Budget deficit hit $1.1 million in 2005: appeal fell short by $150,000.

Mississauga, Ont.

For the third consecutive year, General Synod, the governing body of the Anglican Church of Canada, ended its fiscal year with a deficit: $1.1 million in 2005. Treasurer Peter Blachford told the Council of General Synod (CoGS) that the church cannot afford another deficit, since reserves have been used to bridge the gap, leaving only $200,000 in the coffers.

About $650,000 of the deficit was revenue-related, Mr. Blachford told COGS, the church's governing body between triennial General Synod meetings, which met here May 12 to 14. He said that Anglican Appeal received $150,000 less than its target of $650,000 because three dioceses (Huron, Edmonton and Nova Scotia) did not participate; Anglican Book Centre (ABC, the church's bookstore and publishing arm), which was expected to break even, lost $222,000; undesignated bequests received were short of projections by $214,000; and proportional gifts from dioceses were down $53,000. Investment income was down $7,000.

In an interview with the Anglican Journal, Mr. Blachford said last year's budget had not factored in $142,000 for General Synod's partnerships department, which had made commitments to its overseas partners from previous designated funds.

"We used to have designated funds that used to support what partnerships did and in 2004, because of a change in accounting rules back in 1997, we had to bring those into undesignated income," said Mr. Blachford. "They became undesignated funds and that was what was used to cover the deficit." He said he was scheduled to meet with Ellie Johnson, director of partnerships, "because it may mean that we would have to talk to these partners and say we can only afford to do this one more year; some of these were multi-year commitments."

In an interview, Ms. Johnson said, "I am aware that some of what had been designated donations or bequests are not available under new accounting laws. What hasn't happened is a meeting with the treasurer, myself and (partnerships) staff to be told exactly which account lines are no longer available to us. That needs to happen," she said. "We continue to use lines which, perhaps, are not available anymore."

Ms. Johnson said that the management team at the national office in Toronto had been "quite stunned" when told about the deficit during a meeting in April "We didn't know that we were in deficit." (At the fall 2005 meeting of CoGS, Mr. Blachford had acknowledged that the total 2005 budget--initially pegged at $10.5 million and reduced midway last year to $10.1 million to avoid a deficit resulting from lower-than expected donations--had been "unrealistic." Last September, citing budgetary pressures, General Synod announced the layoff of six staff members at the book centre and a five per cent cut in each departmental budget.)

Other factors that contributed to the deficit, said Mr. Blachford, were lawyers' fees and other costs related to the church's new building at 80 Hayden Street ($128,000) and legal fees related to the Indian Residential Schools Settlement Agreement ($146,000). Communications and information resources shows an overall loss of $41,000. While the Anglican Journal Appeal reduced the Journal's net expenditure from $551,449 to $471,858 (a reduction of $80,000), other areas of information resources were over budget by $121,000. Mr. Blachford was unable to give a breakdown of the areas involved.

An audit of General Synod, conducted in early 2006 by chartered accountants Ernst & Young, had also showed that last year, $462,667 was used to partially repay the General Synod Pension Plan. "In 2003, it was determined that a bequest of $931,384 received by General Synod in 2002 and included in deferred contributions should be transferred to the General Synod Pension Plan," the audit report said. "As a result, this amount was recorded as due to the General Synod Pension Plan of the Anglican Church of Canada in the consolidated statement of financial position. During the year, payment terms were agreed to provide for this amount to be repayable by quarterly payments of $116,423 commencing February 1, 2005 to November 1, 2006."

Mr. Blachford said that the undesignated bequest came in 2003 "and the original interpretation was that it should go to General Synod ... On further review, the lawyers and auditors said no, it should just go to the pension fund because of the wording of the estate."

By then, he said, the money had gone into the General Synod budget. (General Synod ended 2003 with a deficit of $307,000.) He said, "The primate (Archbishop Andrew Hutchison) and I came up with the idea that when we close the building (the church's new office, see related story, page 11) we would pay the ($931, 384) in one lump sum and we would owe the bank."

