Editor’s note: This article was written by Roger Simpson. Roger is a regular commenter at SBC Voices, a retired software engineer, and decades long Southern Baptist. His statistical analysis in this post is very much appreciated.
I. Introduction
The International Mission Board is again facing a shortfall in recurrent sources of funding. Recurrent revenue sources are received periodically such as a portion of Cooperative Program gifts from the churches forwarded to the IMB via the Executive Committee, Lottie Moon offering monies, and other gifts.
Many will remember the “hand raising opportunity” which was a program to induce personnel, both in the field and in Richmond, to leave the IMB. Now, in 2017, the IMB is implementing a second wave of staff reductions to reduce expenses. This time, the epicenter of the staff reductions is with the Information Technology group in Richmond.
In both cases, IMB management liquidated assets to be able to fund ongoing personnel expenses. But in both cases, the liquidation of assets, while giving temporarily relief, did not solve the underlying problem of inadequate revenues to meet salaries, pensions, benefits, and other personnel related expenses. As a result, Unrestricted Net Assets are significantly reduced without any permanent benefit to the stability of the organization.
II. First Use of Unrestricted Net Assets to meet Operating Expenses [2007 – 2011]
Unrestricted Net Assets were at an all time high at year end 2007. They stood at $256,036,000. By year end 2012 Unrestricted Net Assets were down to $91,078,000. At year end 2012, Unrestricted Net Assets were reduced to only 35% of the 2007 value. It became evident that the problem meeting the payroll, and associated personnel expenses, was going to have to be solved by increasing revenues or cutting manpower because raiding Unrestricted Net Assets, while possibly being a wise move during a temporary revenue dip, was no longer tenable. The decrease in revenues was not just a situation that was unique to 1 or 2 years; in fact it was recognized as longer term trend. As a result, management instituted the “hand waving opportunity”.
III. Second Use of Unrestricted Net Assets to meet Operating Expenses [2013 – 2015]
Unrestricted Net Assets recovered from a low point in 2011 to $118,987,000 at year-end 2013. Since 2013, Unrestricted Net Assets have been in decline. Liquidating assets is again being used by IMB management in an attempt to maintain staffing levels. As we now see for the second time, liquidating assets is not able to solve the revenue shortfall problem. So the IMB announced a “Phase II” headcount reduction in the first half of 2017. The cut back was centered on the Information Technology group in Richmond. From year end 2013 to year end 2015 Unrestricted Net Assets fell from $118,987,000 to $76,057,000.
IV. Unrestricted Net Assets, Temporarily Restricted Net Assets, and Permanently Restricted Net Assets
Total Net Assets are divided into several classes. These classes are (1) Unrestricted Net Assets, (2) Temporarily Restricted Net Assets, and (3) Permanently Restricted Net Assets. Temporarily Restricted Net Assets can be moved to the Unrestricted Net Asset account under a proviso specified in the notes to the Financial Statements for a given year. The most recent Financial Statements of the International Mission Board is for the year ending 2015. These Financial Statements appear starting on page 281 of the 2016 SBC Annual. Note 10, on page 291 of the 2016 SBC Annual, states “Net assets were released from donor restrictions by incurring expenses satisfying the restricted purposes . .” In Note 10 a total of $35,875,000 is declared as being moved from the category of Temporary Restricted Net Assets to Unrestricted Net Assets. This reassignment was broken down between years 2014 and 2015 as follows: Year 2014 = $18,552,000; year 2015 = $17,323,000. The net result of this transaction is that about $35.9 million of Temporarily Restricted Net Assets were released so they then became Unrestricted Net Assets.
V. Summary
IMB management should address its plans going forward on (a) The moving of Temporary Restricted Net Assets to Unrestricted Assets, and (b) Its plan to use Unrestricted Net Assets to cover annual operating expenses. Management should make the case that [1] continuing to “raid assets” provides more than just a temporary “band aid” solution to budget shortfalls, and [2] that any use of Unrestricted Net Assets does not draw down asset accounts to a level that is not consistent with prudent management of funds. Two real-world cases since 2007 demonstrate that asset draw downs — while delaying headcount reductions for a few years — have not fundamentally altered the trajectory of the financial stability of the organization.
VI. Questions relating to reducing personnel costs in the IMB
- Can the IMB reduce full time staffing proactively and move to a shared cost model where churches supply and finance personnel for selected projects?
- Can the IMB enlarge the scope of where it engages in work cooperatively, and more economically, in structures where it shares management of the given ministry in specified settings?
- Is it possible to navigate to a paradigm involving less labor cost without bringing about what Mark Terry has called “the ‘amateurization’ of missions”
This is fascinating.
