Birgitta Rantakari (Finland), outgoing chair of the Finance Committee, gave a preliminary finance report on 4 December. She said the past seven years had been economically turbulent for the Council and for many of its members. Although WCC leaders had hoped the constricted revenues would be temporary, in fact they appear to "reflect a fundamental change in the Council's funding base". Several factors contribute to this change: (1) the worsening global economic climate; (2) a sharp drop in the value of the US dollar in relation to the Swiss franc; (3) large deficits in 1991 (SFr.6 million) and 1992 (SFr.9 million).
Since the last assembly the Council has reduced its staff from 300 employees (immediately following Canberra) to 237 in September 1997. Staff salaries were frozen for two years; and to provide coherence and control over finances, the new structure approved by the central committee in 1997 regroups the four previous programme units into an administrative whole, provides for centralized finances. This will enable the WCC administration to keep its operating costs in line with annual income, and to present a balanced budget for 1999. Rantakari said the WCC needs to: (1) broaden its donor base; (2) have administrative flexibility, making expenses consistent with income; and (3) change its "working style and culture", for example by having fewer and less costly meetings. An investment portfolio has produced income with fluctuating results.
Following a hearing on the General Secretariat, during which WCC finances were presented, the assembly again heard and discussed the finance report on Friday, 11 December. It was noted that a continuing imbalance in sources of income makes the WCC vulnerable, with 81.76 percent coming from churches in Western Europe. The Finance Committee urged "complete openness and transparency in financial accountability".
Issues raised by delegates included the proper relationship between membership grants and representation on decision-making bodies of the WCC, and the responsibilities of affluent member churches in relation to the whole; concerns about the impact on programmes of the decline in WCC staff; and the degree to which the Ecumenical Institute at Bossey should be self-supporting. Strong concern was raised about whether the investment portfolio is being handled as effectively as possible. The general secretary was asked to explain in greater detail how the reductions in staff had been accomplished. He said some contracts had been terminated by non-renewal, some staff had taken early retirement, and some had been relocated within the WCC.
The following Finance Committee recommendations were widely supported or, in the case of 4.2 and 5, unanimously adopted. The full document then was considered, and received almost unanimous support (one against, no abstentions).
From1948 to 1998, the vision of the WCC has always been greater than its financial
resources.
The seven previous assemblies have each faced the challenge to match vision
with money. Since Canberra, costs have been cut by reducing the number
of staff by one third. Now this jubilee assembly faces its own challenge
to increase income by deepening the commitment of all the members and by
accepting new methods.
Before making its recommendations, this report briefly reviews:
I. From Canberra to Harare
1.
External developments
2.
Internal developments
In
the face of projected budgetary deficits, the central committee also approved
a significant reduction in staff numbers. The number of staff declined
from 340 in 1990 to 270 in 1992. This 20% decrease in staffing levels enabled
the Council to balance its budgets and to obtain small surpluses from 1991
to 1993.
Table
1: Operating results 1987 - 97
The
great political, social and economic changes taking place in the world
have deeply shaped the WCC’s finances during the past seven years. Amongst
the most significant have been:
These
events have, directly or indirectly, affected the financial circumstances
of the member churches. This is made worse by the concentration of the
WCC's sources of income. In 1997 the situation was as follows:
As world
developments had their impact on Western countries and their governments
reacted to that, so the financial situation of the churches deteriorated.
For example, German churches, which provide half of Europe's contribution,
have had to react to financial restrictions in their work and to cuts in
their spending because of expected changes in the country's tax policy
which will deeply influence the financial situation of the churches. In
addition, many Western member churches face crises from declining numbers
of members and ageing congregations. There must therefore be no complacency
about the WCC's present stable financial position.
Western
Europe
81.76%
USA
and Canada
15.83%
Rest
of the world
2.41%
2.1
Restructuring 1991 - 93
In
response to the worsening global economy in the early 1990s, and its own
significant operating deficit in 1990, the seventh assembly at Canberra
mandated a number of initiatives to achieve a balance between income and
expenditure. A radical re-structuring of the Council was implemented in
January 1992. The seventeen existing administrative units and financial
groups were replaced by five administrative units: four programme units
and an expanded general secretariat. Each programme unit, however, retained
a number of financial functions and each had its own finance officer.
Table
2: Investment Income /(Loss) 1994-1997
Exchange
rate fluctuations led to some exceptional losses on transactions, and some WCC funding partners
were obliged to reduce their contributions.
