Undesignated Funds

(What follows is my interpretation (or best guess) augmented by my memory of the events that drove many of these numbers.  I spoke with the former treasurer, Dan O'Neill, at AC2017 and he had no memory of any shortfalls in this account, but he said something like 'if it is in the audit, those are good numbers.' I am sure if we had asked him on some of this at the AC of that year what was going on, he could have offered sparkling insight.  I personally was present on the Council on Finance and Administration from 2007 to 2015 and was present when much of this was discussed or agreed to.)

The above chart shows a sixteen year history of what is shown on the annual audit for the Rocky Mountain Conference as Undesignated Funds. 

I show the years in five year intervals between 2001 and 2016, but then call attention to  2008 and 2010.  

Let's start with the negative and balanced numbers between 2001 and 2009.  

Here is my interpretation:  What we see here is the report to the Conference was how "short" we would have been if on the same day, every owner of a restricted or designated account came in and said "we need our money."  Think the Bailey Savings and Loan from the movie It's a Wonderful Life. 

The negative numbers for 2001 through 2004 merely represents the shortfall that existed on December 31st of those years in the area of designated and restricted money.  Because the conference is operating from a cash basis, this piece of information is more bookkeeping and accounting than nefarious. In the movie, George Bailey had loaned the money to prospective homeowners and small business entrepreneurs.  In the RMC, we had loaned the money to ourselves.  The likelihood of a single day rush on the system to square up the borrowing was low.  In fact, it was borderline impossible.  

You will notice that between 2005 and 2007, we had gotten to a place where on December 31st, we were totally balanced and were not relying on borrowing from ourselves in order to handle the operations of the conference.  I have to think this was a conscious decision to try and do this, but I don't know with certainty.  

The next two negative years of 2008 and 2009 were a function of the new apportionment model and the changes made for 2009 with the pending but not yet finalized sale of our camp at Woodland Park, CO called Templed Hills impacting on our decision making.

Here is my memory: The RMC really struggled financially in 2008. We had embarked on a new apportionment model and our fielding of that program was problematic.  We had bills we needed to pay, people accounts, and the negative numbers for 2008 are very close to the income/expenses differences for the 2008 budget.

Factored into this discussion was a technically driven decision, associated with Templed Hills, by our supporting bank, to suspend our line of credit.  

To summarize, we:  

• Did not have a line of credit in order to make payroll.  
• Were sitting on more designated and restricted money than we would need in a singled day, and perhaps the most important factor in this,
• Had (by late 2008) a very good offer on Templed Hills.  

If readers want to discuss Templed Hills, let me know, but I don't wish to engage in the efficacy of the decision. We were losing a lot of money annually on Templed Hills and we reached a decision in 2007 to sell.  

In order to make payroll in 2008, the first year of the new apportionment model, we had to use designated and restricted funds to support the budget.  Said another way, because we did not have a line of credit, we had to finance ourselves the shortfall of income in relation to expenses.  

I will cover apportionment income to budget expenses in a separate piece later.  

We made changes in the apportionment model for 2009 and also significantly reduced expenses.  You see the impact of that on the Undesignated short fall in 2009.  It went from down about $500K to down less than $200K.  A lot of credit should go here to Wayne Bettendorf (Conference Treasurer) and Bishop Elaine.  Others were factors in this.  

We then completed the sale of Templed Hills and you see that change in Undesignated cash for 2010.  

I have been asked, "where did the Templed Hills money go?"  

Much of the Templed Hills money was used to make up the shortfall we had created by financing the RMC in 2008 (the budget) out of the designated and  restricted accounts.  I am sure some see that as problematic and I agree.  I also saw it as necessary to avoid a crisis. 

Conference Reserve.  That positive number of nearly $300K in 2010 does NOT show the decision out of the Templed Hills moneys (plus income over expenses for 2009 in the budget) to create a conference cash reserve. By definition, now that it had a designation, it was now a designated account.   

The Rocky Mountain Conference went from nearly bankrupt in 2008 to sitting in a very good cash position by the end of 2010.  

This happened because:

• We tweaked the apportionment model to yield more income.
• We reduced budgeted spending considerably (nearly $1,000,000 in 2009). 
• We got out from under the negative cash flow issues of Templed Hills.
• We effectively eliminated the need for a line of credit by creating a Conference reserve. 

While the red numbers from 2001 to 2009 are a function of "accounting", I think the blue numbers are another matter entirely. They show resources which have not been designated as having a home. To the best of my knowledge, this is real money and represents potential funds for investment elsewhere.

It should be noted that because the Conference reserve is now a designated account, we actually have in that account plus undesignated moneys, as of December 31, 2016 right at $1,500,000 in cash available to us to lubricate the financial systems and back stop needs for cash to support unexpected requirements. This is a swing from the end of 2008 to the end of 2016 of right at $2,000,000.       

Selah, Dennis

The next blog is HERE.  

The apportionment is called "Connectional Giving" in the Rocky Mountain Conference.  This new naming occurred early in 2017.