Parochial Reporting Tips
Parochial Reporting Tips
By Louis Fuertes, Canon for Mission Finance & Operations, 2/15/17
Parishes are required (by the National Church and ECCT) to file Parochial Reports annually, and compliance with this request has been quite good in recent years. The timeliness of compliance is another issue, however. Parochial Reports are due on March 1 by ECCY canons, and our reminders of this date reflect the fact that we need information early in the year so we can monitor parish financial performance, support clergy transition planning and to prepare ECCT budgets.
Conversations with many parishes and our analysis of Parochial Report submissions led us to introduce “Parochial Report 101” training sessions this year to help parishes complete their reporting in a manner that portrays parish activity and financial performance accurately, completely and in a manner that is advantageous to parishes financially. [There are good reasons for you to read further!]
Page 2 of Parochial Reports document membership, attendance, worship services, sacraments (baptisms, confirmations, marriages, burials) and Christian formation practices, reflecting parish life in the prior year. We review this information carefully, and do not sense that parishes experience great difficulty in completing this page.
However, Page 3, which summarizes parish financial performance and condition, can be a challenge, particularly for first-time Treasurers. Let me focus on three areas.
- Line B – Operating Revenues (portraying this information correctly can reduce future Common Mission Support obligations)
- Lines 4 and 20 (reporting this information correctly can prevent parishes from problems with the Endowment Stewardship & Mutual Responsibility Resolution passed at our 2015 Annual Convention)
- Line E – Operating Expenses (the financial sibling for Line B, which together portray parish operations and are key drivers of financial sustainability
Line B – Operating Revenues -- A parish’s statement of its 2016 Operating Revenues will determine its Common Mission Support obligation for 2018 (10% of “trailing year” Operating Revenues has been the Common Mission Support obligation since our 2014 Annual Convention, and 2016 is the trailing year for 2018). Parishes should report all revenues generated in 2016 to support operations – but no more than Parochial Report requirements dictate. Non-operating revenues do not affect Common Mission Support obligations and should be excluded from the lines that collectively add up in calculating Line B. For example:
- Line 3 (“Plate collections, pledge payments and regular support”) should not include capital campaign pledge payments (a non-operating revenue reported on line 8). Funds collected for designated outreach efforts (e.g., Hurricane Relief for Costa Rica, Coats for Kids drive for needy families in Connecticut) should be reported on line 11, non-operating revenues to be transmitted to other organizations
- Line 4 (“Money from Investments for Operations in 2016”) should not include any draws from your parish’s investments that was used for major building maintenance (e.g., repaving the parking lot, re-roofing the sanctuary, replacing a boiler). Only funds from investments used to pay employee compensation, building operating and minor maintenance costs, Common Mission Support, parish ministry expenses and other operating costs should be reported on Line 4.
- Line 5’s title is a mouthful (“Other operating income, including unrestricted gifts & restricted gifts used for operations & contributions from congregation’s organizations”) and typically includes fund-raising and facility use contributions from outside organizations. In addition to the “operating vs non-operating” distinctions discussed above, be sure and subtract the expenses incurred by the parish in generating this income.
- If there was a fund-raiser, subtract the costs incurred for it.
- If the parish rents out its rectory, subtract the property taxes, utility expenses and maintenance costs incurred.
Lines 4 and 20 – Endowment draw % determinants. The Endowment Stewardship and Mutual Responsibity Resoultion of our 2015 Annual Convention (https://www.episcopalct.org/FileRepository/DownloadFile.aspx?FileID=458)
specified three year limits on parish endowment drawdowns in support of operations and consequences for exceeding these limits. In practice, ECCT staff will compare information on Line 4 (“Money from Investments for Operations in 2016”) with Line 20 (“Total investment at market value”) to identify parishes that might exceed limits specified by this resolution. Through conversations with a number of parishes, we are aware of common reporting errors that can falsely indicate non-compliance with the resolution. To avoid this result, we advise parishes as follows:
- For Line 4,
- include only income used for operations, as noted in the discussion above.
- In addition, include only investment income for operations from investment funds that benefit only your parish. Report income used for operations from shared trusts (that benefit your parish and other organizations and individual) on line 5
- In Line 20, include only market value from funds that benefit only your parish
By following these practices, your parish’s endowment drawdown practices will be reflected accurately.
Line E – Operating Expenses. In the discussion above, we referred to operating expenses as expenditures to “pay employee compensation, building operating and minor maintenance costs, Common Mission Support, parish ministry expenses” and other costs to support annual operations of your parish. Other expenses should be reported elsewhere:
- The purchase of long-lived assets (vestments, hymnals, prayer books, artwork, furniture, computers, printers and other office equipment) are non-operating expenses and should be reported on Line 15.
- In addition, proceeds of collections to be transmitted (or passed-through”) to other organizations should be reported as a non-operating expense on Line 18.
After sorting out these non-operating expenses, report Common Mission Support on Line 12, Outreach expenses from your operating budget on Line 13 and all other operating expenses (employee compensation, parish operating expenses, etc.) on Line 14. If you netted out expenses in your calculation of Other Operating Income (as advised above), net out the same amount from your calculations of Line 14 so you will not overstate your parish’s operating expenses.
What about all the other lines in Page 3? Instructions for other line items on pages 2 and 3 are provided in Workbooks on the National Church website:
For page 2: http://www.episcopalchurch.org/library/document/workbook-page-2-membership-attendance-and-services
We focused on the sections above because they are most pertinent to parishes in Connecticut.
Good luck and thank you ...
- for your efforts to portray your parish accurately
- for getting Parochial Reports to us by March 1 and
- for all you do to support your parish.
Closing note: It’s not too early to prepare for your parish audit of 2016 financial reports.
- Parishes with Total Revenue (Line D on your Parochial Report) over $500,000 are required to have a full audit performed annually by a Certified Public Accounting firm.
- Parishes with Total Revenues less than $500,000 can have a Financial Review of Agreed-Upon Procedures performed by an Independent Public Accountant.
Audits/Financial Reviews of 2016 financial statements are to be submitted before September 1, 2017. Please contact Karolyn Nicholaides (KNicholaides@episcopal.org or 203-639-3501, ext. 123) for names of firms that have performed audits and reviews for other ECCT parishes.