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

Thursday, July 23, 2020

St. Paul’s Preschool Covered on My Flagship, Anglican Watch

St. Paul’s Alexandria

As a follow-up to my previous post about former Grace head of school Chris Byrnes showing up as alleged interim head of school at St. Paul’s Alexandria, I have posted an article on my flagship, Anglican Watch.

As things stand, St. Paul’s appears headed for serious financial issues, compounded by poor staffing choices and a lack of even basic good governance, including financial transparency and reporting. Additionally, Chris seems poised to engage in many of the same behaviors that were problematic at Grace Church, including manipulation, triangulation, and empire building.

Here’s hoping that folks at St. Paul’s take the challenges they face seriously as we all struggle to make it in the midst of the pandemic.

For the record, as of press time the church had not responded to my request for comment. I presume it would have been quick to do so had it had good news to report.

Sunday, May 24, 2020

See for Yourself: Perjuring Priest Bob Malm Served Additional Request for Admission

Earlier today, I served an additional Request for Admission to perjuring priest Bob Malm. This brings the total to 35.

In this one, I look at that reasons behind my concerns about church governance, which include allegations that Bob lied repeatedly to vestry members. Needless to say, this does not lead to a whole lot of confidence in Bob’s overall leadership.

More on the various legal actions against perjuring priest Bob Malm, Grace Episcopal Church and perjuring priest Bob Malm’s family in the coming days.

Saturday, December 14, 2019

Positive Signs at St. Dysfunction, aka Grace Episcopal Church

As Grace church begins the lengthy process of transition, there are some positive signs. The church, diocese, and vestry deserve kudos for these changes.

First and foremost, we see the wardens and vestry finally assuming their proper role under the Episcopal canons. Instead of Bob Malm personally choosing the executive committee, which is a violation of the canons, and then controlling decisions via his hand-chosen inner circle, we are seeing the wardens and vestry actually exercising leadership as they communicate with the parish, make decisions, and try to map out a path forward for the parish.

Second, we are seeing the parish back away from Bob Malm’s knee-jerk instinct towards controlling and restricting the flow of information. This includes publishing pledge totals (versus deliberately vague information), and greater transparency about decision making. 

The problem with Bob Malm’s approach is that secrecy is deadly to a voluntary organization like a church, which depends on the labor, giving and participation of members. Instead of accurate information, secrecy begets the ugly gossip that has roiled for years right behind the scenes at Grace church, ranging from rumors of affairs, to speculation about the sexual orientation of married persons, to claims that one person had a penile implant (seriously!). Such rumor and speculation may seem like harmless fun, but it’s ugly, damaging, hateful, and a powerful disincentive for outsiders to join the church. And it’s often used by persons like Alison Campbell when they want to play the Mean Girls game.

Ironically, Bob’s efforts to control information, which were intended to curtail my access to information, had zero effect on me, other than giving me one more topic to blog about. Data regarding parish giving and governance is readily available via other sources and, like all organizations, there are always plenty of internal sources to leak data. Indeed, more than one member has speculated that all the secrecy means there must be something to hide—which, given Bob’s perjury and other misconduct, is spot-on.

Going forward, the church would be well-served by returning to publishing vestry minutes. The reality is that posting this information on the bulletin board outside the office door does nothing. Yes, persons may glance at it, but no one is really going to glean much information as they try to read it standing in a busy hallway. Similarly, few are going to go to the trouble of contacting Amy Medrick, which in itself alerts clergy to their interest in governance issues.

Similarly, the parish annual report should be on the website. Not providing it keeps nothing secret, and I am well aware of the sharp declines under Bob Malm  in pledging units, average Sunday attendance, and other barometers of parish health.

Same for the parish budget. As I have said in previous posts, both the budget and the so-called audit should be available on the website. Lisa Medley claims there is “complete transparency,” but that is absolute bullcrap. Indeed, the vestry does not see the audit engagement letter or the results, let alone parishioners, and existing safeguards were not adequate to prevent Richard Newman from being overpaid for many months, until Jeff Aaron spotted the issue. (I have always suspected that his disclosure of the matter resulted in Bob Malm shoving him out the door. Bob does not like it when his negligence comes to light.) Nor were they adequate to detect the thousands of dollars in unaccounted-for stale checks and cash found in the parish administrator’s office after she retired in 2014.

