Showing posts with label Church finances. Show all posts
Showing posts with label Church finances. Show all posts

Sunday, September 8, 2019

Grace Episcopal Alexandria Lurches Towards Financial Crisis

As I’ve said many times, Grace Episcopal’s existing cost structure is unsustainable. Thanks to the debt incurred for the recently completed HVAC project, as well as the parish’s continuing willingness to live above its means and its refusal to save, things are looking grim for the 2020 budget. This is the result that, in 2014, I warned Bob Malm was looming, possibly as early as 2016 if expenses were not curtailed. I did so in writing and, predictably enough, did not even get the courtesy of a response from Dysfunctional Bob.

Specifically, as of right now, the parish appears poised for 2020 annual income of $975,000, expenses of $1,206,000, and a net deficit (get ready!) of $231,000. 

Variables used to reach these results:
  • $70,000 diocesan pledge
  • $9,000 reduction in pledges over 2019 figures. In light of the length of Bob Malm’s tenure, the decline could prove much greater
  • $80,000 reduction in salaries, primarily attributable to alignment of interim’s salary with local norms, or $130,000 annually
  • $70,000 in debt service
  • $50,000 income from trust
  • $50,000 in maintenance (note that this covers janitorial supplies (paper products, etc) for both the church and school, which then reimburses half the cost to the church. These funds are returned to the operating budget, not line items associated with facilities expenses. Thus, according to the church’s customary financial reporting, nowhere near the full $50,000 actually is available for repairs or maintenance.)
  • $20,000 in search expenses
  • $10,000 invested in management reserve
  • Inclusion of the Alexandria sewer tax
  • A 2% increase in most operating expenses to adjust for inflation
  • Continued zero funding for the school beyond cost sharing, which already benefits the school
  • Limited programmatic, worship, and local outreach funding. Note that these are areas already cut very thin, and typically frozen at end of year. As a result, sooner or later several categories will require additional funding in order to continue.
Not factored in is the increasingly likely possibility of a recession, which would erode both Q4 2019 giving and 2020 pledges, and potentially reduce the allowable draw on the trust fund.

Of course, these figures don’t leave room for contingencies, such as extensive snow removal in the event of a severe winter, or burst pipes. (As I have pointed out ad nauseum, copper pipes do not have an indefinite life span. All the original plumbing in the building is at actuarial end of life. Same for the 20-ton HVAC unit serving the nave, which is well beyond end of life expectancy and already has had one fan motor replaced in an effort to buy time.)

Clearly, church staff recognizes the challenges ahead, and director of music Richard Newman (a delightful person and wonderful musician) has been wise in maintaining visibility by performing concerts in venues around the country. Similarly, it may no longer be possible for the parish to maintain full-time staff for the parish administrator and family ministries positions, or the associate rector position, for that matter.

It may also be time for the church to assess whether the school should continue and, if so, whether it might be spun off as a completely separate entity. The 50/50 cost sharing arrangement, often portrayed by Dysfunctional Bob as a benefit to the church, actually is to the school’s benefit, not the church’s, as the former is responsible for the vast majority of utilities, etc. Another possibility is to require the school to pay its full cost of operation. Such an arrangement could reduce the financial burden on the church and free up money to address issues like hunger in the community, versus devoting such a large portion of the budget to educating children who in most cases come from privileged, affluent backgrounds. It’s also worth noting that very few of the families with children at the school ever become involved in the church, especially since the school eliminated the tuition break for church members. 

In a situation such as this, there are no easy solutions, and it is vital that the parish begin to learn to save for the future. But no matter how things unfold there are some tough decisions and difficult times ahead.

And yes, before folks ask, I will continue to protest the church’s conduct, even after Bob Malm’s departure.

Bob Malm has stated in writing that the vestry and other parish leadership joined with him in its decision to take legal action against me, with the tacit approval of the diocese. So Bob Malm’s perjury, his decision to try to drag a dying woman into court, his decision to include Mike in his vendetta, and the various fabrications and inflammatory rhetoric in Jeff Chiow’s legal pleadings — none of these have been repudiated by the parish or vestry. Thus, it is appropriate that I continue to make public my experiences.

