (~ $23,000) received from the sale of the building from Hope Lutheran Church in Saint John, New Brunswick, a congregation that disbanded in 2014, were invested in the 8-3

5 synod s Remembering for the Future Endowment Fund. The synod gratefully received bequests totaling $27,841 during 2014, almost all of which were designated for Youth and Young Adult Ministry endowment funds. A re-valuation of the liability associated with the retiree health benefit plan resulted in a $531,300 increase, bringing the total liability as of December 31, 2014 to $1.3 million Financial Overview After excluding $15,000 of one-time, favourable accounting adjustments, the synod ended 2015 with an operating fund surplus of almost $49,000 on a cash flow basis, offsetting the 2014 deficit Financial Summary Actual Budget Variance Total Income $2,434,210 $2,491,257 -$57,047 Total Expenditures $2,370,511 $2,491,257 -$120,746 Surplus / Deficit (including accting adjustments) $63,699 $0 $63,699 Income Summary Note that numbers in this section are reported on cash flow basis (consistent with the operating budget). As such, they differ somewhat from those reported in the audited financial statements. For the first time since 2007, the synod reported a notable increase in benevolence offerings received from congregations and individuals. Given the declining trend that has been all too evident in recent years, this $44,000 (3%) increase over 2014 is welcome news, although it should be noted that despite this increase, the total for 2015 was still less than Total income for the synod s operating fund in 2015 was approximately $57,000 less than budgeted. This was due to 1) lower than budgeted investment returns due to the turbulent economic climate in 2015 and 2) a reduced need to utilize ELCIC grants (the unused portion has been allocated for use in a future year) or request grants from several restricted and unrestricted bequests and other funds from the Evangelical Lutheran Foundation of Eastern Canada (ELFEC) due to under-expenditures in several areas of the budget. INCOME Actual Budget Variance Benevolence Offerings $1,488,270 $1,459,000 $29,270 ELCIC Grants $275,089 $351,000 -$75,911 ELFEC Grants $510,455 $533,155 -$22,700 Rent/Services $76,602 $76,602 $0 Registration Fees $51,925 $47,000 $4,925 Donations $30,384 $21,500 $8,884 Other $1,485 $3,000 -$1,515 Total $2,434,210 $2,491,257 -$57,

6 Expenditure Summary Total expenditures were approximately $120,000 under budget, attributable primarily to underspending in Canadian Missions, Salaries/Professional expenses and Office Administration expenditures. Smaller amounts of underspending were also realized in several other budget lines (refer to the Expenditure table below for details). Once again the synod met in full its commitment to the National Church ($383,000 in 2015, a 7.2% increase over 2014) and its commitment to Waterloo Lutheran Seminary ($416,000 in 2015). Other significant amounts of financial support that were provided during the past year included ~$300,000 for Canadian Missions (to cover grants to sixteen different congregations and/or emerging forms of ministry) and $167,000 for Youth and Young Adult Ministries (to support the synod s three camps, campus ministries in seven locations in Eastern Canada and half a dozen other ministry programs targeted for youth and young adults across the synod). Contracts with our telephone provider were renegotiated during the year, resulting in savings that are expected to exceed $3,000 over each of the next three years (a 50% reduction). Expenditures Actual Budget Variance ELCIC $383,300 $383,300 $0 Waterloo Lutheran Seminary $416,000 $416,000 $0 Mission Committee $298,913 $316,400 -$17,487 Youth & Young Adult Ministries $166,891 $181,157 -$14,266 Candidacy Committee $20,750 $26,100 -$5,350 Professional Leadership Committee $34 $2,200 -$2,166 Stewardship & Resource Development $30,922 $34,400 -$3,478 Communication $25,312 $27,500 -$2,188 Ministry Director Programming $34,541 $27,300 $7,241 Office of the Bishop $22,250 $21,700 $550 Salaries and Professional $684,258 $729,300 -$45,042 Office $127,350 $151,000 -$23,650 Retreats and Conferences $39,976 $41,000 -$1,024 Synod Council (inc In Mission for Others) $19,650 $21,150 -$1,500 Ministry Area Programming $38,402 $47,500 -$9,098 Grants and Subsidies $61,962 $65,250 -$3,288 Total Expenditures $2,370,511 $2,491,257 -$120,746 Other 2015 Financial Activities The synod received $1,500,000 representing the first three installments of an unrestricted bequest. A final installment is anticipated in In accordance with pre-existing synodical policy, 10% of each installment, a total of $150,000, was gifted to the ELCIC in support of national ministries. 8-5