The
Council undertook a complete review of budgets, initiated a full programme
evaluation, and mandated a staff restructuring scheme. By 1997, the number
of staff had been further reduced to 237.
2.3.
Aiming at equilibrium 1997 - 98
Table
3: Operating Income Contributions 1994-1999
Budget Budget Many
member churches and partner agencies found themselves in similar situations.
It was obvious that the Council would have to make, yet again, a radical
adjustment in its structures and activities. The result was the adoption
of a new working structure and style which eliminated the four programme
units and regrouped all the Council's work as "one administrative whole",
operating in four clusters of staff teams. A new budgetary methodology
opened the way for transparent discussions by management about budgetary
priorities and, in turn, for a coordinated approach to the 1999 budget.
In
1997 a small operating surplus was achieved, and similar results are anticipated
for 1998.
The
eighth assembly Finance Committee acknowledges and applauds the energetic
efforts and significant changes exercised by the finance committee of the
central committee over the past seven years to achieve stability in the
WCC's finances. An important element in the considerable progress made
has also been the unswerving commitment of hard-working WCC staff members
to improve financial accountability, and clarity in budgeting and reporting
mechanisms.
Despite
the significant progress that has been achieved since Canberra, this assembly
Finance Committee is mindful of a number of continuing challenges:
Internal
and external challenges for the WCC:
II.
The "Common Understanding and Vision" Process and its implications for
the financial policy of WCC
The
Common Understanding and Vision document raises some specific implications
for the finance functions of the WCC.
The
restructure of the management process within the Council to inter-related
teams and clusters requires new financial processes and has implications
for the meaning of membership.
1.
New understanding of the meaning of "membership"
1.2.
The Finance Committee strongly supports the principle that every member
church meet its membership contribution.
1.3.
The importance of the membership contribution is not only its financial
implications but also an expression of participation in the ecumenical
movement and the work of the WCC, as emphasized in the CUV
document.
2.
Teams to become both revenue and expenditure centres
2.2.
Alternate funding sources and cost reduction possibilities can be developed
through further joint ventures with church ecumenical and/or other
organizations.
2.3.
It is also affirmed that member churches second staff where
appropriate.
3.
Financial control
4.
Moving towards financial equilibrium
4.2.
Definition of terms used in Table 4:
Undesignated
income
Activity
income
CHF
000's
1994
1995
1996
1997
Total
Investment Income/(Loss) to the Council
(9,158)
(3,048)
10,774
5,669
It
was now clear that WCC's financial difficulties were not temporary. Its
operating income was static and its reserves had been substantially
reduced.
CHF
000's
1994
1995
1996
1997
1998
1999
Membership
Contributions
6,366
6,267
6,347
6,659
6,531
6,972
Designated
Operating Contributions
20,906
21,026
20,358
21,035
18,338
16,355
1.1.
The Finance Committee affirms the principle that membership contributions
reach the goal of 10 million CHF in five years from now. To achieve this
goal, the member churches will need to work with intention and deep commitment
so that they meet, and wherever possible exceed, the minimum contribution.
Changes in the capacity of the traditional contributors of the past challenge
other member churches to contribute as an expression of mutual
accountability.
2.1.
The Finance Committee believes that there is considerable scope for the
staff teams to generate revenue. It is anticipated that workshops to help
develop skills for innovatively using staff teams as revenue centres based
on project concepts will enhance the capability of the Council to perform
its work in this regard. The Committee believes that there is considerable
potential for new income sources to be developed through partnership with
other organizations around themes and projects. Likewise, we believe that
significant cost reduction could be achieved through diverting non-core
projects to regional and national ecumenical organizations or member churches.
The imperative for staff teams is to operate with a new mind-set that is
proactive in identifying and generating sources of funding through the
implementation of the project work. This work will be coordinated through
the Office of Income Coordination and Development (OICD).
Finance
and accounting functions of the teams must continue to be integrated into
one financial and administrative service function for the work of the whole
Council.
4.1.
Financial equilibrium aims to match certain types of income with specific
categories of expenditure. Table 4 illustrates an "ideal" situation. Arrows
represent flows of funds from one category of income to the appropriate
category of expenditure.
Membership
income
4.3.
Proposal for equilibrium
Membership
income represents the contributions paid by the member churches for the
general support of the Council. They should be used primarily for the General
Secretariat, finance services and administration, and public information
functions.
These
funds give the Council the necessary flexibility to carry out the priorities
established by the member churches. They comprise additional contributions
from member churches and others which carry no pending restrictions. To
these are added rental income from properties, investment income and production
income. They may be used for any of the expense categories listed in the
diagram.