And that is exactly what I will do.


Saturday, July 27, 2019

Ain’t it Great to Be Wealthy? Grace Church Pays Bob Malm $100,000 Bonus, Borrows to Keep the HVAC On

When you give to Grace Church, is it with the idea that the parish will pay $100,000 bonuses to Bob Malm? At the same time it’s cutting health insurance benefits to other clergy and employees? Is this social justice?

Does it mater to you that the church is paying bonuses of this sort when it is borrowing to keep the HVAC on in the building?

Does it matter to you that one out of every five dollars the church brings in go to Bob Malm?

When was the last time you got a bonus of $100,000? Or were able to spend a month at the beach?

Are you comfortable funding a church where the rector commits perjury? Tries to drag a dying woman into court? Or where the vestry lies to you, falsely telling you that members left the church on their own, when in fact Bob Malm instructed church staff to exclude them? When Bob Malm goes after Mike Smith, who didn’t even arguably do anything to anyone? 

When the Fairfax County Office of Consumer Affairs lists Grace Church as the only church with a successful consumer protection claim filed against it, after the parish deliberately misused memorial donations Mike Smith gave in memory of his mother? And did so on Bob Malm’s instructions?

These are valid questions to ask as you consider your pledge for 2020.

Wednesday, July 17, 2019

Keep Your Pledge Current!

Ever since Bob Malm’s $100,000 bonus, things have been a little tight money-wise for Grace Church. Don’t make Bob give up his month at the beach! Keep your pledge current! 

Tuesday, July 2, 2019

Really Scary

After wasting more than $1 million since 2004 on feckless priest Dysfunctional Bob, the church will probably take up a purse for him when he leaves. Pretty ironic, given how Bob’s action’s have damaged Grace Church.

Tuesday, December 4, 2018

See For Yourself: Grace Parishioners Asked to Pay Half the Cost of HVAC Rebuild, Despite Almost No Benefit to the Church

At a time when Grace Episcopal is barely hanging in there financially, there’s a dark cloud hanging over things. Specifically, members of the church are being asked to pay half the cost of replacing the HVAC systems in Merrow Hall, the wing of the complex that houses the school and the auditorium. Given the limited benefit to the church of the work, this expenditure, which is estimated to cost in total $626,440, is going to prove a difficult pill for members to swallow.

The work, which is confined to the Merrow Hall wing of the complex, comprises the auditorium, myriad classrooms, the tower rooms, and two small rooms on the third floor of the building — one of which has almost entirely been taken over by the school. In addition, while the offices and sacristy are not part of the same system, they should be included in the work, as the HVAC compressor on the roof that services these areas is already past end of life.

The problem comes into sharper perspective when one examines the question of who uses this space; it overwhelmingly is the school. Yes, the church uses several classrooms for an hour a week, and the auditorium for about two hours a week (coffee hour and La Gracia). The school, however, uses all the space, and on average 40 hours per week. Yet, per the terms of the agreement with the school, the church is being asked to pay half the costs. 

Yet if one looks at the use of the nave, the church uses it about five hours a week, while the school uses it one hour a week for its weekly chapel. (School staff refers to the nave as “our chapel,” and church officers as “volunteers in our chapel.” Not surprisingly, school parents often view the church as part of the school, resulting in a certain level of disrespect.) Despite this relatively high percentage of usage, however, the school contributes nothing to the cost of maintenance, utilities, and repairs when it comes to the nave. 

Similarly, the sharing of utilities favors the school. These costs are shared 50/50, despite the fact that the overwhelming majority of utilities are consumed by the school. As a result, and as a result of the school’s effective fundraising efforts, the school is relatively flush with cash, and will be able to pay for its share of the HVAC work from savings. (Amusingly, some vestry members in 2015 were very resistant to eliminating the $9,000 annual grant to the school, under the theory that “we then would be doing nothing for the school. Hardly.)