7 Motivated in part by this generous bequest, synod officers established a task force with the mandate of recommending the best way(s) of exercising responsible stewardship over these types of unrestricted funds. What an impact this bequest, in combination with other special designated and undesignated gifts, is having on our synodical ministries today! What an impact these gifts will continue to make in the years ahead! Despite our best intentions, a project that had been initiated to install solar panels on the roof of the synod office building proved not to be viable. Given this disappointing news, a different approach to ensure that the synod takes seriously its responsibilities with respect to sustainable energy sources has been incorporated into budgets for 2016 and future years. Synod Professional Staff Remuneration The following information is provided in accordance with direction provided at Assembly 2012: There are four incumbents in professional roles. Three of these (Bishop and two Assistants to the Bishop) are positioned in salary ranges that vary between a minimum of 80% of full job value and a 110% maximum. In 2000 the 100% job value (defined as fully meeting job expectations) for Bishop was established at 155% of the Synod Compensation Schedule for 2000, based on a pastor with 15 years of experience (125% for Assistant to the Bishop). These job values are updated annually to reflect changes with the Cost of Living Allowance (COLA) index and periodically benchmarked against the other four ELCIC synods to ensure they remain reasonable and competitive. For 2016, remuneration for the role of Bishop at 100% of job value is $90,603 (includes both salary and housing components) while the corresponding remuneration for Assistant to the Bishop is $77,568. This results in ranges of $72,482 to $99,663 (Bishop) and $62,054 to $85,325 (Assistant to the Bishop). Benefits are in accordance with those prescribed by the Synod Compensation Schedule. In lieu of mileage reimbursement for travel, the synod provides a vehicle to the Bishop, an arrangement that is financially favourable, both to the synod and the incumbent Bishop. Synod council conducts an annual review of the Bishop s performance and the Bishop conducts performance reviews of other synod office staff members. Compensation for the fourth role, a half-time Director of Youth & Young Adult Ministries, was determined at the time of initial appointment based on an agreed upon percentage of remuneration the incumbent was receiving from the parish he served, an amount that changes annually based on COLA. No health or dental benefits are paid. Financial Statements The next sections of this report provide highlights from the financial statements and other reports that follow in this section & 2015 Congregational Receipts Congregations forwarded a total of almost $4 million in designated and undesignated offerings to the synod in 2014 and 2015, a decrease of approximately $200,000 from the previous biennium. (This excludes the $1.5 million individual bequest mentioned previously). $100,