(CoGS also approved the seeking of a collateral mortgage of up to $2 million once General Synod takes legal ownership of its new office building. Mr. Blachford told CoGS the credit line could be used to solve "cash flow problems," particularly during the summer, when proportional gifts from dioceses tend to slow down.)

Meanwhile, Mr. Blachford told CoGS that he was concerned about the fact that "it's our third year of loss; we're no longer in a position to support such losses."

He said that while General Synod is not going into bankruptcy, CoGS nonetheless needs to outline what it considers to be priorities since existing funds can no longer sustain all the work it has been mandated to do. The council members reflected on three questions: "What must we do? What would we like to do? What can we do?"

In response, CoGS approved a resolution for the creation of a prioritized operational plan by a working group composed of the management team, the prolocutor of General Synod, the chair and other members of the financial management and development committee, two members of CoGS and CoGS chaplain, Archbishop Terrence Finlay. The working group will make recommendations to CoGS.

Council members also voted to refer to the working group a recommendation made by the church's audit committee that the finance committee review the rationale for including undesignated legacies as part of the essential budgeted revenue in the General Synod's annual budget. (The national church failed to realize $214,000 in bequests Sat it budgeted to receive.) The working group has been asked to comment on the expected consequences if this practice of counting on undesgnated bequests were to be discontinued in 2007.

British Columbia bishop James Cowan asked whether there might be other ways to raise revenues for General Synod other than the diocesan proportional giving (set at 26 per cent of its revenue). "Is our present formula realistic? Do we need to look at a fundamental way for dioceses to support our work in General Synod?" asked Bishop Cowan.

Current diocesan proportional giving has averaged 21 per cent, said Mr. Blachford. He said that while some dioceses gave more than their share, others gave less.

Dean Peter Wall of Niagara agreed. "It seems clear that 26 per cent isn't working as we might hope (it would). We might have to look at other choices. What I seem to be hearing is the sense that this examination needs to look at the revenue side as much as the expense side."

In his report to CoGS, he said his department has been tracking the 2006 budget and so far the April figures for ABC shows that "it's in the black."

The budget for 2006 is $9.8 million, which is three per cent less than the revised 2005 budget and anticipates decreases in projected revenues from proportional giving by dioceses, investment income, planned giving and net profit from ABC. The 2006 budget forecasts revenues of $9.8 million and expenditures of $9.9 million. The projected deficit of $47,183 will be offset by "recoveries" from the government of $50,000 relating to residential schools expenditures.

In other matters, CoGS:

* Approved a resolution directing the financial management and development committee to include in the 2007 General Synod budget "20 per cent of the estimated cost of Council of the North dioceses' attendance" at General Synod or an estimated $20,000. Bishop Michael Ingham of New Westminster said "unforeseen costs" were making it difficult for poorer dioceses to send delegates to the meeting. (See related story page 3);

* Approved a motion presented by the finance, management and development committee endorsing the establishment of an endowment fund in support of the Council of the North to be administered by the Anglican Foundation of Canada;

* Approved a motion urging CoGS members to "communicate to their bishops and diocesan councils the urgency of acquiring financial support" for the Letting Down the Nets initiative, which had been approved by General Synod in 2004. The initiative, to be implemented over a four-year period, needs about $775,000 a year but as of last March. only $437, 680 has been received and about $367,860 has been spent on programs.

* Elected Susan Winn of the diocese of Montreal as deputy prolocutor, succeeding Peter Irish of the diocese of Fredericton, who resigned.

* Was informed by Denise Hambidge, representing the Primate's World Relief and Development Fund (PWRDF) board, that the fund did so well in its fundraising campaign in 2005 that $350,000 in surplus was allocated to its Partnership for Life campaign, which aims to raise $1 million for HIV-AIDS initiatives. An additional $1 million in bequests was given to the campaign, bringing a total of $2 million for PWRDF-funded programs to combat HIV-AIDS. Before 2005, the campaign raised $600,000.

* For additional CoGS coverage, please see p. 12

MARITES N. SISON

STAFF WRITER