8th assembly/50th anniversary

Together on the Way
3.7. Report of the Finance Committee



The work of the Finance Committee
The assembly Finance Committee provides general oversight and guidance concerning the WCC's finances. The central committee is constitutionally mandated "to adopt the budget of the World Council and secure its financial support" (art. V.2.c.6). It gives more regular oversight than is possible by the assembly which meets every seven years. A 44-page 1997 financial report was provided to all delegates.

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).




Report of the Finance Committee

Introduction

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:

  • the financial position achieved since Canberra against a background of world economic upheaval
  • some financial implications of the "Common Understanding and Vision" document and process in the present and foreseeable contexts.

I. From Canberra to Harare

1. External developments
The great political, social and economic changes taking place in the world have deeply shaped the WCCs finances during the past seven years. Amongst the most significant have been:

  • the ending of communist systems in the USSR and Eastern Europe;
  • the further integration and growth of the global economy;
  • conflicts in former Yugoslavia, the Middle East and Africa;
  • financial crises, first in Mexico and, more recently, in the countries of South and East Asia, Russia and Brazil;
  • the imposition of structural adjustment programmes on countries with unpayable debts.
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:
 
Western Europe 81.76%
USA and Canada 15.83%
Rest of the world 2.41%
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.

2. Internal developments
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.

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

2.2. Dealing with deficits 1994 - 96
The improvement in the Council's finances by 1993 underwent a sharp reversal in 1994 due to a number of factors. After a number of good years, WCC investment portfolios performed poorly.

Table 2: Investment Income /(Loss) 1994-1997
CHF 000's
1994
1995
1996
1997
Total Investment Income/(Loss) to the Council
(9,158)
(3,048)
10,774
5,669

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
It was now clear that WCC's financial difficulties were not temporary. Its operating income was static and its reserves had been substantially reduced.

Table 3: Operating Income Contributions 1994-1999
 
CHF 000's
1994
1995
1996
1997
1998

Budget

1999

Budget

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

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:

  • reduced financial resources among some member churches and church-related agencies
  • increased competition in the churches between needs at home and those abroad;
  • shifting priorities among development agencies;
  • increased competition for funds from other ecumenical bodies;
  • fluctuating exchange rates;
  • volatility in investment portfolios;
  • insufficient undesignated income to cover full operating costs;
  • continued heavy financial dependence on only 10 member churches;
  • lack of membership contributions from 48% of current members;
  • reduced level of reserves;
  • continued need for greater transparency in budgeting process and financial reports.

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"
1.1. 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.

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
2.1. 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).

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
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. Moving towards financial equilibrium
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.

4.2. Definition of terms used in Table 4:

Membership income
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.

Undesignated income
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.

Activity income
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.

4.3. Proposal for equilibrium

Some activity income may be designated to special time defined projects residing in the general support areas - the ecumenical database is a case in point. This is depicted by the dotted arrow.

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
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.

6. Reinforcing ecumenical commitment
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.


III. Finance Committee recommendations

1. Ecumenical commitment sunday
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. Financial support by member churches and associate members
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.

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
3.1. 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.

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
4.1. 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.

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
We recommend the continuation of the recently established prudent investment policy with regular monitoring of investments. (Approved)

6. Financial development and budgeting
6.1. We recommend that sufficient resources (fiscal and personnel) be allocated for income development.

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
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)

8. Public relations and promotion
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)


Conclusion
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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