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Administration and Finance Policy Group

Terms of Reference

Review and develop policy on:

• Administration including Laughton House, Human Resources, risk management and compliance
• Financial management and resourcing of work of Presbyterian Church , including raising finance for church's work and requests for appealing to members for money
• Overview of Investment and Church property policies in relation to Assembly Funds
• Strategic communication issues and strategies
• Archives and historical records including future policy regarding collection, collation and storage

Synopsis

• Strategic financial and administration issues arising from changes in Church
• Changes to provision for leasing of ministers' homes
• Strengthening appointment processes
• Single assessment proposals

Recommendations

(1) That section 2.1.2 Location b in the Book of Order from the words b) By leasing a house owned by the minister to ... main worship centre, be repealed. [see section 4 of the report]

(2) That regulation 225 be amended by adding a new clause (vi) as follows (with consequential renumbering of succeeding clauses): Before a Board of Nomination makes any approach to a minister or puts a name before a Session or Parish Council the Nominator shall confer with the Assembly Office as to the status and standing of the minister or nominee and other relevant information, and shall report that information to the Board of Nomination. [section 5]

(3) That regulation 226 be amended by adding a new clause (v) as follows (with consequential renumbering of succeeding clauses): Before a Board of Nomination makes any approach to a minister or puts a name before a Session or Parish Council the Nominator shall confer with the Assembly Office as to the status and standing of the minister or nominee and other relevant information, and shall report that information to the Board of Nomination. [section 5]

(4) That the Book of Order be amended by the addition of a new regulation 86A and a new clause in Appendix E-17 4.1.2 (with consequential renumbering) as follows: Before a Session or Parish Council or Interim Moderator makes any approach to a minister to serve as Stated Supply the Interim Moderator shall confer with the Assembly Office as to that minister's status and standing and any other relevant information, and shall report that information to the Session or Parish Council. [section 5]

(5) That the Book of Order be amended by the addition of a new regulation 86B as follows:

(1) Before a Session or Parish Council or Interim Moderator makes any approach to a person to serve as lay worker in a position with pastoral responsibilities, the Interim Moderator shall confer with the Assembly Office as to the status and standing of any prospective appointee and any other relevant information, and shall report that information to the Session or Parish Council.

(2) When a Session or Parish Council considers the appointment of a person to a position with pastoral responsibility it shall obtain from the Police a record of any convictions and shall obtain the consent of all prospective appointees to do so.

(6) That the Book of Order be amended by the addition of a new regulation 608 as follows:

Subject to the decision of a judicial body to the contrary, every complaint made to a Session/Parish Council or Presbytery/UDC under chapter 10 of the Book of Order (including Appendix E-9) and every disciplinary action taken by a Church Court or Court of Law shall be reported to the Assembly Executive Secretary immediately, and a record of every disciplinary action taken shall be placed on the minister's personal information file. [section 5]

(7) That regulation 4 be amended by the addition of the following words at the end of the regulation after the words Chapter 5 "...whose good standing has been verified by the Presbytery and the Assembly Office." [section 5]

(8) That regulation 230 be amended by the addition of the following words after the words "retired ministers" in line 2: "and in good standing as verified by the Presbytery and the Assembly Office." [section 5]

(9) That regulation 245 be amended to read as follows

"When a call is sustained, in favour of a minister not holding a seat in any Presbytery or of a licentiate, the Clerk shall transmit it to the Clerk of the Presbytery on whose roll the minister's or licentiate's name is listed, together with extract minutes of relative proceedings and a statement of reasons for the translation. The minister or licentiate receiving the call is asked to intimate his or her views in regard to it, which he or she may do in writing. The Presbytery considers the case and gives its decision. If the Presbytery decides to put the call into the hands of the minister or licentiate and it is accepted, the Presbytery directs the minister or licentiate to await the orders, relative to induction, of the Presbytery forwarding the call. Prayer is offered for the minister or licentiate and the process continues as set out in regulations 263 and following. (see also 231) [section 5]

(10)

(a) That one assessment be used to fund the work of the General Assembly.

(b) That all other assessments currently used to fund the work of the General Assembly cease at the time of the commencement of the new assessment.

(c) That the underlying principle for funding the work of the General Assembly remain an equitable sharing of burden among all parishes rather than user pays.

(d) That the assessment be based upon the number of members in a parish and the parish income with the weighting to be 50% membership and 50% income.

(e) That the definition of income contained in Appendix 1 in this report be used to determine the amount of income of a parish subject to assessment

(f) That the single assessment be effective from 1 July 2003. [Appendix 1]

Report

1. Assets for Mission

1.1 The Policy Group is grappling with the consequences of changes in the way the Church engages with the community and the changes in demographics.

