SUPPLEMENTARY REPORT

OF THE

COUNCIL OF ASSEMBLY

MAY 2008

PROPOSED DELIVERANCE

The General Assembly:

1. 	Receive the Report.
2. 	Approve the Co-ordinated Budget Proposals for 2009. (Section 3 and Appendices 1 and 2)
3. 	Note the indicative Rolling Budget for 2009-2013. (Section 4 and Appendix 4)

REPORT

1.	The Co-ordinated Budget
1.1	One of the Council’s key budgetary objectives is to maximise resources available to congregations.  Last year the Council was pleased to bring forward a budget which reduced the amount contributed by congregations by £1 million from the level of the previous year.  This year the Council presents a budget which contains the increase in the amount asked of congregations to £400,000, or less than 1%.
1.2	The remit of the Council of Assembly requires it “to bring recommendations to the General Assembly concerning the total amount of the Church’s Co-ordinated Budget for the following financial year and the disposition thereof amongst Local Congregational Expenditure, the Parish Ministries Fund and the Mission and Renewal Fund”.  The Council’s recommendations for the 2009 Co-ordinated Budget are to be found in Appendix 1.
1.3	The Parish Ministries Fund is used for the following work of the Church:
* The National Stipend Fund which pays the stipends and other costs of parish ministers.
* Support and development of ordained parish ministry.
* The salaries and other costs of ordained deacons, associate ministers, community ministers, interim ministers, the readership, parish assistants and specialist workers employed or appointed by the Ministries Council in the context of Presbytery plans.  (Parish staff employed locally by congregations are not paid from the Parish Ministries Fund).
* Area team ministry costs.
* Recruitment and education for ministers, including the employment of probationers.
* Supporting chaplaincies and new charge development.
1.4	The Mission and Renewal Fund is used to support the work of the General Assembly’s Councils and Committees, excluding the Ministries Council:
* Mission and Discipleship: responsible for developing policy and resourcing congregations in children’s ministry, youth work, adult education and elder training, congregational mission and development, worship, doctrine, church art and architecture.
* Church and Society: engages with, and provides Christian comment on the social, moral, political, scientific and technological issues of today.
* Social Care: offers caring services to people in need throughout the nation and provides specialist resources to further the caring work of the Church.
* World Mission: encourages an understanding of one world Church and develops partnerships with churches in particular countries.
* Support and Services: acts as an “umbrella” for the Assembly Arrangements, Central Services, Ecumenical Relations, Legal Questions, Safeguarding and Stewardship & Finance Committees.
1.5	After the General Assembly has approved the total amount of the Budget for 2009 and the proportionate sharing among Local Congregational Expenditure, Parish Ministries and the Mission and Renewal Fund, the Council of Assembly will be required “to determine the allocation of the total budgets for the following financial year for the Parish Ministries Fund and the Mission and Renewal Fund amongst the relevant Agencies of the General Assembly and Ecumenical Bodies”.
1.6	Appendix 2 gives details of Total Expenditure, Central Income and the resulting amount to be met by congregations.  Appendix 3 shows indicative budgets for the Committees and departments within the Support and Services Council and Special Contributions to other bodies.  The final determination of individual budgets will be made after the General Assembly, by the Ministries Council in relation to the Parish Ministries Fund and by the Council of Assembly in relation to the Mission and Renewal Fund.
1.7	The Council is also required “to prepare and present to the General Assembly an indicative Rolling Budget for the following five financial years”.  The Rolling Budget for 2009 to 2013 is to be found in Appendix 4.  The Rolling Budget is reviewed and updated annually, in the light of the latest known circumstances, to allow longer term strategies and planning of resources to be developed in a systematic way.  Appendix 5 illustrates the trend since 2000 in the distribution of congregational income between funds available for local mission and contributions required to meet Ministries and Mission costs.

2.	Congregational Income
2.1	Details of 2007 Congregational Income are contained in Appendix I.  These show that there was an encouraging increase of 3.3% in total Ordinary General Income, with Offerings up by 2.1%, Tax Recovered by 5.3% and Other Income by 9.0%.  This overall increase was in line with inflation and follows an increase of 4.5% in 2006.  Thanks are due once again for the generosity of many members in supporting the Church’s ministries and mission.  Grateful appreciation is also due to all those involved with the promotion of Christian stewardship and the administration of congregational finances, particularly at this time of change and additional regulatory requirements.
2.2	As detailed in the Stewardship and Finance Committee’s main report (Section 1) the Pilot Stewardship Programme, currently being implemented in the Presbyteries of Ardrossan and Falkirk, is progressing well and is to be extended to four more Presbyteries in 2008 and 2009.  It is still too early to factor in any estimate for the additional resources which this will yield to fund the Church’s work, and so the Council has assumed increases in total congregational ordinary general income of 2.75% per annum for both 2008 and 2009.  The Chancellor’s decision to provide transitional relief until 2011 from the effect on Gift Aid repayments of the reduction in the basic rate of Income Tax was most welcome.  This will be worth almost £4 million to congregations over the next three years.
2.3	To provide stability for their work the budgets of Councils and Committees, after making appropriate adjustments to the 2008 budgets, have been increased by 2.75%.  This is possible, notwithstanding an increase of less than 1% in the total to be met by congregations, because of increases in investment income and the further use of reserves held by Councils and Committees.  This continues the policy of limiting the funds required of congregations without placing undue pressure on the work of Councils and Committees and encouraging more effective management and deployment of the resources held centrally.