8 of this shortfall was attributable to the tremendous responses to the ELCIC Praise Appeal in , responses that were not repeated in the last biennium. Decreases in congregational benevolence offerings accounted for another $100,000 decrease receipts included an $81,000 one-time gift to CLWR from a congregation. CLWR remittances in 2015 included approximately $50,500 for the Nepal Earthquake Appeal and $62,500 for the Syrian Refugee Appeal, much of which was eligible for matching government funding Budget Recommendations Assumptions relating to budgets for the next biennium are summarized in the budget presentation documents. Key factors that are placing stress on these budgets include: The ongoing, general trend of declining receipts from congregational benevolence offerings. The synod s responsibility for covering registration fees for delegates to the 2017 national convention. This $50,000 cost was previously absorbed by congregations. As an interim measure, Assembly 2014 approved budgets for (inclusive) that were balanced by allocating principal from the Undesignated Gift Bequest Fund. Obviously this is a practice that can t continue indefinitely. In response to these and other challenges, Synod Council authorized the development of a Strategic Plan for the synod, a process that is designed to solicit broad input from those across the synod, including delegates to Assembly The plan is expected to be ready this fall. Although the budgets being recommended by synod council for 2017 and 2018 currently project deficits of $256,950 and $235,800 respectively, these will be balanced by synod council at its November, 2016 meeting based on Strategic Plan outcomes. The recommended budgets assume an annual increase of 1% in congregational benevolence offerings as well as an annual 1% increase in the synod s support of the national church & 2015 Audited Financial Statements Ernst & Young, the synod s auditor, expressed an unqualified opinion that the 2014 Financial Statements presented the financial position of the Synod fairly, in accordance with Canadian accounting standards for not-for-profit organizations. Although the audit had not been completed at the time this report was prepared, a similar opinion is anticipated for Closing Comments The past two years have seen both successes and challenges from a financial perspective. Looking forward into the next biennium, more of the same appears to be on the horizon. I have always considered it an honour and privilege to serve as your treasurer and remain deeply thankful for my many faithful colleagues in this ministry of financial administration these include my fellow officers (Bishop Pryse, Linda Grainger and Pastor Wendell Grahlman), synod council members, deans, ministry directors, office staff and those pastors and members who serve across our synod. A particular word of thanks to Laurie Kitchen who provides accounting consulting services to the synod, Assistants to the Treasurer Sue Heimpel and Karen Cross, and Irene Fancy who volunteers with a number of mailing and other important tasks. Thanks to each of you for your dedication, partnership and friendship! 8-7

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21 EASTERN SYNOD BUDGETS Principles, Assumptions and Notes 1. Congregational remittances to regular benevolence will increase by 1% year over year, using 2014 actual remittances as the base. 2. The economic environment over the next biennium will be characterized by low interest rates, low inflation rates, and low-moderate equity returns. ELFEC investments will generate approximately a 3.5% rate of return % of the operating grant from the Evangelical Lutheran Foundation of Eastern Canada (ELFEC) will be allocated to the operating budget. This investment income, earned from gifts made by our forefathers many years ago, will be allocated to fund all expenses associated with the synod office infrastructure (e.g. utilities, building maintenance, office equipment and supplies, IT, insurance, auditing, legal and other incidental expenses), thus enabling benevolence offerings to be allocated exclusively towards on the ground ministries supporting pastors, congregations and others in our response to our call to be a synod In Mission for Others. To the extent that favourable income and/or expenditure variances are realized at the end of each year, 50% of the excess will be reinvested with ELFEC in the General Investment Fund (the source of the ELFEC Operations Grant) to help offset the impact of inflation. 4. The amount committed to ELCIC benevolence will increase a minimum of 1% annually and will represent at least 25% of congregational benevolence receipts. To the extent that favourable income and/or expenditure variances are realized during the year, 50% of the excess will be allocated the ELCIC. 5. Budgeted expenditures reflect historical priorities and also incorporate newly emerging needs, priorities and opportunities (e.g. National Convention synod delegate fees, 500 th Anniversary of the Reformation, synod strategic plan, funding provided by the ELCIC s Church Extension Capital Fund (CECF) in each of 2016 and 2017 for creative mission opportunities). 6. To the extent necessary, budgets for will include $12,000 of funding from Canadian Mission gifts and bequests to cover salary, benefits and other expenses incurred by staff support for Canadian Missions. 7. To the extent necessary, an allocation of up to $168,500 will be made from the Undesignated Gift & Bequest Fund to balance the 2016 budget. Budgets proposed for currently have large deficits. Synod Council will balance these budgets at its November, 2016 meeting following adoption of the synod s strategic plan. (A strategic plan process started in Nov and is scheduled to be completed by Oct ) 8-20

22 NOTE: The Bishop, Assistants to the Bishop and office staff provide administrative support for both operating budgetary items and non-operating items. Non-operating budgetary items supported by the salaries and benefits paid to these individuals include CLWR, as well as programs funded by designated offerings, gifts, and bequests and represents as much as one million dollars in additional annual receipts. 8-21

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