BY JONATHAN GALLAGHER, United Nations Liaison Director General Conference

t all started at the 2000 Annual Council with the approval of the Adventist Church's tithe sharing plan, an initiative to double the percentage of tithe paid by the 12 world divisions to the General Conference, from 1 to 2 percent, and reduce the amount of tithe passed on from the North American Division (from 10.72 to 8 percent). The initiative addressed a longstanding need for the church's world divisions to step up their financial support to the world church.

From the start world leaders knew that that implementing the new plan would cost and cost dearly. The General Conference would lose up to $15 million per year in projected tithe income for the church's world budget.

As GC treasurer Robert Lemon presented his annual report to the GC Executive Committee the effects of tithe sharing became painfully clear to all committee members.. Lemon projected that the GC would be operating at a projected $3 million loss in 2004, the first loss in many years. Further losses of $5 million and $3 million are projected for 2005 and 2006 before a foreseeable break even year in 2007. Lemon said that these projections were compounded by 9-11, escalating insurance costs, and a decline in world mission offerings, which fell from $48 to $46.4 million in the past year. This has a major effect on how much the world church can do to impact unreached territories in the 10/40 Window.

Lemon noted that during the three years leading up to the change in the tithe sharing formula, church leaders raised the GC's working capital requirements by approximately $11 million to offset anticipated shortfalls. He also noted that total world tithe increased from $1,093,239,502 in 2000 to $1,161,698,977 in 2003.

Declining Support
Of the decline in world mission giving, Lemon observed, "I believe we have failed to properly communicate the needs and the tremendous importance of the mission offerings in church growth, nurture, and unity. We must lay before our members the great unfinished work, particularly in the 10/40 Window. We are facing unprecedented opportunities in the 10/40 Window now. We have to communicate the importance of our regular mission offerings and the exciting things that are being done as a result of these offerings."

He also had words for those who complain about a top-heavy structure and bureaucracy in the church. "Some tend to evaluate the operation of the church on the same basis as they would a commercial business enterprise with line authority between administration and employees. We need to apply the best business principles possible in the operation of the church and reduce as much as possible the overhead costs and inefficiencies. On the other hand, we must not forget the differences between corporate business structure and a volunteer church organization."

The GC treasurer had better news than last year regarding the performance of investments, which, while not yet fully recovered, showed definite improvement. "The investment picture is more encouraging this year than it was a year ago. Although the markets certainly have not returned to their highs of a few years ago for the General Conference Operating Fund, we are back to within a little over $1 million of what was paid originally for the stocks in our portfolio."

Lemon ended his presentation with a challenge to all: "The Lord's work is going to be finished. The questions is: Are we going to be a part of it? Are we going to do our part?"

Undertreasurer Steven G. Rose later presented more specific numbers, including a review of financial trends, the September 30, 2003 financial statement and the proposed world budget for 2004.

For the first time in recent years, the financial statement revealed a $4.9 million loss before adjustments. However if other factors such as tithe accrual and "unrealized" gains in investments are included, Rose reported, then the figure becomes a gain of $933,893.09.

Rose explained that the new tithe sharing arrangements resulted in a decrease of $12.3 million in 2003 as compared to the old funding system. This difference will increase to $15.6 million in 2004. "We are trying to keep the current appropriation level," he stated, adding but that there would be no possible increase in appropriations to the world divisions and GC institutions until 2008.

On the positive side is the good news that the GC headquarters budget is well within the operating expense cap. The tithe-sharing plan has also affected the formula under which the cap is calculated. Previously the GC cap was set at 4.25 percent of gross tithe collected in North America and 4.25percent of the 1 percent tithe income that the General Conference received from the world divisions. Now the cap is set at 2 percent of gross world tithe.

Deficit Spending
Rose noted that this year's actual expenses will exceed the GC's 2003 world budget by $3.1 million. However, he said that the overage was due to increased insurance premiums due to the 9-11 tragedy that were voted at last year's Annual Council meeting.

A little later, the Adventist Church's highest administrative body between GC Sessions voted the church's first deficit budget in recent years. The 2004 world budget listed expenses at $118,222,507 with income of $115,083,730.

Richard Osborn, Pacific Union College president, wondered if it were possible not to present a deficit budget, but rather a balanced budget so that those "on the frontline could see that the pain was being shared."

Lemon responded that most costs are directly related to GC elected staff and those assisting them. Many cost-saving measures were being implemented, including the non-replacement of staff that leave. "However," he added, "If we don't turn things around in a year or two, we may have to look at major restructuring."

Associate treasurer Don Robinson also commented, "It is possible to make cuts, but there is nothing more destabilizing to an organization than to lay off and then take back employees. I greatly appreciate the fact we have done long-term projections on this."

Replying to a question on whether all mission offerings were routed through GC accounts, Lemon replied that all mission offerings including Global Mission are in the report except those sent on to divisions.

Lay delegate Nina Myrdal, of the Trans-European Division, mentioned it would have been better for delegates to receive the papers dealing with financial matters earlier, while Mack Tennyson, a lay members from South Carolina, asked about possible revision of division appropriations.

Former GC treasurer Robert Rawson expressed concerns over accounts receivable from the institutions, which he categorized as a "precipitous increase." "It is increasingly more difficult to collect accounts receivable from other church entities," he said, adding that "There is a growing tendency to put the church last."

Former GC president Neal Wilson expressed appreciation for "the level of financial care we have from our treasury staff. It is phenomenal how God has blessed this church."

In a related financial matter, Adventist Risk Management president Robert L. Sweezey presented a brief report entitled "Does the Adventist church get sued?" He stated that ARM deals with 450 current lawsuits on average, with 150 new per year. Using tables, he showed the escalating costs of insurance for both GC properties (some 700 around the world), and particularly hospital professional liability insurance. "As Annual Council delegates, you need to know your exposure and your protection," he concluded.

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Adventist Review news and online editor Carlos Medley also contributed to this story.