This
represents money coming to the Council designated for particular activities
and which must be used for those activities, both as direct costs and as
management costs.
The
arrow to the right of the activity expenditure box represents a levy (management
fee) due by the activity teams to general support teams for services rendered,
such as accounting and finance, personnel, information technology, building
maintenance services.
5.
Accountability and transparency
6.
Reinforcing ecumenical commitment
III.
Finance Committee recommendations
1.
Ecumenical commitment sunday
2.
Financial support by member churches and associate members
2.2.
We recommend that the minimum contribution remains low so as to encourage
all members and associate members to contribute.
2.3.
We recommend a goal of CHF10 million in member-church contributions to be reached
within five years.
2.4.
We recommend in addition the encouragement of undesignated giving outside
the membership contributions. (Approved)
3.
Additional sources of funding
3.2
We recommend that the general secretary ensures that a consultation is
convened on new ways of income development and the finding of new resources
with fundraising and marketing experts from the ecumenical family.
3.3.
We recommend the use of seconded staff and the receipt and use of "in kind"
resources. (Approved)
4.
Reserves
4.2.
We recommend that clear guidelines be developed regarding the use of reserve
funds for approval by the first meeting of the new executive
committee. (Approved)
5.
Investment policies
6.
Financial development and budgeting
6.2.
We recommend the development of improved instruments of fiscal
forecasting.
6.3.
In affirming the commitment to a balanced budget, we recommend a three-year
forecast and encourage member churches to forecast their contributions
for this period.
6.4.
We recommend that time limits be set for projects and encourage that these
time limits be respected, subject to proper evaluation of the work
done. (Approved)
7.
Facilities: Ecumenical Centre in Geneva and Ecumenical Institute at
Bossey
8.
Public relations and promotion
Conclusion
The
Finance Committee is aware that some member churches have expressed concern
at the lack of detail in financial reporting. The Assembly Finance Committee
affirms the need for complete openness and transparency in financial accountability.
Such transparency is required to be mutual so that the Council has confidence
in the commitment of its member churches.
The
Finance Committee has accepted with enthusiasm the possibility of member
churches observing an ecumenical commitment Sunday on the third Sunday
of Advent or on another Sunday, following the solemn recommitment to the
World Council of Churches during this assembly on the third Sunday of Advent
1998. This would have as its objective a focus on membership commitment
as well as provide an opportunity for fund-raising. It also can potentially become
an occasion for member churches to have participatory involvement in the
global ecumenical movement.
We
recommend that the member churches be encouraged to observe ecumenical
commitment Sunday with an offering for the activities of the World Council
of Churches. We suggest the third Sunday in Advent or another Sunday of
the churches' specific choosing. (Approved)
2.1.
We recommend that the assembly adopts the change in the Rules regarding
financial participation, and instructs the central committee at its first
meeting to decide on how rule I.6.c on not fulfilling the financial obligations
should be interpreted and inform the member churches.
3.1.
We recommend that the teams, under the coordination of OICD address the
issue of generation of income for the activities, with appropriate approaches
to funding sources beyond the member churches. To this the WCC should convene
workshops which help to proactively and innovatively fulfil this task.
4.1.
We recommend that an appropriate and prudent level of reserves be established,
and that reserve funds depleted by the fiscal emergencies of the last few
years be restored as soon as possible. Therefore the staff review designed to examine the level and
purpose of reserves should be completed and reported to the next meeting of the executive
committee.
We
recommend the continuation of the recently established prudent investment
policy with regular monitoring of investments. (Approved)
6.1.
We recommend that sufficient resources (fiscal and personnel) be allocated
for income development.
We
recognize that the development of a fund for renovating these facilities
is already underway, and recommend that the general secretary present
a detailed financial proposal for these projects to the meeting of the
executive committee to be held in the second half of 1999. (Approved)
Recognizing
that addressing the issues of public relations and interpretation is more
the task of the Council's communications teams, the Finance Committee believes
that the success of this work is crucial to the establishment of an effective
income development strategy. We therefore recommend that a plan for the
raising of the profile of the World Council of Churches be developed. For
example, the lay training programme at Bossey could be seen as an ingredient
of this strategy. (Approved)
The
assembly's Financial Committee emphasizes that there is no room for complacency
regarding the Council's finances and commends this report and its recommendations
to the assembly, as we commit ourselves in this 50th anniversary year to
strengthen the World Council of Churches.
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