I’m guessing these numbers aren’t adjusted for inflation to 2015 dollars? Not that it would help, but it would show just how much of a desparity in the “then and now.”
This is a real problem and the IMB’s failure to communicate the severity of the issue ultimately falls on the hands of Dr. Platt. While he may be a gifted communicator and preacher, his leadership ability and financial acumen ( and that of those he has hired—especially Sebastian Traeger) continue to be a question mark.
David Platt inherited the current mess. One can question the way he has dealt with the issue, and many have, but no one can suggest that he created the problem or failed to communicate the problem. In fact, most of us didn’t realize that there was a problem until David Platt took over and began dealing with it.
I don’t think that’s a fair assessment. First, these numbers are pre-drawdown. We don’t yet know what the results of that are. These numbers present an analysis of available information, which is valuable in its context. The danger is people jumping to unwarranted conclusions or not taking into account other data that may be relevant but isn’t presented here or available to us. Second, it has been communicated that the situation is serious. I don’t think that can objectively be called a “failure” to communicate. Maybe you think it should have been said differently or more emphatically. And there’s room… Read more »
The numbers come straight from the Balance Sheets for years 2013-2015 of the IMB as printed in the SBC Annuals. These numbers are not adjusted for inflation. If there is sufficient interest I’ll augment my report by using Bureau of Labor Statistics inflation multipliers for each year relative to a baseline year of 2003 and restate the results. Then, for example, Unrestricted Net Assets for year-end 2015 rather than being $76,057,000 would be something lower. The augmented report would have assets in terms of dollars in terms of spending power for year 2003. Year 2003 is the first year that… Read more »
Roger, isn’t it the case that the VRI and other reductions are going to significantly change the situation?
If I’m understanding you correctly, (and it’s possible that I’m not or only getting part of what you’re saying) the main point is that the assets sold are only a short-term answer and that the two options are dramatically reducing expenses or dramatically increasing income. The personnel drawdowns were aimed at accomplishing one of those goals – and we don’t have the indications yet (that I’m aware of) to see if it fully addressed that or only partially.
I’m going to be in prayer for the IMB. You guys are awesome, and you do amazing work. A few thoughts: 1. First and foremost…the IMB & NAMB needs to step up their “ground game”. The vast majority of SBC churchgoers have absolutely now idea how the IMB/NAMB work. If you were to poll SBC attenders, I’m willing to bet that nearly 100% of them would be in favor of “giving to missions”, yet you would have a hard time getting 10-20% of them to correctly identify the name of the organization that runs those missions. It’s a branding issue… Read more »
I think the hemorrhaging was stopped by the personnel reductions. Your figures certainly?put the matter plainly.
Brent: No one can predict the future. And, of course, this includes me. But one thing we see from the past is that from 2007 until year-end 2015 [which is the most recent year for which we now have audited financial reports] we saw Unrestricted Net Assets fall from $256 million to $76 million. But even though this is the case, as recently as in early 2017, the IMB was still cutting back on manpower. So the sum total of annual revenue plus raiding assets still was not able to keep headcount on an even keel. It could be that… Read more »
Roger Your post got me digging this afternoon. You mentioned that no one noticed. So I went looking at other entity financials. I noticed two things specifically. One has to do with what appears to be borrowing from endowments at Southwestern. There is a $19MM line item on the budget that is due to their investments. This has grown over the past few years and is now more than half the budget. Does this mean they are borrowing from some quasi endowments to cover operating over runs? Second, the cash on hand at New Orleans. It’s by far the lowest… Read more »
Jeremy: I have some graduate level accounting exposure from when I was working on my MBA but I am not an accountant and specifically I am not an expert at reading financials of non-profits. About all I know is that for a non-profit balance sheet we have: Assets = Liabilities + Net Assets In layman’s terms “net assets” are “things you have” in terms various items of value — either financial instruments or physical items. “Cash” is just one type of asset. For non-profits typical assets include items such as: investments, endowments, property and equipment, and receivables. If you are… Read more »
Your examinations are interesting there, sport.
Seminary $$$ will be the next blow up
Sorry but I made a dumb typo on my post on May 18 @8:56pm.
Change the text:
“. . . plan to use the levers of more drawdowns of unreported … ”
to
” . . . plan to use the lever of more drawdowns of UNRESTRICTED . . . ”
Believe it or not I proofread stuff but even still I just don’t spot all dumb errors.
I need a personal secretary to keep me on track here.