Nor is the school content to remain within its space. Over the years, it has managed to take over the clergy office attic, space in the undercroft, the music library (which was supposed to be temporary, but certainly has not been) and more. Indeed, at one point the school was trying hard to take over one or more of the vesting rooms, but it fortunately was not successful.

Is the school responsible for the church’s relatively lackadaisical attitude towards fundraising? Of course not. But at the same time, there’s little evidence that the school benefits the church. I mean, it’s not like students later become church members, or their families become long-term members. (In the past, some joined the church in order to get a discount on tuition, but pledges to the church from these “quasi-members” often were startlingly small, and a surprising number flew the coop the instant their kids graduated from the school. This discount is no longer available.) Indeed, if even half of each year’s graduating class became members, that would add up to 60 new families every year. This clearly is not the case.

The contingency funds for the project could also be an issue. Sensibly enough, the planning phase of the project includes $200,000 in contingency funding, which is a good idea when dealing with a 70-year-old building. Yes, the asbestos has all been removed, but a building that age invariably tosses contractors some curve balls, especially given the rather shoddy construction that formed the basis of the 1994 project. So, the church could wind up on the hook for another $100K.

True to form, the church has made no effort to save for this day. Even the fig leaf of the .05 percent of annual revenue, or $5,000, was zeroed out a few years ago in order to continue to pay Bob Malm’s outrageously generous compensation package. Meanwhile, staff is being asked to contribute to the costs of their own health insurance, and outreach is being cut, but Bob continues to live life large, with his annual month at the beach, his trips “out of town,” any time he feels like a week in Massachusetts or Georgia or elsewhere, and his autocratic control over the composition of the executive committee. Yet Bob has no game plan to grow the parish, no vision for the future, and no goals for tomorrow except to keep riding the Grace Church gravy train for as long as he can.

It’s time for parishioners to put the brakes on things and demand accountability from Bob, or make clear to Bob that it’s time to get the hell out of Dodge. The church simply cannot go on with an engaging but indifferent rector whose primary goals in life are to go jogging, hang at the beach, and play golf; and who evinces zero evidence of any genuine Christian conviction. Bob’s conduct over time has damaged the church on every front, and it’s time for change.

For the record, below is the current status of permitting with the City of Alexandria, which makes clear, inter alia, that the church has nothing to do with the project except to pay its share of the bill. Note the cost of the permitting and the fact that the city apparently has rejected the church’s mechanical plans as of today due to the lack of calculations regarding refrigerant quantity. Interesting, when you consider that the project originally was supposed to have been done last summer.

Ain’t it Great to Be Rich?

Wednesday, November 14, 2018

Grace Episcopal Church: Dispelling the Myth of a Balanced Budget

One of the things that’s troubling about Grace church’s governance is the enduring myth that the church has been running a balanced budget.The reality, however, is that it’s been running a deficit for many years.

Per the Financial Accounting Standards Board’s Statement of Financial Accounting Standards No. 93, issued in 1987, all nonprofits must include depreciation and amortization in their financial statements in order to receive an unqualified opinion during an audit. (Another reason Bob Malm’s claim of repeated “clean” audits is inherently suspect.)

What does that mean in practice? It means that while including depreciation and amortization in the financials doesn’t alter the church’s cash flow, it does hit the statement of financial activities, or SOA. The SOA is the nonprofit equivalent of an income statement. 

Thus, if we use a value of $1.5 million for the 1995 renovations and simply allocate them on a straight-line, annualized basis over the next 20 years, through 2015 there was an extra $75,000 every single year that was not included in the SOA. In other words, most years the church has operated on a loss basis due to its failure to cover the “using up” of its fixed assets.

The matter, of course, gets worse when one considers the value of the renovations to the organ and the choir loft. Roll these into the mix, and Grace has been losing well over $100,000 annually.

Of course, some will say, “Well, we raised money before, and we’ll do it again.” But that’s a foolish argument, for attendance continues to drop, and the really generous members of the parish, who have long helped hold the whole house of cards together, are fast reaching an age when their generosity will soon be coming to an end. Yet Bob Malm, the vestry, and the church as a whole largely ignore these issues.

