Showing posts with label church budgets. Show all posts
Showing posts with label church budgets. 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.


 

Wednesday, December 12, 2018

Pastor Buys Wife 200K Sports Car — Maybe Grace Episcopal Should Buy One for Bob Malm


Pastor John Gray, of Relentless Church in Greenville SC, has recently drawn criticism after buying his wife a Lamborghini for their anniversary. But I’m not sure what all the hullaballoo is about. After all, in 2014, Grace Episcopal aka St. Dysfunction gave Bob Malm a 100K bonus. I mean, what’s a few hundred thousand among friends?

Indeed, given that Bob is big into keeping up with the Hillers, maybe now is the time for Grace to buy Bob a Lamborghini.

Check it out at here.




Sunday, October 14, 2018

Grace Episcopal Church Pleads for Additional Funds as it Faces a Financial Crisis Caused by Poor Planning, Bad Behavior by the Church

Following its decision to try to silence critics by falsely claiming that the church was threatened by, in the words of attorney Jeff “Sugarland” Chiow, “domestic terrorism,” and its decision to try to drag a woman dying of COPD into court, Grace Episcopal Church is facing a growing budget deficit.

On the giving side, year-to-date income is down by approximately $50,000. Compounding that are the soaring costs of HVAC repairs, which, as I have posted previously, were entirely expected, but glossed over during the formulation of this year’s budget. In other words, the church budgeted too little money for these repairs, even though they were entirely foreseeable given the age of the physical plant, the extent of deferred capital investment, and the sorry state of major HVAC components.

As a result of these bad decisions, depending on how the church manages its Q4 expenditures, and how much revenue it pulls in, the deficit could easily surge beyond 10 percent of the annual budget.

Moreover, next year looks to be even worse. Not only will medical insurance premiums increase sharply, but the increasing average age of parishioners, the influence of natural attrition, the quickening pace of inflation, and the inability of parishioners to increase giving to offset the loss of further pledging units spells a perfect storm.

Additionally, the lasting reputational harm of the church’s decision, made at Bob Malm’s urging, to “discipline” me (his choice of diction) as a former member by filing a civil complaint against me claiming that various words, taken out of context, somehow consititute a threat, together with Bob Malm’s smear campaign against me, have greatly damaged the church’s reputation. For the first time, parishioners and members of the community alike can see in writing the sorts of things Bob Malm says about parishioners, and they are neither Christ-like, nor pastoral. Nor does this sort of tomfoolery reassure people about the church’s organizational or collective good judgment.

Meanwhile, Bob’s flying monkeys over on Fairfax Underground continue their efforts to prove just how toxic the church really is with their ad hominem attacks, untruthful statements and defamatory statements. And the emails between Grace parishioners and Bob Malm about me show just how ugly the behind-the-scenes discourse really is in this sad, dysfunctional church.

In short, Grace Episcopal aka St. Dysfunction is fast approaching a meltdown, and things are only going to get worse. In fact, my prediction is that, with members of the community increasingly aware of the church’s claim that it is a terrorist target, there will be a major decrease in attendance and giving during the Christmas holidays. After all, with Bob Malm invoking fictional church shootings in the fictional town of Sugarland Texas in his legal documents, my bet is people are wary on multiple fronts.





Sunday, July 1, 2018

The Financial Fragility of Grace Episcopal Church

Much was made in the closing months of 2017 about the fact that Grace Church has a budget surplus. But this triumphalism is both empty and dangerous for the parish, as it overlooks the parish’s tremendous financial vulnerability.

Let me start by saying that parishioners have stepped up their individual pledges by almost 17 percent over the past two years. That is a good sign, to be sure.

At the same time, however, the church has lost more than 100 pledging units during the same period of time. Additionally, costs relating to the physical plant are skyrocketing. Average Sunday attendance — a barometer of how compelling the fellowship, worship, and other Sunday ministries are — has dropped by more than 17 percent in the past two years.