3.	2009 Co-ordinated Budget
3.1	2009 Income Disposition
3.1.1	One of the key elements in the Co-ordinated Budget process is the determination of the “Income Disposition”.  This is the allocation of estimated congregational Ordinary General Income among Local Congregational Expenditure, the Parish Ministries Fund and the Mission and Renewal Fund.  It should be noted that this deals only with the unrestricted income of congregations.  It does not include extraordinary general income, such as legacies, restricted income not available to meet regular expenditure, fabric fund receipts etc.  Such funds, which are assumed to be used exclusively to meet local congregational expenditure, are estimated at over £20 million each year.
3.1.2	The Council of Assembly proposes that the amount of the Budget to be met by congregations in 2009 should be increased by less than 1% (£400,000) from the 2008 total of £42,970,000 to £43,370,000.
3.1.3	A freeze in the Budget in 2007 was followed by a reduction of £1 million in 2008.  Thanks to the increase in the amount of investment income generated by the Investors Trust Growth Fund, and the continuing review of the reserves held by the six Councils, it has been possible to contain the increase now proposed in the 2009 Budget well within the increase in congregational income.  This means that £1,870,000 of the estimated increase of £2,270,000 in next year’s congregational ordinary general income will be made available for local congregational expenditure.  This expenditure will rise from £40,781,000 to £42,701,000 (4.7%) and represents 50.4% of the Income Disposition in 2009 against 49.4% in 2008.  This is a continuation of the Council’s policy of transferring resources back to congregations and the Council believes that it will be of considerable assistance to the finances of the church at congregational level.  It should be noted that between 2000 and 2009 resources available for local mission will have risen by 58%, from £27.1 million to £42.7 million, while resources required for ministries and mission costs will have risen by 11%, from £38.0 million to £42.1 million.  This trend is illustrated in the chart shown in Appendix 5.
3.1.4	As a further stage in the development of financial monitoring and reporting, the Council proposes to introduce the concept of ‘gross budgeting’.  This will result in Councils and Committees being accountable for their total expenditure, rather than simply for the funds which they receive through congregational contributions.  This will extend the budget process to include other sources of income, including investment income and reserves, and will allow a more effective and coordinated use of the total resources available to fund the Church’s work.
3.2	Parish Ministries Fund
3.2.1	From Appendix 2 it will be noted that the total budget for the Parish Ministries Fund for 2009 is £45,652,000.  This now includes costs for chaplaincies and new charge development which were previously funded from the Mission and Renewal Fund under the heading of Other Ministries.  After deducting central income of £8,243,000 the net amount to be met by congregations is £37,409,000, an increase of 3.8% on 2008.  After deducting vacancy allowances this represents 42.6% of the Income Disposition compared with 42.2% in 2008.  In addition, following the decision taken by the 2007 General Assembly, the Ministries Council is now making direct contributions from its reserves, starting at £2.2 million per annum, towards the past service deficits of the Ministries and National Mission Pension Schemes as assessed by the triennial actuarial valuation at 31 December 2006.
3.3	Mission & Renewal Fund
3.3.1	The Mission and Renewal Fund’s share of the Income Disposition will decrease from 8.4% to 7.0% in 2009.  This is a result of the transfer of the Other Ministries part of the Budget referred to above, as well as the utilisation of £500,000 from the reserves of the Mission and Discipleship Council and £220,000 from the reserves of the Support and Services Council, which is now also contributing £30,000 per annum directly towards the past service deficit in the Staff Pension Scheme.  It also includes a contribution of £450,000 from the income of the Mission and Renewal Reserve Fund, which still stands at a level above that required to meet working capital requirements.  Again this will assist in containing the contributions required from congregations and the Council of Assembly will continue to use the reserves at its disposal in this way.  The Fund has also been supporting the Parish Development Fund since 2003 and will contribute £250,000 per annum from 2008 until the end of 2010.  In addition extra funds have been provided in 2009 for the Media Relations and Communication Department to assist with the implementation of the Communication Strategy, while savings have been achieved in the General Treasurer’s Department.

4.	Five Year Rolling Budgets from 2009 to 2013
4.1	Five Year Rolling Budgets are indicative in nature and are intended to allow longer term strategies and planning of resources to be developed.  The Rolling Budget from 2009 to 2013 is shown in Appendix 4.  As the budget process continues to evolve, the Council intends to extend the budget planning period to allow detailed budgets to be prepared for more than one year ahead.  This will allow Councils and Committees to make longer term strategic decisions for their areas of work with more confidence.

5.	Conclusion
5.1	In 2009 the Council of Assembly’s Budget proposals will reach a milestone when congregations in aggregate will have more than half of the total general income available for local mission after meeting their contributions towards the costs of parish ministers and the other work and mission of the Church.
5.2	The Council proposes that future Budgets should aim to ensure that, in aggregate, congregations continue to retain at least 50% of total Ordinary General Income.  There is a recognition that Reserves cannot be used indefinitely to support the Budget.  At the same time Presbytery planning, investment returns and pensions costs will continue to be major influences on the Church’s finances.  Nevertheless the resilience of members’ offerings and the prospect of real growth through the implementation of the Pilot Stewardship Programmes should allow this to become a realistic and achievable target.

In the name of the Council

HELEN MCLEOD, Convener
ALAN GREIG, Vice-Convener
FINLAY MACDONALD, Secretary