Keep in mind, too, that the parish will soon have to compile a parish portfolio as part of the search process. All this data needs to be included, and not in a glossed-over manner. The reality is that Bob Malm’s tenure ended with the parish in a period of precipitous, perhaps terminal, decline marked by conflict, outrageous clergy misconduct (aided and abetted by Sugarland Chiow and the vestry), declining giving and participation, and an utter lack of any sort of strategic plan or vision for the future. Indeed, during his final five years, even Malm’s admirers felt that he was thoroughly burned out, indifferent, and focused simply on paying the bills long enough to make it into retirement.

The good news in all of this is that the current wardens are well-suited to the task at hand, and hopefully future wardens will be as well. That said, there remain serious questions about the ability of the parish to recognize, let alone address, the mess left behind after 30 years of Bob Malm.

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, February 16, 2019

Grace Governance Gaps: Trouble in the Offing

In previous posts, I reported on the various governance gaps at Grace Church. With the church presently working towards replacing its HVAC systems, and to obtain funding for this project, I believe it’s timely to revisit these issues. Most importantly, I want to flag for readers a big issue, which is that there’s a huge governance gap in the breakdown in communication between the school board and the vestry.

To begin, serving on the vestry creates a fiduciary legal obligation on the part of vestry members. This means putting aside one’s own interests and acting according to the highest legal and ethical standards in the interests of the beneficiary. In this case, the beneficiary is the parish itself.

This obligation, which includes the obligations of due diligence and reasonable inquiry, is reflected (albeit poorly) in written parish policy, which requires that the executive committee see school board minutes and the school’s financial reports. This in itself does not go far enough, for the school is part and parcel of the parish, and has no existence independent of the church. Thus, the fiduciary obligation of vestry members extends to all vestry members, not just those on the executive committee.

That said, the practice in recent years has been to ignore those requirements, with only Dysfunctional Bob Malm seeing these school documents. That’s hardly reassuring, as Dysfunctional Bob allowed church financials to become a hot mess over a period of years, as acknowledged in the vestry’s own minutes more than a year after Charlotte Payne Wright’s departure as parish administrator. Nor was he alert to potential problems; director of music Richard Newman was overpaid for many months before the matter was discovered by then-director-of-parish-operations Jeff “Airhead” Aaron. As a result, Richard was forced to repay the sum, despite the fact that he was hardly overpaid at the time. Moreover, the news may have had a deleterious effect on the relationship between Dysfunctional Bob and Jeff, as shortly after Jeff broke the news things appear to have gone south for Jeff, and a few months later he transitioned to a new job.

Of course, Dysfunctional Bob is quick to say, “Well, I see them.” But that’s exactly the point: Leaving Dysfunctional Bob in charge of money or financial reporting is worse than no supervision at all, for it gives the illusion of security, despite the evidence that Bob is feckless at best when it comes to these issues.

To make matters worse, when I brought the matter up, the vestry subsequently decided it didn’t need to see these documents, as it might make the school board feel that it’s not trusted. Big mistake. One cannot readily delegate away one’s fiduciary obligation as a vestry member, and saying, “Well, I trusted Bob and the school board,” isn’t going to cut it. Too bad Jeff “Sugarland” Chiow didn’t wade in on this issue — it would have been a far better use of his time versus subsequently trying to drag dying people into court. And yes, I am referring to my mother.

So what exactly is the risk? My take on it is that school internal controls are good—certainly vastly better than the almost non-existent controls at the church. Instead, issues are more likely to come up in the context of errors, omissions, and misunderstandings. For example, I have heard school board members glibly say of the parish budget, “We won’t have a deficit if we move money over from reserves.” Well, yes, you will still have a deficit. Money from reserves is not income, and you will still have a deficit, no matter how you choose to cover the bills.

So what could happen? I’d say the biggest risk is that the school incurs liability that could attach to the church. For instance, an incident of child sexual abuse would, even if covered by insurance, prove devastating for both church and school. And heaven knows, there are gaps a mile wide in both the church’s and the school’s prevention efforts. So while Dysfunctional Bob stirs the pot with fears of an active shooter (a phrase that he likely didn’t even know in 2014), the far greater threat is internal misconduct.