1.2 Over its history the Church in its congregations has built up considerable assets. Many congregations have an ongoing dynamic of developing their assets as part of their mission in the community, becoming more open, welcoming, and engaging with their communities in Christ. Many of those congregations have done so through sacrificial giving and involvement. It is exciting to see, for example, the development of community connecting ministries within the Pacific Island and Asian parts of the Church through activities like language nests. There is evidence of a strategic mission approach flowing through to good decision-making about property.

1.3 On the other hand with the decline in participation in many congregations quite small numbers of people oversee considerable investments and property. On the basis of statistical returns we see the mission and ministry of the Church is increasingly funded by income from investments and reserves and not from the giving of the congregation. Unless the Church finds more ways to connect with the community in Christ the scenario we face is of small numbers with considerable capital.

1.4 Signs of this include congregations amalgamating and the property being sold or becoming part of a larger pool of congregational asset. Many congregations are using the interest on capital or reserves to fund their mission and ministry, and to retain a full-time minister of word and sacrament beyond what the giving of the congregation would allow. In many cases those reserves will be exhausted within a short period but that time has not been used to enable the changes which will connect the congregation more effectively with the community. In many parts of the country the Church has assets insufficiently focussed on enabling its mission.

1.5 The Policy Group is increasingly aware of the signs of financial distress. Less than half of our parishes can afford full-time ministers of word and sacrament. Essential national levies are going unpaid, and many buildings are being inadequately maintained. It seems clear our resources are spread too thinly suggesting we need to focus our resources more strategically. We need to consolidate our resources so that we are able to use them more effectively in the mission of the Church.

1.6 The Policy Group believes the main answer to many of the issues with which we struggle is, as outlined in Directions, extending the Church's connections with the community and growing participation so that we grapple with issues of growth rather than decline.

1.7 A challenge facing the Church is that the Church is short of development money where there is considerable population growth and congregational vitality or potential vitality - the outer edges of Auckland - North West Auckland, South Auckland, Albany, Botany Downs, the northern part of Hamilton, the northern part of Tauranga and southern part of Mt Maunganui, within the Pacific Islands and Asian parts of the Church, and to a lesser extent in other areas. The Policy Group has tried to release some of the Assembly's assets but the pool is small.

1.8 We want to release assets from places of demographic decline and irretrievable loss of congregational mission to places of demographic growth and readiness to connect with communities. We know that unless there is spiritual readiness and passion to connect with the community, adding money and assets makes no difference.

1.9 The Policy Group is hopeful the Council's proposals to strengthen presbyteries will be a first step in enabling presbyteries gradually to redistribute the Church's assets to places of greatest need and potential. This will require presbyteries to be more strategic about developing mission priorities and more resolute in challenging congregations sitting on assets which could be more usefully applied. We also believe the present policy whereby capital proceeds must be spent on capital projects does not serve the Church well. The Policy Group will be bringing proposals to the next Assembly to enable greater release of assets in mission. It also plans to develop guidelines which help presbyteries assess how assets may be most helpfully applied and reapplied.

1.10 The Presbyterian Church is multicultural. Different cultures take different approaches to property, finance, communication and Assembly funding. The Policy Group is seeking to take account of these different approaches within our resources and the Church's overall policies and approach. It has helped clarify, in the interim, the funding of the Pacific Islanders Synod and has met with the Council of Asian Congregations.

2. Assembly operations

2.1 The changes in congregations have inevitable consequences for Assembly functioning. Giving to congregations has held up over the years, but giving to the Assembly and consequentially the functioning of the Assembly has reduced significantly. The Assembly has absorbed reductions to enable more giving to go to congregations. However the point has been reached where what were regarded as essential functions such as mission resourcing and equipping leadership is at risk, certainly as they are presently provided.

2.2 We are also conscious that a future scenario sees less fully-functioning congregations as we have known them and more smaller-groups generally under the auspices of the Presbyterian Church but with looser links. These may or may not choose to help fund the operations of the Presbyterian Church.

2.3 The Council has decided that nationally the Church will invest in encouraging those changes which help congregations engage more effectively with the wider community, and will use reserves to ensure that leadership development and mission resourcing focuses on helping that happen.

2.4 We are closely monitoring the situation and try to keep the Assembly, the Council and the wider church fully informed as we develop approaches to address the situation.

3. Assembly Budget

3.1 In the shorter term the most difficult task facing the Administration & Finance Policy Group over the last two years has been the formulation of an Assembly Budget for the 2002-2003 year for proposing to the Council of Assembly, and planning beyond that date.

