Throughout the month of January, we are highlighting the work we do together as the Free Methodist Church in Southern California through year-end reports shared by the people who serve us all in the boards and committees of the conference.
About The Management Group
This board provides oversight and leadership for The Management Group, a for-benefit corporation of the Free Methodist Church in Southern California that provides bookkeeping and administrative services for eligible ministries. As with all Free Methodist Church leadership, the board is composed of an equal number of ministerial and lay (non-ordained) leaders.
Report
Evan Collins, Chair, The Management Group
The Management Group operates as an enhanced investment committee as you might see in other non-profits. This reflects the fact that our Conference has oversight responsibility for an unusually large and diverse group of assets. This includes 41 churches spread over 10 counties, an endowment of more than $15 million, just under $1 million of loans to some of our own churches, as well as the management of a number of other owned properties which are not operating churches – leased out school buildings for example.
So, let me give you a recap of our major activity areas in 2021 together with a quick look at some impending changes.
Our Endowment
Several decades ago we set out to build an endowment substantial enough that the income would cover all of the normal operating expenses of our Conference. This would then allow the annual local church tithes to the Conference to be directed entirely to mission outreach thereby significantly enhancing our potential mission impact.
Through God’s generous blessing we have been able to grow our Endowment significantly over the last few decades. Most recently, we grew by 9.5% in 2020 and a further 11.4% so far in 2021. All this while taking on only a moderate risk profile. While the Endowment’s income does cover all of Conference expenses, it currently exceeds 70% of our operating budget.
During this time, we have worked closely with Alex Brown & Co. on the day-to-day management of the Endowment and they have been a significant help in the production of these results. The Management Group’s oversight includes both frequent contact with Alex Brown and detailed quarterly reporting. This partnership has worked out very well for us while not requiring a significant amount of daily effort. We look forward to continuing this relationship.
Church Loans
We also oversee two types of mortgage loans made to individual churches within our Conference. The first type is loans made through the Free Methodist Foundation. These are typical mortgage loans made between the Free Methodist Foundation and the individual church. However, in every case the Conference must also approve the loan and serve as a co-signer. Currently, there are 12 such loans with a total outstanding value of $17.2 million. Our potential Conference liability here is one reason we need to keep a substantial Endowment reserve. A second reason is that the Conference’s strength ensures that all our churches receive the lowest possible loan rate from the Foundation.
The second type of loan are those the Conference has made directly to a local FMC church rather than utilizing the Free Methodist Foundation. Currently we have 9 such loans with a combined value of $925,000. It is certainly important for our churches to have ready access to an FMC source for appropriate loans but providing such a service within the Conference while the Free Methodist Foundation is an available option is not a part of our core mission and does divert staff resources from their primary responsibilities. Therefore, we are in the process of transferring all of these loans to the Free Methodist Foundation. In addition, all future individual church loan requests will be directed to the Free Methodist Foundation. It is important to note that there will be no additional cost to any church as a result of this transfer.
Other Real Estate Properties
Over time we have assumed responsibility for several church related properties which are not now true churches such as pastoral residencies, private schools located on former church properties and currently vacant former church buildings. The current effort to sell the Redlands church property is one good example. Each of these are unique situations which often require difficult policy decisions. To assist us we have retained an outside real estate consultant who is very helpful in this area and performs a great deal of the necessary leg work. Because of the mission relevance and complexity of these issues, oversight needs to remain with the Management Group together with frequent dialog with the FMCSC Board of Administration.
Management Group Structure
Finally, to clarify the gradually evolving operating responsibility of the Management Group we are recommending that, as of year-end, it be re-named as the Investment Committee.
I hope that you have found this review of the Management Group’s – soon to be called the Investment Committee – activities and I look forward to speaking with you directly in the near future.