Similarly, a bad investment decision by the school could result in liability for the church. To use a real-life example from another non-profit with which I am familiar, suppose the school took out a loan containing a derivative. These are surprisingly common, and if the school’s loan contained an interest rate swap, versus a cap or collar, it could soon be on the hook for millions of dollars in payments. As I said, this happened to one prominent northern Virginia non-profit, with devastating results, and all because the executive director did not have adequate board supervision.

Needless to say, these risks are exacerbated by the church’s present precarious financial position. As I have said many times, cash reserves are far too thin for comfort and structural costs far too high, including the fact that 1 out of every 5 dollars the church pulls in goes into Bob Malm’s pockets. What’s really telling, too, is that the church has lost more than a third of its pledging units at a time when the Northern Virginia population is growing. Thus, the church is in a period of precipitous decline, despite the fact that the community around it is burgeoning.

As I have said before, Grace’s woes are compounded by the fact that Dysfunctional Bob must, under church canons, retire within the next few years. Such events are inevitably problematic, but all the more so when, as here, 1) Bob has stayed for more than 30 years and 2) Bob has created a narcissistic paradigm that focuses people’s attention on him and the church, versus on God. Pull Dysfunctional Bob out of the toxic crock of goo and there will be a hot mess on the diocese’s hands in record time.

To make matters still worse, the parish has very few real leaders. Real leaders tend to leave once they understand the problems at Planet Malm, replaced by sycophants, enablers and admirers who allow Bob to pretty much do as he pleases — a paradigm that Dysfunctional Bob both encourages and exploits. Thus, with Bob gone, there will be no meaningful plan B. And the true leaders in the parish simply don’t have the sway to influence the Planet Malm drone population.

So, a shout-out to candidates for assistant rector and potential lenders everywhere: Look before you leap. Things are gonna get ugly on Planet Malm in the next few years. Guaranteed.

Tuesday, January 15, 2019

A Blast From the Past: Internal Controls Checklist

As the St. Dysfunction vestry meets tonight to discuss, inter alia, the church's 2019 budget, here's a great bit of context I came across from my old blog: A completed version of the Episcopal Church's internal controls checklist. The denomination asks that all parishes complete this as part of the annual audit required under canon law.

As you can see, despite (or perhaps because of) Dysfunctional Bob's 29 years with the parish, the church's internal controls are a hot mess. More to the point, there basically are none.

Needless to say, this evinces a profound lack of respect for the generosity of church members. I mean, how the hell can Bob Malm get paid more than many bishops, but he can't be bothered with basic aspects of his job, like this?

While my normal copyright forbids any usage or reproduction of content on this site, permission is granted to church auditors, loan officers, and bankers to reprint this and use as needed.

Here it is, in PDF.

Friday, January 11, 2019

More on Bob Malm’s 2014 Bonus

By the way, when one contemplates the wisdom of paying Bob Malm a $100,000 bonus in 2014, especially in light of the church’s failure to plan for the replacement of the school’s HVAC system, it’s important to know that there were vestry members who wanted to give Bob the full $200,000. That’s right, folks, there were vestry members with so little financial common sense that they wanted to give away $200,000 of the church’s funds.

This includes Lisa Medley, whom Bob Malm later asked to serve as senior warden.

So, when Bob pulls his usual trick at the upcoming parish meeting of taking zero responsibility for the hot mess that is Grace Church, just remember: Bob appoints the executive committee. Thus, he is responsible for both its direction and its decisions. And members of St. Dysfunction have a right — and I submit, an obligation — to ask some tough questions.

All of this is donated money, and interest on donated money. Donated money should not be used to pay $100,000 bonuses. If Bob wants a bonus of that magnitude, he should get a high-level corporate position, rather than working for a non-profit church.

