wfn.org | Budget constraints continue for mission agency

[NewsDesk <NewsDesk@UMCOM.ORG>]

TITLE:Budget constraints continue for mission agency

April 22, 2002      News media contact: Linda Bloom7(212) 870-38037New York
10-71B{179}

STAMFORD, Conn. (UMNS) - The United Methodist Board of Global Ministries,
like many other organizations, benefited from the robust economy of the late
1990s.

The benefits were so great that the agency authorized $60 million in new
mission programs, financed by unrealized capital gains, between 1997 and
1999. Another $12 million was advanced to the Missionary Health Benefit
Trust. But the use of capital gains in this way would later prove to be
"problematic," according to Stephen Feerrar, who became the board's
treasurer last November, and the current funding shortfall is expected to
continue into 2003.

Feerrar's report to directors during the April 15-18 Board of Global
Ministries meeting provided some background to the agency's fiscal problems,
which resulted in a 20 percent staff reduction last October and spending
cuts in office operations, materials and services, program expenses and
staff travel.

While capital gains on the board's investments yielded nearly $125 million
from 1997-99, total assets grew only $49 million during that period. The
growth in program expenditures was accompanied by a 22 percent increase in
support costs and although administrative costs were kept to 10 percent of
total expenditures, that still represented a 40 percent increase from 1997.

"Such growth would have been a proud achievement for many commercial
companies in the go-go times of the late 1990s," Feerrar said. "Having been
responsible for international finance in my previous job, I know how
difficult it is to expand internationally. I can sincerely appreciate the
challenges placed on an organization trying to expand globally at this
rate."

With the new century came a reduced allocation of denominational revenues,
mounting pressures on denominational agencies to lower their reserve funds
and the responsibility of new, unfunded mandates from General Conference,
the denomination's top legislative body.

Although the stock market declined in 2000, a recovery seemed possible the
next year, until the devastating economic impact of the Sept. 11 terrorist
attacks.

"While we had expected to book gains of about $10 million per year in 2000
and 2001, we actually booked losses of about $13 million each year," Feerrar
explained. "Those $23 million annual swings effectively eliminated all the
increases in net assets of 1997-99. This was a huge turnaround from our
expected plan."

For 2002, support expenditures are budgeted at $13.6 million, 29 percent
below the 1999 level and controls are in place to keep that number below $13
million if funding does not meet budget expectation, he said. Last October,
board directors also redesignated $8.9 million to balance the 2002 budget.

Excluding specified funds of the Women's Division and Health and Welfare
Department, the Board of Global Ministries' unrestricted assets have
declined by $72 million since 1998, from $113.8 to $56 million. But if some
of those remaining assets were used, such as pre-funded pension costs, it
would affect future cash flows. "We have limited liquidity in the board's
unrestricted asset pool," Feerrar reported. "This is the major reason for
the cash flow restrictions currently imposed on our program funding."

Financially, he said, the Sept. 11 attacks affected the agency directly and
indirectly, from the obvious loss of investment income to the effect of
rapid interest rate cuts on the United Methodist Development Fund to
expected 50 percent increases in liability insurance costs.

Outside of the insurance increases, spending has been kept at 80 percent of
budget for the first quarter of 2002, according to the treasurer. "Despite
all this progress, expenditures in 2003 will require significant changes to
meet the funding gap now foreseen," he added.

Feerrar encouraged every director to become involved in fundraising efforts
for the agency and some made pledges to do so during the meeting.

In other business, directors received an update on the search for a new
chief executive to succeed the Rev. Randolph Nugent, who will retire at the
end of the year. Bishop Joel Martinez, San Antonio, board president and
search committee chairman, reported that the application period closed March
31 and that 27 candidates were being considered. A Stamford, Conn.-based
firm has been hired to assist with the process.

The search committee met again on April 18, at the conclusion of the board
meeting, to review the applications and narrow the pool of candidates.
Interviews will be conducted in July and a recommendation made to the
board's personnel committee at the end of August. That committee will
convene in September and is expected to present a nominee to the board's
annual meeting in October.

Board directors also:

7	Had a welcoming service celebrating its new mission in Bermuda,
involving Methodist churches formerly associated with the United Church of
Canada.
7	 Heard a presentation by the National Committee on Ministries with
Deaf, Late-Deafened, Hard of Hearing and Deaf-Blind Persons; and
7	Greeted representatives of the mission agency's Russia Initiative,
which marks its 10th anniversary this year.

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United Methodist News Service
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