# LCMS Convention Workbook_St. Louis Missouri_2007_S103 # Machine transcription, uncorrected — CHI Digital Archive (demonstration) SYNOD REPORTS ‘ 103 R7-03 Vice-President-Finance—Treasurer/Chief Financial Officer The Vice-President-Finance—Treasurer of The Lutheran Church—Missouri Synod serves as the Chief Financial Officer (CFO) in administrating the financial affairs of the Synod. The du- ties of the CFO are carried out in accordance with the rules and regulations adopted by the Synod and as directed by the Board of Directors of the Synod. I believe all my activities have been con- sistent with this requirement. When reading this report, it is important that you understand the distinction between the Synod and corporate Synod. Bylaw 1.2.1 (q) of the 2004 Handbook indicates that Synod “refers collectively to the association of self-governing Lutheran congregations and all its agencies on the national and district levels.” This means that in addition to congregations, “Synod” includes corporate Synod, 35 districts, 10 colleges and universities, 2 seminaries, Worker Bene- fit Plans, and 5 synodwide corporate entities. The synodwide cor- porate entities are Concordia Historical Institute (CHI), Concordia Publishing House (CPH), The Lutheran Church Extension Fund— Missouri Synod (LCEF), The Lutheran Church—Missouri Synod Foundation (Foundation) and Concordia University System (CUS). Corporate Synod is defined in Bylaw 1.2.1 (c) of the 2004 Hand- book as “The Lutheran Church—Missouri Synod, the Missouri nonprofit corporation, including the departments operating under the supervision of the Board of Directors of the Synod and the pro- gram boards and commissions of the Synod.” This report does not include any comments on the financial con- dition of the individual congregations of Synod, as this informa- tion is not available. However, it is estimated that total congregational receipts approximate $1.3 billion, of which $120 million are used for the work of the church at large. The operating budget of Synod, excluding congregations, for the year ended June 30, 2007, are summarized as follows: Budgeted 2007 Operating Revenues Corporate Synod $ 88,164,000 Districts 99,283,000 Seminaries 33,107,000 Colleges & Universities 238,151,000 Synodwide Corporate Entities 121,843,000 Total Budgeted Operating Revenues $580,548,000 The Synod has substantial unrestricted assets. Unrestricted net assets may be defined as the accumulated operating profits. At June 30, 2006, the unrestricted net assets are as follows: Unrestricted Net Assets at June 30, 2006 Corporate Synod $ 2,214,000 Districts 168,683,431 Seminaries 31,755,613 Colleges & Universities 129,709,905 Synodwide Corporate Entities 165,290,794 Total Unrestricted Net Assets $497 ,653,743 The relationship of unrestricted net assets to annual operating revenues indicates a strong financial condition existing in the Synod. Another indicator of financial strength of the Synod is the rela- tionship of capital debt to the value of capital assets. A summary of capital debt at June 30, 2006, is as follows: Capital Debt Corporate Synod $ - Districts . 21,414,000 Seminaries 27,043,000 CUS, Colleges & Universities 126,547,000 CPH - LCEF - Foundation 1,459,000 CHI le Total Capital Debt $176,463,000 The insurable value of the capital assets (excluding land) ex- ceeds $1.5 billion. This value and the amount of unrestricted net assets demonstrate that Synod is in an extremely favorable debt po- sition. The permanent endowments of the seminaries, colleges, and universities are $175 million. These endowments continue to grow. While the financial condition of Synod is strong, several dis- tricts, a college, and a university are experiencing current operating losses. Corrective plans have been implemented that should result in the elimination of the losses. The financial position of corporate Synod is not as sound as the rest of Synod. Corporate Synod continues to experience decreases in unrestricted revenues (primarily receipts from districts). In 1985, corporate Synod received $28 million from the districts. In 2006, district receipts have decreased to $20 million (unadjusted for in- flation). Fortunately, during this same time, restricted gifts in- creased and now comprise 75% of the annual budget of approximately $88 million. The trend of continuous decreases in unrestricted revenues is a significant problem to the Synod. Currently, $10.7 million of unre- stricted revenues are budgeted for nondiscretionary Synod consti- tutional officers and general and administration expenses. Normally, this means that fewer unrestricted revenues will be avail- able for allocation to program boards and commissions. However, during this triennium, corporate Synod has been suc- cessful in not reducing the allocation of unrestricted revenues to program boards and commissions. This has been accomplished by, reviewing the operational efficiency of the general and administra- tive function. The review resulted in reducing staff levels by 35 full-time equivalents. In addition, operational reviews are being performed on a continuous basis to ensure that business processes are not duplicative or redundant. The operational reviews have been expanded to include program boards and commissions. As we proceed to the next triennium, there are insignificant op- portunities for general and administrative efficiency gains. Clearly, then, program boards and commissions will be adversely impacted by a continuing reduction in unrestricted revenues. The audit of corporate Synod for its year ended June 30, 2006, showed a reduction in unrestricted net assets (loss) of $3,778,000. Although there are positive variances and some immaterial nega- tive variances, as compared to budget, only significant negative variances are listed below: Board for Mission Services $3,600,000 Legal Expenses 500,000 Insurance 250,000 KFUO 200,000 Included in the variance for missions are $1.4 million of Fan Into Flame fund-raising expenses. Corporate Synod will be reim- bursed for these expenses as the Fan Into Flame campaign receives contributions. The remainder of the mission variance results from a shortfall in annual fund-raising revenues. The variance for legal ex- penses is directly related to the Anderson lawsuit. The insurance variance results from underestimating insurance reserves. During the last triennium, KFUO has consistently been operating at nega- tive variances. The unrestricted net assets of corporate Synod at June 30, 2006, are $2.2 million. While this does not reflect a strong financial po- sition, there are some positive financial indicators. At June 30, 2006, corporate Synod has no long-term debt. During the trien- nium, corporate Synod liquidated the mortgage on the International Center. Also, corporate Synod has a $10 million line-of-credit with 2007 Convention Workbook