Sunday, January 6, 2019

Grace Episcopal: Lack of Accountabilty

One of the recurring themes in my experiences with Grace Episcopal, aka St. Dysfunction, is lack of accountability. Lack of accountability by Bob Malm, by the vestry, by parish “leaders,” by Jeff “Sugarland” Chiow, and more. As I’ve said many times, where but church can a key employee, Bob Malm:

  • Lie to vestry members about important HR issues (“don’t worry about it, they’ll be retiring this year,”)
  • Lie in court
  • Fail to  adhere to basic organizational policies (like the canonical requirement that the vestry elect its officers)
  • Lose track of thousands of dollars in funds (like those found in the parish administrator’s office)
  • Generate facially inaccurate financial reports
  • Deliberately misuse funds (like our memorial donations)
And still keep their job? And get a $100k bonus on top of that?

I was happy to see that my sentiments about churches generally were recently echoed by my friend Dee Parsons, who tweeted this:

Saturday, January 5, 2019

Before You Pledge, Know This: 1 out of Every 5 Dollars Goes to Bob Malm

As you consider pledging in 2019, it may be helpful to look at Bob Malm’s compensation in light of the church’s overall financial condition. Here is a quick summary of Bob Malm — by the numbers.
  • Compensation as part of total parish annual budget
    • Total church annual budget: ~ $1 million
    • Total Bob Malm compensation, including indirects: ~ $200,000
    • Percentage of church revenue devoted to Bob Malm compensation: ~20%, or 
1 out of every 5 dollars goes to Bob Malm!
  • Highest paid bishop on presiding bishop’s staff annual income, including housing, per DFMS annual financial report:
    • $166,519
    • Bob Malm annual compensation: Higher!

  • Annual compensation versus local average
    • Alexandria mean annual family income per CityData: $89,200
    • Bob Malm annual income: Almost twice this number
  • Annual leave
    • Average annual leave for employees with 20+ years’ experience, nationally: 20 days (16 days actually used)
    • Average annual leave for Bob Malm: 35+ days (all used) (does not include sabbatical)
  • Average annual bonus
    • Average annual bonus per Monster: $1,797
    • Bob Malm average annual bonus, based on $100,000 bonus paid in 2014: $3,333
  • Average Alexandria home value:
    • $476,900 per US Census Bureau
    • Bob Malm home value: $734,263 per Zillow (note that this number is probably high due to deferred maintenance on Bob’s home, lack of improvements)
Keep in mind, too, that Bob’s almost $200K in annual income is not the same as your $200K, or my $200k. 

Why is that? 

It’s because federal tax law treats Bob’s housing allowance AND his mortgage as both deductible. When this double dip is factored in, Bob’s putative compensation is well north of $200K.

So, before you give sacrificially, consider this: 1 out of every 5 dollars you give does NOTHING to fund the church, but instead subsidizes Bob Malm. And even as the church’s financial position continues to deteriorate, Bob gets paid no matter what. Ministries may lose funding, but by gummy, the gravy train and the good life continue for Bob Malm, even though church governance has been a train wreck for much of his time with the church.

Caveat emptor.

Friday, December 21, 2018

Notice Something Amusing? Grace Church Further Retreats from Good Governance

One recent amusing change is that Grace Church has pulled the vestry minutes from the website. Leaving aside the fact — the “burning question,” as Kemp Williams would call it — that I don’t rely on the website for access to the vestry minutes, it shows how utterly clueless Bob Malm and the church are.

Why is that? It’s because when an organization is in crisis, which St. Dysfunction clearly is, the secret to turning the situation around is utter — almost ruthless — transparency. That’s right, warts and all, you make a public commitment to transparency and accountability.

Going the opposite direction suggests to detractors, of whom Bob now has many, both within and without the church, that you have something to hide. 

And indeed that is the case. Bob is eager to reduce awareness of his multiple courtroom lies, his lies to parishioners (ranging from his infamous, “Don’t worry about it, they’ll be retiring this year,” to his claim, in writing, to multiple parishioners, that I agreed at the Fredericksburg meeting to adhere to the bishop’s “directives” — a curious proposition for someone not then even a member of the diocese of Virginia). Indeed, in utopia, Dysfunctional Bob would get a confidentiality agreement and the opportunity to slap a little Jesus-babble on things, with his usual inane claptrap about moving forward in grace, love and peace, as he continues to avoid accountability for his actions.