But the real risk comes when you look at the concentration of giving in the parish. Three families, all well-known to parishioners, comprise well over 10 percent of all annual giving. Additionally, much of last year’s surplus is attributable to appreciated stock gifts from these same donors. It also bears mentioning that all three families are largely retired. That means that they days when they can support Grace at current levels are fast drawing to a close.

Yet safe money says that most vestry members have no understanding of this phenomena. Lose any one of the three as donors for any reason, and things get ugly in a hurry. Yet there is no plan to deal with this risk, and other than the trust fund, there is very little saved for the future. Indeed, as I have pointed out before, operating cash reserves are dangerously low, and nowhere near recommended levels for a church of this size. Yet the good times continue to roll, and cost structures remain much too high, including the massive expenditures necessitated by the cost sharing arrangement with the school. This means that utilities and other non-fungible costs are shared 50/50 with the school, despite the fact that the school consumes the lion’s share of utilities, and causes much of the wear and tear on the building and grounds. Yet there is little evidence that the school produces members for the church or otherwise benefits the church’s long-term mission.

In fairness, the school is much more collegial these days, and the old empire-building days on the part of the school seem to be over. Additionally, Patty, the new head of school, appears both more approachable and more engaged than was Chris Byrnes. Nonetheless, I continue to have long-term reservations about the willingness or ability of parishioners to subsidize the school.

It’s also curious. Even when the vestry was urged to cut back in 2014, parish leaders responded by saying that there was little to cut back. And yet more than $80,000 has been pared from the budget in recent years, including ending the ludicrous $9000 annual grant to the school, which was both unneeded and silly in light of their church’s subsidy of the school’s operating costs.

The upshot is that the church would be wise to start from a zero-based budget, then to ask what programs are ministries are essential, and budget from there. Nor should there be any more bonuses to Bob Malm or other staff absent an annual performance review and the achievement of specific and measurable outcomes. Hint: Bullying and shunning should not be part of any clergy person’s job performance, ever.

Wednesday, June 20, 2018

Here’s What a Church Budget Should Look Like

Earlier, we discussed the hot, dysfunctional mess that has been Grace Church’s financial reporting for most of Bob Malm’s tenure as rector. While some Planet Malm flunkies like to claim that there is “complete financial transparency” at the church, one only has to look at the opaque presentation of budget information, particularly salaries, to know that it is anything but. Nor is it posted on the parish website, which itself speaks volumes to the state of governance at Grace Church.

This post shows an excellent example of a church budget, as found on the St. Alban’s Annandale website. (BTW, kudos to my buddy Paul for being there. The church is richer for having you.)

First, as stated earlier, the budget is available via the church’s website. No need to ask for it, to look for it on the bulletin board in the downstairs hallway, etc. Instead, it’s available for all the world to see, under the vestry section of the church’s website. That sends a very public message about transparency and accountability in the church, and allows prospective members and donors to see, without making a big deal of it, how the church spends its money, even before visiting the church. In this post-Enron day and age, that’s huge.



Even more important it the breaking out of budget items by line item.That includes the rector’s compensation, the compensation of other staff, and more.








Check it out...everything is there. Yes, I get that this may not be comfortable for clergy or church staff, but it’s much the same regime as ethics disclosure forms for government employees. And the funds are donated, so why shouldn’t donors have this information?

Digging a little deeper, are there issues at St. Alban’s that are revealed in the financials? Yes, there are. These include the fact that the parish is drawing funds from its management reserve to balance the budget, which may or may not be a problem, depending on the root cause. Also, the limited amount of money allocated for the audit makes clear that the church does an Agreed-Upon Procedures (AUP) of the financials, which probably is not adequate for a church of this size.

But these issues are out in the open. 

Further rummaging around the church website makes clear that the parish does, in fact, do an AUP. The good news, though, is that the entire vestry sees the report and has the chance to answer questions. And with full disclosure of budget line items, including salaries, there is much less possibility of wrongdoing or hidden surprises.

Church minutes further reveal that there is a meaningful finance committee, which takes an active interest in the financial health of the parish and understanding the nuts and bolts of the budget. No having to ask the parish administrator for the audit report and being told no, as happened to me at Grace. (Why would that even be an issue? The fact that it was is profoundly troubling and speaks volumes to the state of affairs in the parish.)