Roger
Many more missionaries accepted the Voluntary Retirement Incentive than the IMB administrators expected. So, in 2016 the IMB experienced a significant reduction in personnel costs, about 1200 less missionaries and headquarters employees. Coupled with a good Lottie Moon offering in December 2015, the IMB’s financial situation improved in 2016. I do not know much better it is, but I do know the IMB plans to appoint more new missionaries in 2017. The IMB leaders told us missions professors that they mean to be careful in the future not to let the missionary force and income get out of balance as… Read more »
Mark: Thanks for this great report. When the YE 2016 financials actually hit the street, I’ll take a look. Consistent with your report we should see Unrestricted Net Assets on the Balance Sheet going up compared to YE 2015. Also looking at the Statement of Activities we should see at the line item “Total Contributions – Unrestricted” something ‘significantly’ more than the $284,327,000 for YE 2015 . . . maybe something like $312,000,000 which would be a 10% increase. Or maybe we will also see the Line Item “Total overseas programs and stateside supporting expenses” drop by 10 to 20%… Read more »
Yes, the IMB did incur significant one time expenses due to severance benefits. One can infer from their plan to increase new missionary appointments in 2017 that they expect a good balance sheet in 2017. Another factor is that new missionaries receive a lower salary than veteran missionaries. My wife and I received a $200 a month raise every 5 years. I don’t know about the timing of the EC report release.
Roger, first of all thanks for doing the digging to find the data to make this informative article. A few observations: 1. The trend over spending was more than a one or two year blip. This is not to throw blame (enough of that discussion has taken place already), but instead to ask why this has occurred and specifically why overall giving (which I am assuming comes almost exclusively through Cooperative Program giving and from the Lottie Moon Christmas Offering) has not kept up with inflation or at least that which was required to support the overseas personnel and those… Read more »
David: I have not yet delved into the question of how the IMB handles retirement. But a glance at Notes 8 and Notes 9 appears to give the answer. These notes are on page 289 and 290 of the 2016 SBC Annual. These footnotes are very “dense” and you just can’t read them and have any clue about what they say without pouring over the stuff. Here is my guess at the essence of what it says. “Future retirement costs are reflected in our financial statements based upon the present value of these costs. Our present value is determined based… Read more »
Roger, thanks for doing the digging. From what you have found, the retirement obligations are 86% of all liabilities of the IMB, so it seems to me pretty obvious that the leadership has a great incentive to reduce this expense going forward. This is not to cast nefarious motivations towards them, it’s just simple math. While they have had aspirations of putting more personnel in the field, an increasing percentage will most likely be short term and a decreasing percentage long term, just to reduce the long term liability of paying pensions and health care for retired missionary and in… Read more »
From my limited experience, I think many churches simply don’t give as much to the CP as we would hope/expect them to give. For several years I served as an elected officer for the Baptist State Convention of Michigan. The largest churches were typically the lowest givers to the CP (both in total giving and in percentages). I have a suspicion, that problem is not unique to that state. Of course, this goes back to SBC identity and other issues your raised. The entire picture is complex. However, I think a lot of responsibility falls on those in leadership at… Read more »
The IMB sets up Guidestone retirement accounts for its missionaries, and it also assists them with Social Security. So, retired Ms have those two income streams. The IMB provides retirees with a small group life insurance policy. For me the policy would pay $10,000. The IMB also provides us with a stipend to help us pay for Medicare Part B and medical insurance. My understanding is that the IMB has to demonstrate to the government that it has sufficient financial reserves to cover its retirement liabilities.
Mark: Do you get a 1099-R each year from Guidestone which indicates your retirement pay from the IMB? The reason I ask this is that it might help to inform the question as to whether the onus to make retirement payments has been assumed by Guidestone or whether Guidestone is merely serving as a processing agent for retirement disbursements. The question I’m trying to ask, and I admit I’m asking this in a crude manner, is “has the IMB purchased fully paid up insurance for former IMB employees that have already retired?” Coming straight to the point, who is now… Read more »
I am getting into deep water which is over my head. NOTE 9 [page 290 of 2016 SBC Annual]: Note 9 covers [1] “certain payments to former employees who are not retirees” and [2] “certain benefits to retired employees such as health care, life insurance and tuition assistance for eligible retired employees”. Payments under Note 9 are carried on IMB’s books as liabilities. Note 9 does not cover retirement pay In a previous post I stated that “retirement pay” is carried on IMB’s books as a liability. This is not correct. I apologize for propagating false information. My problem was… Read more »
I should have added that the IMB deposits 5% of a career missionary’s salary with Guidestone each month. This payment is not deducted from the missionary’s salary. The IMB used to pay in 10%, but during the economic recession the retirement account payment was reduced. I hope that the IMB trustees will restore the retirement benefit to 10%, once financial stability is regained.