It will be interesting to see what the future brings.

Friday, September 28, 2018

Of Finances and Fix-ups: Fiscal Woes Ahead for Grace Episcopal Alexandria

One of the challenges facing Grace Episcopal Church Alexandria aka St. Dysfunction is that, not surprisingly, it manages its finances only slightly better than rector Bob Malm manages his personal finances. Or in other words, it’s a case of “let the good times roll,” right up until the bill comes due. 

The painful reality is that the bill has arrived, and it’s big.

Consider: Just the project to restore the stained glass windows, an congeries worth more than $200,000, will cost north of $60,000. Not a huge portion of an annual budget that approaches $1 million, but when it comes on top of other projects that the vestry has been pointedly ignoring for years, a very heavy burden for a church that is barely making ends meet.

What are these other projects? They include the rotting wood trim (rake boards, window trim, exterior woodwork on the new narthex), the replacement of the ever-failing faux slate roof over the new narthex, the repaving of the parking lot, the replacement of failing double-pane windows (all of which have surpassed expected end of life), and more. Plus, there’s the issue of items failing before their normal end of life, including the condensing boilers, which have not been appropriately maintained since Mike Hix’s death, except for a brief period in 2014. Those little mechanical monsters are seriously expensive, and a major pain in the butt to replace. Moreover, I seriously doubt that staff or the volunteers who handle maintenance of the physical plant even know what I am referring to. Oh well.

The kicker, though, is lurking right beneath the surface. With the departure of more than 120 pledging units, and newer pledging units giving, on average, much less than more established members, the church is falling into a giving pattern consistent with that of dying churches, which is that remaining members ramp up giving trying to delay the end. Thus, there’s very little capacity left for remaining pledge units to increase their giving.

Moreover, there are three factors that undercut that effort over time. One is the demographics of the church, with top givers all now retired and facing limitations on their ability to continue their generosity. Two is the breakdown in Episcopal polity in the parish, which injects risk into the equation. By this I mean that, under the canons, there are only two ways to lose one’s membership in a particular parish: to die, or to transfer. Bob Malm, however, has decided to go rogue and create a third way, which is via the unilateral decision on his part, combined with a campaign of shunning and harassment. Thus, members are faced with an unfortunate reality: They are one falling out with Bob Malm away from losing their investment of time, talent and treasure in the parish. Third is the increasing realization that Bob is not the priest people thought he was. No matter how generous one’s feelings towards Bob, his courtroom lies and his willingness to go after innocent family members, including an elderly dying woman, provide unequivocal evidence of his real values. Ugly stuff, for sure.

Nor are the specifics of my dispute reassuring. Anyone who would pursue a dying woman in court, or try to eject innocent family members like Mike from the parish, is going to have few scruples when it comes to trying to throw others out of the church. (For the record, going after the defenseless is bullying, hence my nickname for Bob, “The Ballless Wonder.”)

Then there is the issue of a replacement for Fanny Belanger. Bob no doubt will try to delay hiring a replacement for as long as he can to balance the budget, but at the same time that means a reduction in pastoral care and other services parishioners receive. Not good at a time when Bob and the vestry are soon going to be asking members to do more in the form of ponying up $600K to get the school’s HVAC back on.

At the same time, working families at Grace find Dysfunctional Bob’s lifestyle to be alien to them. At a time when many, myself included, haven’t had a vacation in years, Bob’s month every summer at the beach, his regular “out of town” junkets, and his extravagantly generous compensation package, combined with his aloof approach and lack of servant leadership, speak to a superficial faith and indifference to the parish’s welfare. Or as one wag put it, “The only time Bob breaks a sweat is when running, or when playing golf.”

Moreover, the $100K bonus Bob got paid in 2014 is cringeworthy. In a day and age when top performers at companies like AT&T may hope to snag a $20,000 bonus, Bob’s bonus is both unseemly, and a really stupid idea at a time when the church is struggling financially.

Who knows? Maybe Bob will have a flash of Christian inspiration and decide to gift his $100K bonus back to the church.

Somehow I doubt it.