Fishbowl Trustees Meeting: A Case Study

SCENARIO:

The Universal Presbyterian church of Nancook, Ohio is in an unusual situation, one that it has not faced for a number of years. After years of successfully meeting the budget by pledge increased and loose change gifts totaling five to eight percent per year, the Finance committee finds that the pledges for next year clearly will not support the planned budget. After being unable to work out the shortfall with the various committees, the Session has asked the Trustees to make up the difference by a payment from the endowment. The Trustees have asked to meet with Session representatives at a special meeting to discuss the request.

The major new additions that have contributed to the increased budget are:

• The planned hiring of a part-time youth choir director which the Worship and Music Committee says is needed to improve the youth program and increase participation.
• The acceleration of the program recommended by the Property Committee to remodel the education rooms to shorten the schedule from five to two years. The Christian Education Program is an important part of the church and the committee says they will start to lose children with the current families.
• The planned hiring of a part-time person to work with the school district to set up an after school mentoring at the church. The Mission and Outreach committee believes that this is a vital part of its neighborhood programs.

BACKGROUND INFORMATION:

The Universal Presbyterian church is a suburban church located on the outer edges of a growing midsize city. Its membership hovered between 450 and 500 members for a long period, but in recent years, it has been slowly growing and is now over 500. The average age is around fifty- five with a slight drop coinciding with the increase in membership. About one-third of its members attend church on a regular basis. The other two-thirds either attend on a sporadic basis or only participate in the Christian Education (CE) programs.

Participation in the youth CE program averages 75 children. The adult CE program has 40 active participants broken into three classes.

The church has an active Women’s Association and Men’s Club. Additionally, it sponsors the usual Cub Scout, Boy Scout, Brownie, and Girl Scout activities.

Last year’s budget was $249 thousand with eighty percent of the pledged dollars coming from twenty percent of the members. The church has an endowment of $250 thousand that generates an average of $10 thousand per year from dividends and income-producing equities.

SOME OBVIOUS QUESTIONS:

What is a Fishbowl Presentation?
It is a case study that is acted out in front of an audience. The objective is to create a situation that will help explain or teach certain principles to the audience. Sometimes, the audience taps out one of the participants and then participates in the discussion. We will have to discuss this before the session. We have about one hour available, which could be broken down as follows:

• 30 to 35 minutes of meeting
• 15 to 20 minutes of discussion from the audience
• 5 to 10 minutes of wrap up

What is my role?
You are to act a role of your choosing in a one act play with an outline, but no script. The objectives not to resolve an issue, but to illustrate the confusion and conflict that can result from lack of communication, and not having operating policies. It is important that you have a position and represent a viewpoint. This case contains many issues (more on this later), but is typical of the situation in many churches. During the dialogue, some of these issues should surface.

The suggested roles are:

• The Minister
• An Elder on the Finance committee
• Another Elder characteristic of the new younger members
• A Trustee on the Finance Committee
• A Trustee on the Endowment Committee
• A Trustee on the Property Committee

Other roles can be developed if we have sufficient people available. Before the session, we will have to discuss the play, who will fill which roles, and how to develop and end it.

ADDITIONAL INFORMATION ABOUT THE SITUATION:

This information is to be presented in the discussion because it shows how the lack of guidelines and policies create confusion. Most of the thoughts are linked to the above roles.

The church does not have a written policy about the use of its endowment nor does it have an investment policy. A local bank where a church member is a loan officer manages the funds. The current ratio is 40 percent equities \ 60 percent corporate grade bonds. Income needs drive the ration. There is continual pressure for more income, but the management committee supported by the bank has resisted increasing the ratio of bonds. The investment officer of the bank is concerned about the current ratios and is strongly advising a fifty to sixty percent equity ratio.The remodeling of the education rooms is part of a long list of maintenance items that the Property committee juggles continuously to deal with the usual emergencies.

Income from the endowment flows into the financial reports as income and becomes lost in the general revenues. It appears as a line item only on detailed financial reports.

The Endowment Management committee has no documentation about restrictions on any of the endowment funds, particularly in the use of principal. Everyone feels that this is not an issue because the income is used for the good of the church and its missions. There has never been a request to use principal in the memory of the committee members.

The church will receive a trust sometime in the next two to three years from an estate now under probate. The exact amount is unknown because complexities in the estate, but it will total at least $250 thousand and may reach $500 thousand. The minister and a few members of the finance committee are aware of the pending gift. However, the minister is beginning to wonder about how many people know of the gift. In recent weeks, he and one of the older elders have received comments from members about “all of the money in the endowment and why does the church keep asking for more and more money.”

The endowment appears as an item in the annual report, but is never part of the agenda at the annual meeting. Infrequent questions are handles quickly and the agenda moves on.

The establishment of the tutoring program was presented to the Session by two Elders who are teachers and enthusiastically endorsed by the Mission and Outreach Committee. The ideas has been discussed informally with the principal where the teachers are located and one member of the school board. Both support the idea enthusiastically. No other individuals in the school systems or agencies working with youth have been contacted. The Mission and Outreach Committee wants this work to wait until the new person is hired.

WHAT ARE SOME OF THE ISSUES IN THE CASE STUDY?

There are gaps in communicating with the congregation. The make-up of the church and its environment is changing with the usual energy of change, confusion and resentments. The leadership is sensitive to these issues, but they are not communicating their vision to the congregation. Consequently, the congregation is either confused or not buying in.

The church does not have a definite policy on the use of its endowment that is available to the congregation. There is not a vision on how to use it. It is another source of income and thereby becomes a mystery to most members. The new addition will compound this problem, creating more mystery and confusion.

A written management policy does not exist. There is no understanding of the Total Return Concept nor are there any guidelines on the use of principal. This and the lack of documentation about any restrictions on the use of the funds raise fiduciary questions.The tutoring program is a new type of program for the church and in the absence of no other information will gain momentum rapidly. Both the benefits and points of conflict with other agencies are many. Would cooperation with other agencies reduce this potential for conflict and perhaps help with the funding issues? Also since this is a broad program outside the church, is it a legitimate use of the church’s endowment?

OTHER THINGS TO THINK ABOUT:

Using endowment principal:

Given the number of problems, a church should spend all the money it can find.

The spiritual health of the church is more important than the endowment.

It is wrong for church to hoard money

Churches are different form other nonprofit organizations and should not follow the same spending rules.

If the endowment is depleted, then the members will have to assume more responsibility for the operations of the church.

Use only the undesignated gifts.

Not using endowment principal:

Moral responsibilities to the donors to protect their gifts.

Fiduciary responsibilities of the governing boards.

The marketing of responsible management to future donors.

Repaying the principal removed from the endowment.

Income in future years will be less because of the reduction in principal.

Additional personnel result in recurring costs.

Where will the money come in the following years.