Moreover, Bob would like to shield from view the church’s collapsing finances and attendance. Yet the reality is all of that data gets reported to the national church and is a matter of public record, and available online to anyone who may be interested. Moreover, any church that can’t or won’t publicly share its board/vestry minutes, financial reports, and budget is one of which you should be most wary.

In short, at a time when numerous questions remain about the multiple governance issues and problems at St. Dysfunction, it’s utterly boneheaded to try to be clever by withholding information.

Speaking of, if you’re pledging at Grace Episcopal, did you ever get an good explanation as to the thousands of dollars of cash and stale checks found in the parish administrator’s office when Charlotte left? As in how it happened, and why no one discovered it for years? Or what steps have been taken to prevent a repeat? As I have said before, “We trust Beth,” is NOT an internal control.

I’ve got $100 that says the best anyone has gotten is some deflection from Dysfunctional Bob about how “we all knew Charlotte had to go.” Which does absolutely nothing to answer the question.

My advice if you are pledging: Caveat emptor. There is less transparency at Grace Church under Bob Malm than there is at many evangelical mega-churches, and this should make you very, very cautious.

In the meantime, check out this screen cap from, especially the part about increasing donations. Hashtag clueless.

Wednesday, July 25, 2018

Churches and Liquidity Targets

Speaking of St. Dysfunction  Grace Episcopal and its governance/financial management, there’s a good article on churches and liquidity targets at:

Before you ask, the site is affiliated with the Assemblies of God. Given The Episcopal Church’s long history, and Bob Malm’s more than 40 years of “ministry,” it’s surely a sad day when Grace Church vestry members in most cases don’t even know what a liquidity target is, but our sisters and brothers in the Assemblies of God do.

And, as I have stated on here before, Bob Malm does the church and its vestry a grave disservice when he tells folks that “funds held for others,” otherwise known as restricted funds, can be repurposed to cover shortfalls. Unless the original solicitation clearly stated that the funds could be used for purposes other than that for which they were solicited, to do so without donor approval is illegal. Of course, given Grace’s dysfunctional record keeping, in most cases that’s going to be problematic, because there is no system under which the church tracks its restricted solicitations and restricted donations.

Moreover, at a time when the church is paying for lavish farewell parties and 100K bonuses for Bob, historically it hasn’t set aside 10 percent of its revenue for purposes of maintaining liquidity by building savings. It hasn’t set aside five percent. It hasn’t even set aside 1 percent. 

Historically, the church has set aside one-half of 1 percent in savings, or $5,000 a year, out of a budget of almost $1 million.

As a result, the church now is proposing spending what will likely total more than $60,000 in interest to borrow the funds needed to keep the HVAC on in the building.

And that is the very definition of “dysfunction.”

Reality Check: Grace Church’s HVAC Project Signals Big Trouble Ahead for the Church

One of the recent discussions amongst the vestry, clergy and staff of St. Dysfunction, aka Grace Church, is about how to fund next year’s HVAC work in Merrow Hall. As a component of that discussion, some have suggested that a capital campaign is not necessary, but that the church should borrow the funds needed for the work, and that it may be possible to pay off a loan of that sort within five years.

Those discussions illustrate three key points:
  1. The management of the church and its temporal affairs has been inept, at best.
  2. The proposed HVAC project is problematic on multiple fronts.
  3. The church’s problems extend far beyond the issues at hand.
Before we go further, some important context. 
  • Today, twenty-four years after the 1994 renovations, major HVAC system components already have outlived their actuarial life expectancy by four years. In other words, the church has been living on borrowed time for years. The failure of the HVAC system in key areas of the building now drives home the fact that this issue cannot be ignored any longer; nor can one ignore the fact that the church has done nothing to prepare for the inevitable.
  • The primary beneficiary of this project will be not the church, but the school. The school uses rooms in Merrow Hall for more than 40 hours a week, while the church directly uses the space for about four hours a week—two for La Gracia, and two for coffee hour, or  about 9% of total usage. Yet half of the projected $1.2 million cost is to be borne by the church.
In the case of the nave, however — the focal point of the parish — total usage is about 9 hours a week. Of that total, roughly 8 hours is attributable to the church, while 1 hour a week represents the school’s weekly usage. (These numbers shift somewhat in the summer, but the for-profit summer camp that has used Merrow Hall over the past few summers largely has kept the ratio relatively constant, while greatly increasing wear and tear on the building.) Thus, the school’s usage represents about 11% of the total, yet there is no cost share. This, despite the fact that school staff refer to the nave as “our chapel.”