Even better, the church provides budget-to-actual figures, which allow people to ask the hard questions and promotes accountability.




Looking at the church’s vestry minutes, there are some other really positive signs. These include a formal strategic planning process, using data derived from a parishioner survey; as well as proactively planning and budgeting for HVAC replacement. 

That compares favorably with Grace Church, which has ignored the fact that much of its HVAC has beyond beyond actuarial life for between four and nine years now. As a result, Grace will not only be dealing with a lack of HVAC on the third floor until well into 2019, but it has to borrow money for replacement—the most expensive way possible to fund the work. Meanwhile, the church is only vetting prospective vendors and getting quotes after failure of major system components.  This represents an appalling debacle that should never have been allowed to happen in the first place—and I can assure you, decision makers at Grace, including Bob Malm, have been given multiple heads-up about this sad state of affairs.




Is St. Alban’s a paradise in which problems and conflicts, including governance issues, don’t exist? Of course not. Are there things the church could do better? For sure. Even just a quick read of church governance materials shows, for example, that there is some conflation of strategic and tactical planning. That said, governance at St. Albans represents a massive improvement over the sadly dysfunctional system under Bob Malm and his appointed executive committee













Sunday, May 6, 2018

The Shocking Decline of Grace Church

One of the myths perpetuated by Bob Malm is that Grace Church is holding steady in terms of membership and finances. The reality, however, is far different.

When Bob first came to Grace Church, roughly at the same time I graduated from law school, the population of Alexandria was 111,198 per the US Census Bureau. Today, the city’s population is 160,035, representing an almost 44 percent increase. During that time, the parish has not increased by a similar percentage, but rather has continued its slow decline. Thus, when membership is correlated with local population, it is clear that the church has lost “market share” by roughly 50 percent during Bob’s tenure.

Attendance similarly is down. While some of the numbers for attendance at divine worship in years prior to Bob’s arrival are suspect, there can be little doubt that attendance is down sharply over time. Indeed, some early reports suggest that Easter and Christmas worship often topped 1000 persons, a number that seems improbable given the small size of the nave. There can be little doubt, however, that the numbers far exceeded those of today, when average Sunday attendance (ASA), a key measure of congregational health, runs about 275. Moreover, the sharp decline in ASA since 2015, roughly 31%, does not bode well for the church. This speaks to the value that people perceive in the opportunities for community, fellowship, and worship that the church provides.

Similarly, total pledges have dropped precipitously during the last five years, from $890,000 to about $780,000, a decrease of more than 12 percent.

Meanwhile, the relatively constant budget, which has been subsidized by gifts of appreciated stock, as well as increased reliance on the relatively modest trust fund, masks an ongoing decline in purchase power. Assuming, for example, a steady budget from 2007 to 2017, inflation during that time results in a 15.41% decline in financial capacity. Similarly, a steady budget from 1989 to 2017 results in an almost 50 percent decline in purchasing power.

Even more alarming is the precipitous decline in pledging units. From its recent high of 340 pledging units, the parish has seen the number plummet to roughly 220, a drop of 35.29%. This, I believe, is attributable to Bob’s having stayed far too long as rector, as well as the deleterious effects of conflict in the parish, including my own dust-up with Bob. (Too often, Bob models behavior that says it’s okay to engage in inappropriate conduct. But I digress.)

Compounding matters is the disparate giving of young couples and newer members versus long-term members. Several families, all long-time members, give very generously to the parish, offsetting declines in giving from other quarters. Eventually, however, these families will no longer be able to support the parish at these levels, which will result in an abrupt decline in revenue. With budgets already perilously thin, any decrease in revenue would prove painful, to put it mildly.

Similarly, committed members of the church have stepped up their giving in recent years in an effort to offset the parish’s flagging fortunes. As a result, the average annual pledge now is $3,300, but there are signs that people are fast maxing out. Thus, continuing declines in acquisition of new members, together with natural attrition of existing members, spell a perfect storm in the making. This will be exacerbated when, sometime in the next 5 years, Bob packs it in and retires. While the fresh air will ultimately good for the parish, in the near-term his departure will result in additional declines in attendance and revenue.