3.2 Two concerns have been central for us. The expressed wish of the Church, as relayed to us by many responses, to continue almost all existing work, and in some cases expand it, and the need to recognise the issues of the future of the institutional Church. We have looked closely at proposed work in the light of "Healthy Congregations" and creative and positive ministries within communities

3.3 It is clear from statistical returns from congregations that Church life in some of the communities in which congregations are set is difficult. There are areas where support for the Church has fallen to alarming levels and some formerly healthy congregations are struggling to survive. To meet the expectations of the Church, as expressed by the General Assembly, and continue to support the paid servants of the Church we have had to reduce spending in some areas, delay spending in others and plan to draw on our limited reserves. Unless there is a significant improvement in congregational life, and the contributions made to the national Church, there will be dramatic reductions in services and support staff in the near future.

4. Leasing of minister's homes

4.1 The last Assembly adopted regulations about ways accommodation could be provided for ministers. One of those ways allowed the congregation to lease a house owned by the minister. Having undertaken further research, and in light of the government's concern about the avoidance of fringe benefit tax, the Council of Assembly and the Policy Group recommend the repeal of that provision. The change of policy will not be retrospective but we would wish to help congregations and ministers phase out any existing arrangements.

5. Sexual Misconduct

5.1 The Policy Group and the Council of Assembly have been aware of suggestions being made by presbyteries and others regarding the sexual harassment procedures, and particularly concerning the management and funding of disciplinary charges. The Policy Group supports the new Appendix E-9 as set out in the report of the Book of Order and Judicial Reference Group.

5.2 There have been 13 sexual misconduct complaints involving 11 ministers and lay workers since 1996. There has been considerable publicity about sexual misconduct in the Church generally.

5.3 It is imperative for the safety of people and the integrity of the Church that our processes be transparent and robust. It is also imperative that we ensure our appointment and call processes help the Church consider matters carefully and thoroughly. The amendments proposed in our recommendations are aimed at doing that.

6. Single Assessment

6.1 As set out in Appendix 1 the Policy Group and the Council of Assembly propose the setting of a single assessment.

7. Debtors

7.1 We have addressed, in a preliminary way, the failure of a large number of congregations to honour their responsibilities to the Presbyterian Church. We are concerned that a significant number of congregations have in the past defaulted on payments of Mission and Ministry allocations, the National Service Levy, the Beneficiary Fund Levy, Seniority Allowance Levy, and/or Insurance premiums. We believe that any congregation in default has created a debt and should follow the proper process with regard to debt established by previous Assemblies. [Congregational approval, Presbytery Approval, Church Property Trustee [or Otago Southland Synod ] approval).

7.2 We have concern that some Presbyteries, as presently constituted, fail to monitor the financial activities of the congregations in their care and allow, by default, a disregard of the Book of Order and the proper processes of the Church. It is our intention to contact the office bearers of defaulting congregations and the relevant Presbyteries in order to recover, as far as possible, outstanding levies. On the advice of the Manager of Financial Services we have looked closely at the number and variety of payments required to be transmitted, on a monthly basis, to the Assembly office. The intention is to consolidate them into a single payment that will then be credited as appropriate. See Appendix 1.

7.3 It is also our hope there will be some relief to congregations when the Assembly is able to authorise the release of capital for the mission of the Church.

8. Financial Services

8.1 Since the last General Assembly Mr Doug Langford has completed his term as Manager of Financial Services and the Task has been accepted by Mr Geoff Bell. Doug Langford took up the task at a difficult time and made a huge effort to clarify the financial situation. In his second retirement he continues to serve the Church Property Trustee. His work is greatly appreciated.

8.2 Geoff Bell has brought to the role a wealth of experience in business and the Church and has invested enormous energy and time in the task of clarifying and presenting the financial management of the Church.

9. Computer System

9.1 The computer system, based on relatively small, and now outdated, computers is now grossly overloaded and the system has collapsed on more than one occasion through the excess load placed upon it. After consultation we have advised that the whole system should be reshaped to provide more efficient use of software and a regularly updated hardware profile. This has been budgeted for implementation over the December -January period. We expect the change to be highly cost effective.

10. Auditing

10.1 The policy group is working on a recommendation regarding the establishment of a clearer and more effective system for the auditing of Congregational financial reporting. We are aware that the standards of some audits do not meet the stringent requirements of true auditing and that to locate a competent person reasonably conveniently is not always possible. While the recommendations are being prepared we would urge all congregational treasurers to carefully consider the "Guide to Treasurers". Copies are available. Commissioners should ensure that their treasurer has a copy and has read it.

11. Communication

11.1 The magazine sPanz is now well established as a quality publication and although it will never satisfy every critic it is being well received. The production staff will always welcome contributions and suggestions for articles. It is of serious concern however that some congregations continue to be satisfied to pile a heap on a table in the Church entry in the apparent hope they will levitate to the homes of Presbyterians.