Meanwhile, the nave’s air conditioning is inadequate on hot days, or when load is heavy, as happens with large weddings or funerals. Yet there is no plan to address the serious issues with the system, including:
    1. The inadequate airflow available via the existing ductwork.
    2. The lack of humidity control.
    3. The temperature differential surrounding the pipes of the organ, resulting in it being frequently out of tune.
Thus, one wonders why these issues weren’t addressed in 1994, and why there is no plan to address these issues now, despite the proposal to spend more than $1.2 million on an HVAC project that primarily benefits the school.

Looking at the Numbers

Now, let’s look at the numbers.

As currently envisioned, the church’s share of the costs of the project will come to $600,000. Assuming the church can raise $100,000 of that (a doubtful proposition), that would leave $500,000 to be borrowed. Assuming the five-year term presently discussed by the vestry, and the 5 percent interest rate also discussed, the monthly payment would be $9,435.62. Total cost of the loan, excluding origination and processing fees, and the full audit likely to be required by the bank (an estimated $20,000 expense), would be $566,137.01.

Given the church’s tight budget, its ability to come up with an extra $113,000 a year seems improbable. Even assuming that the entire $40,000 annual draw on the trust fund is devoted to repayment, that leaves a gap of $73,000 annually. Thus, predictions that the church could pay the loan off in five years seem optimistic, at best.

There is, of course, also the issue of interest. By virtue of borrowing the money, versus paying cash and carry or having a capital campaign, the church will wind up paying $66,137.01 in interest over the life of the loan—a bad example of interest working against you, versus saving and having interest working on your behalf. Plus, again, there are the indirect costs of acquiring a loan, including the likely $20,000 cost of a full audit (not a bad investment, though, considering the dismal condition of church records in past years), origination fees, title search fees and all the other incidentals that make borrowing money such an unpleasant experience.

Keep in mind, too, that $66K is roughly the annual cost of one full-time assistant rector. Or, put in other terms, it’s a lot of money to be giving to a bank, when it could be used for ministry, helping the needy, and more. 

As I’ve said before: Not saving for the future tells me the church doesn’t think it has a future. And given the average age of parishioners, and the relatively few whose estate plans include the church, it’s just plain foolish not to save.

Can the Church Even Get a Loan?

But would the church qualify for such a loan?

There is reason to be dubious. Consider:
  • The church has lost more than 100 of the 320 pledging units it had only a few years ago. 
  • Average Sunday attendance, or ASA (a key metric of parish health), has dropped by 17% over the past two years.
  • Pledge revenue is down sharply, and it was only year-end gifts of appreciated stock and other major gifts that kept the church from running a deficit last year. 
  • The church devotes no portion of its pledge income to savings, and, as stated previously, is dangerously reliant on a handful of major donors, some giving more than $60K annually. Loss of even one of these pledging units could throw the church’s finances into a tailspin.
  • The church has burned through much of its management and replacement reserves, in some cases drawing on savings to fund luxuries like Chris Byrnes’ farewell party. And, of course, there is the $100,000 bonus paid to Bob Malm in 2014.
There also are signs that parishioners are getting stretched pretty thin. Participation in events like the altar guild tea is sagging, as are flower donations and other non-essential expenditures. Loss of any further membership or giving well could push things to the breaking point.

Of course, to qualify for a loan, the church would need to submit a repayment plan to its proposed lender. Additionally, under Canon 14 of the diocese of Virginia, debt exceeding 20 percent of the prior year’s total receipts must be approved by the diocese. Total receipts cannot include funds from an endowment when such funds are designated for other purposes, which means that repairs paid for by the endowment in 2018 cannot be counted as revenue for purposes of the 2019 project.