Roger, This is more complicated than you might think. Before 1981 the IMB (then FMB) provided a pension for its missionaries. After 1981 the IMB set up 403B (like 401K) accounts for its career missionaries with the Annuity Board (now Guidestone). So, some missionaries get a pension payment, based on the number of years served, and they also get a payment, based on their 403B account. In regard to the 403B account, missionaries have the option to make that money into an annuity or to receive monthly interest payments. Either way the pay out is handled by Guidestone. The IMB… Read more »
I downloaded the SBC Annuals from the Executive Committee website for the last dozen years. Looking at the title page of the annual for any given year, the date of the Annual Meeting is listed. Does this imply that the annual is either posted as a PDF up on the internet and/or distributed to the messengers as a physical printed document at the time of the convention? I know many of you attend the annual meeting from time to time — so many of you must know the answer to this question. Once the 2017 annual comes out then I’ll… Read more »
When the VRI was announced, Executive VP Sebastian Traeger said something to effect of, “…no one joins an organization to retire from it some day.” He wasn’t being dismissive of long-term employees; instead, he was stating a reality in today’s working culture. Eventually, he added that retirement benefits would be reduced beginning January 2016. Since the VRI/HRO, I’ve yet to meet someone with as many years in the organization as I, and I’ve got between 15-20 years. We’re getting younger as an organization, I think. Not sure that’s either here or there – just seems to be the reality. But… Read more »
Several comments: Ethan, Sebastian’s comment is an example of the change in the ethos of current IMB leadership. When Mark Terry and I were appointed, if you even hinted you did not plan to stay with the FMB/IMB until retirement you would not be appointed. I am sure Sebastian cannot understand that mind set. Of course, not everyone stayed until retirement for various reasons. The first several years I served we would recognize those retiring every year from our field of service. There would always be several with 35 or more years of service. I retired after 32 years in… Read more »
Before the Voluntary Retirement Incentive induced hundreds of missionaries to retire, the average tenure (total years years served with the IMB) was nine years. I don’t know what it is now. I assume it is lower. At the annual meeting of missionaries on the field, held region by region, missionaries are honored for increments of service–5 years, 10 years, etc. In my last years on the field very few were honored for more than 10 years. I believe this is due to cultural factors in the USA, at least in part. Very few employees now would envision remaining with their… Read more »
Truth here. Truth of the kind that can only come from a brain well nourished with real barbecue.
Bart, we must get together to eat barbecue and chat–in that order.
Amen!
The average IMB giving per sunday morning SBC attendee is around 80 dollars per year. That can easily be improved upon with a little effort. Sending out videos in October won’t cut it. Connect IMB family units directly to churches. Assign each missionary family to a church. That’s about 25 churches per family. Have the missionary initiate and maintain communication with the 25 churches assigned to them updating them on the work, prayer requests and needs. Lottie Moon giving would go up exponentially just because someone they know finally asked. If that’s too hard just hire a professional fundraising firm… Read more »
Tim B: Maybe in the old days, [ca 1950s] churches gave to Lottie at Christmas. Now churches have a “Global Missions Offering” at Christmas time instead. Now most people in my church don’t even know who Lottie Moon was. They think Lottie another line of cosmetics — maybe like Mary Kay — or someone like Joyce Meyer. Here is the breakout of how that offering is spent: (a) “some” to help provide assistance to church members who go on mission trips of several week’s duration — either elsewhere in the USA or in Canada or Mexico or to another continent… Read more »
I refuse to believe that the money is not there for the asking. I’ve been in services where a group who digs wells raised 5k, watched ss classes and individuals pledge 50 bucks a month for a ” compassion” child and church after church spend more on trinkets for shoebox than they give to support imb missionaries. The money goes elsewhere because the imb is invisible in our churches.
After talking with some friends about this over the past few days, I’d like to reiterate what I said above. We’re only a month or two away from knowing the 2016 data and the new situation of the IMB post-VRI. I expect that the new situation will be considerably different than the numbers Roger has analyzed for us here. At that point we’ll have a much fuller picture of the situation than we do today.
FYI: The IMB has just released the Lottie Moon Christmas Offering total for 2016 and it was almost $153 Million, the fourth highest total. However, it was down 7.7% from the record high of 2015 which was received amidst the news of the voluntary reduction in personnel and it was lower than the giving of 2014, which was $154 million (the second highest total giving). Here is the link to the Baptist Press article: http://www.bpnews.net/49001/lottie-moon-offering-nears-153-million