There’s another wrinkle in all of this, which is that, when Bob does head off to Jekyll Island, the parish will have to learn how to fully function within the Episcopal tradition. For example, the canons require that the vestry elect the executive committee; it may not be appointed by the rector. (Sorry, folks, a thumbs-up vote is not an election, unless you’re in Cuba. And maybe not even then.) So, there will be a period of adjustment as people learn to live into the tradition of representative democracy envisioned in Episcopal polity.

Of course, people will also have to unlearn Bob’s focus on the same ol’, same ol’. The world changes and evolves, yet very little except the organ and choir loft has changed within the church since 1994. Yet any organization that cannot change with the times is doomed to die. Nero may have fiddled while Rome burned, but Bob ran, hung out at the beach, and played golf.

The bottom line: Grace Church is in a period of sharp decline that likely will become a perfect storm during the next five years. This paradigm is exacerbated by the church’s reluctance to look the issue in the eye, to engage in strategic planning, and to ask the question, “What’s next?” Or, as the old saying in organizational consulting goes, “If you don’t know where you’re headed, you’ll surely get there.” If it is to survive, the church will need to radically transform itself from a 1970’s vintage model predicated on clericalism to a model that reflects the realities of the 21st century.

It may well be that the parish will not be successful in making this transition.

Wednesday, February 7, 2018

Grace by the Numbers

Did you ever wonder what effect Bob’s vendetta against me has had on the parish? The numbers are telling.

Since 2015, when this dispute first broke out, the parish has lost more than 100 pledging units. This includes long-time members like John Cunningham, who, in a Facebook post, confirmed that he too had experienced relational and other bad behavior while at Grace church. As a result, the church now has roughly 220 pledging units—a number fast approaching the tipping point into unsustainability.

Income has been somewhat buffered by the fact that remaining members have been stepping up their giving. Even so, final pledges for 2018 will probably settle in at around $760,000–a far cry from the $895,000 and higher figure of previous years.

Within those numbers is another troubling data point, which is that new pledging units are typically much smaller than the historic roughly $3,100 average pledge. That combines with the fact that millenials loathe the fact that organized religion often, in their view, shows no better ethical reference point than the world at large, and Bob Malm’s campaign of shunning and harassment suggests it’s going to be a tough slog to get 20- and 30-somethings in the door.

Then there is the whole over-the-top nature of Bob’s vendetta. Most people understand that churches are not immune from conflict, but the fact that Bob has continued his bullying for what soon will be three years speaks volumes to his real priorities. Additionally, most would conclude that locking horns with a woman who is terminally ill (my mother) is a bad idea, if for no other reason than it’s really bad PR, not to mention really bad karma. But Bob seems immune to those sorts of considerations. It’s his vendetta, and he’ll have one if he wants to, seems to be the rallying cry. The best interests of the parish seem not to even be a consideration.

Nor are the vestry or other parish “leaders,” showing much common sense when it comes to leadership. You’d think that, between the bunch, someone would realize that ongoing conflict is incredibly destructive for a voluntary organization like Grace church. But folks seems determined to stay the course, no matter how damaging it is for the parish over time. And why not? They have a letter from Bishop Shannon that basically eggs them on.

Of course, it’s at that point that one sees the crux of the problem: Bishop Shannon is very concerned about who blogged what to whom, all the while forgetting about the people involved. Never once, for example, has he reached out to my mom and asked how she is doing, or showed concern for her. To the contrary, he has brushed off her concerns in writing. So why wouldn’t she be upset? And why wouldn’t she share her unhappiness? Of course, it’s at that point that the diocese tries the whole, “It’s not nice to object publicly to being thrown under the bus,” (yes, that is a metaphor) all the while conveniently overlooking the fact that it was the organization that threw you under the bus.

In all of this, it’s hard to know whether the diocese or Grace church is the bigger mess. But no matter which you conclude, it’s a hard-fought race between the two to come out on top.