Moreover, when one looks at the diocesan debt repayment worksheet available here in PDF, it asks the same sort of tough questions any good banker would ask, including growth or decline in number of pledges, as well as pro forma budgets for the next five years. The latter is problematic, if for no other reason than Bob Malm must, under church canons, retire by the time he turns 72. That will almost certainly erode revenue, as this happens at all churches when there is a change of rectors. And in Bob’s case, having lingered on for 27 congenial but ineffective years already, the effect of his retirement likely will be substantial.

There’s also the challenge that none of this occurs in a vacuum. As noted in a previous post, the faux slate roof needs to be replaced, numerous double-paneled windows need to be replaced, there is extensive deterioration of the rake boards, window trim and other exterior wood, the stained glass is due for restoration, the parking lot is due to be resurfaced, and much of the interior finish of the 1994 renovations is at the end of useful life or beyond. Thus, overall costs will continue to climb in the coming 5-10 year period. Meanwhile, given the average age of the parish population, one should expect the number of pledging units to decline during that time. Plus, there are a number of expenditures in the offing that likely will upset parishioners greatly...more on those issues in future posts.

Then there is the issue of the church, its power dynamics, and its suitability for mission. Specifically, I am not the only person to leave St. Dysfunction having concluded that the place is toxic. Whether it’s bullying, Bob Malm’s little power games, urging people to commit suicide, or disclosing confidential giving information, there is irrefutable evidence that this is one messed-up church. That does not bode well for the long-term health of the church, financial or otherwise.

Summing Up

No matter how one parses things, St. Dysfunction is in a bad way. It’s been doling out 100K bonuses, paying for lavish parties from savings, and otherwise living high on the hog, all the while not saving for the future. Even worse, it’s lost sight of its real purpose, which should be a place of healing, welcome and reconciliation for all persons. Instead, it’s become a religious-themed fraternity/sorority, in which people think it’s okay to bully others, to gossip, to shun people, and to engage in behavior few would contend is Christian or even ethical. (The gossip about an allegedly gay married man in the parish is particularly ugly. If nothing else, it’s none of your business, folks, and if I were his wife and found out about your stupid chatter, I’d be more than a little ticked off.) People aren’t stupid, and they instinctively know when a church has become toxic (look for further documentation on those issues this fall). And few want to give generously to a church that thinks shunning, bullying, and other adolescent antics are acceptable. That would be doubly the case as people increasingly realize that Bob Malm and the vestry have not been accurate, for example, in their recounting of recent events, including the false claim that I resigned from the church in 2015.

So, paying for the HVAC work is going to be a major problem for the parish, but it’s only the tip of the iceberg when it comes to the problems facing St. Dysfunction, aka Grace Church.

Tuesday, July 10, 2018

Grace Episcopal Church: Why No Financial Policies and Procedures Manual?

One of the disturbing things about Grace Episcopal Church rector Bob Malm is that he claims that he is not ignoring his obligations as rector. That’s interesting, because he’s now been there more than 27 years—long enough to be in compliance with the requirements of church canons.

One canonical requirement is to adhere to the provisions of the “Manual of Business Methods” of The Episcopal Church, found, inter alia, at The Manual sets forth standards for effective management of church financial resources.

One of these standards is that all parishes must have a financial policies and procedures manual, as documented in the screen cap below. Yet Grace Church has no such manual.

After 27 years, there’s no excuse for Bob Malm not to have made this happen. Especially when he’s getting paid almost $200K a year, and pulling down a $100K bonus.

When was the last time you got a $100K bonus?

Grace Episcopal Church: Why No Financial Policies and Procedures Manual?

One of the disturbing things about Grace Episcopal Church rector Bob Malm is that he claims that he is not ignoring his obligations as rector. That’s interesting, because he’s now been there more than 27 years—long enough to be in compliance with the requirements of church canons.

One canonical requirement is to adhere to the provisions of the “Manual of Business Methods” of The Episcopal Church, found, inter alia, at The Manual sets forth standards for effective management of church financial resources.

One of these standards is that all parishes must have a financial policies and procedures manual, as documented in the screen cap below. Yet Grace Church has no such manual.

After 27 years, there’s no excuse for Bob Malm not to have made this happen. Especially when he’s getting paid almost $200K a year, and pulling down a $100K bonus.

When was the last time you got a $100K bonus?

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