11.2 Since it costs $1.44 per copy to produce a heap of undistributed copies represents a very extravagant misuse of resources. It is good to know that an increasing number of congregations are using Spanz as an addition to their own newsletter and deliver it to all homes.

11.3 The establishment of a clear "Media Policy" has clarified to role of those asked to respond to questions from the media on matters of life and practise in the Church. It is almost impossible for the media to distinguish between personal views and policies and decisions of the Presbyterian Church of Aotearoa New Zealand when they approach a member of the Church for comment. The "Media Policy" clarifies for all office holders what their role can be.

11.4 The web site www.presbyterian.org.nz is increasingly being used as a point of first contact for information about the Church and its activities. The Book of Order is now 'on line' and much detailed information is quickly accessible. The site is available 24 hrs per day.

12. Archives

12.1 For more than a decade the Archives of the Presbyterian Church of Aotearoa New Zealand have been steadily consolidating on the Knox College site. The cost of storage and its accommodation have been met, largely, by the Council of Knox College and Salmond Hall with the Presbyterian Church of Aotearoa New Zealand meeting the cost of salaries. Over the years thousands of items have been deposited in the archive and the area required to house the collection has grown dramatically. Some collections in other repositories are being held at little or no cost to the Church but there are indications that not all repositories are happy with the present arrangement and would like us to remove the collections. With this in mind the Council of Knox College and Salmond Hall has set up "The Presbyterian Archives Accommodation Committee" with the intention of providing a secure environment of sufficient size to allow the forecast growth of the material to be safely held. At present the initial scoping of the project is being completed. It is hoped that the collection may be housed in reasonable proximity to the Hewitson Library. The archive use by researchers is increasing rapidly.

Brian Williscroft

Ian Watson

Conveners

Appendix 1

Proposal for Single Assessment

1. Purpose

1.1 The purpose of this paper is to recommend a suitable method for assessing the amount individual parishes should contribute to the national functions of the Church including the Assembly Office (including the mission resource team and the school of ministry), ministers' seniority allowance and the employer contribution to the Beneficiary Fund.

1.2 It is not the purpose of this paper to determine an appropriate level of funding for the various activities of the Church, merely to propose a suitable method(s) to raise whatever funding is required from parishes. It also does not address the issue of what portion of the total operating costs should be contributed by parishes.

2. Background

2.1 Over time the character of the Church has continued to change while the methods it has used to fund national functions have remained largely unchanged. The effect has been to change the relationship between the contribution made to the Assembly and the support received from the Church. Worst affected are the parishes that are never likely to have a minister in the future. Because of this change it is appropriate to revisit the way a parish's contribution to national functions is assessed to ensure that assessment is not hindering the development of healthy congregations.

2.2 The changing character of the church is outlined particularly in "Directions" (Appendix 4 to the Council of Assembly Report) and also in the report of the Administration and Finance Policy Group. For the purposes of brevity that information is not repeated here but those papers should be read in conjunction with this paper.

2.3 The loss of income being experienced by parishes is reflected in a loss of income to the General Assembly as it raises much of its income from a levy on parish income. As a consequence the Council of Assembly has had to both restrict its support of parish activities and budget to operate at a deficit for the current and following financial year. Like many parishes the Assembly is living on its reserves in the short term. Cutting costs in the Assembly Office invariably means cutting services, as staff are a very significant portion of Assembly Office costs.

2.4 Changing the manner in which we raise the money from parishes does not in itself create additional revenue for the Church. However such changes can reduce the operating costs of the Church and bring changes in the way parishes manage themselves and their finances. The manner in which a parish is assessed for its contribution to the national functions should not discourage it from having a growing healthy congregation.

2.5 This paper therefore looks at how through the use of an appropriately targeted assessment system the current financial situation of the Assembly can be moved to a sustainable footing. While an assessment may not have this effect when implemented we at least need to ensure that the assessment system does not make the current position worse.

2.6 In looking at determining an appropriate method of assessing parishes it became evident that there is considerable confusion and disagreement as to what constitutes income for the purposes of calculating the amount of the assessment. This paper therefore includes a definition of income that is to be used in conjunction with the assessment system recommended by the paper. Even if the recommendation of the Assembly is to remain with the current assessment system it will need to adopt a definition of income to be applied. Currently, in the absence of a comprehensive set rules the Manager Financial Services is deciding what constitutes income.

3. Types of Assessment Basis

3.1 When raising funds from parishes several different methods of calculating parish liability can be used. Each method has its own particular characteristics and will be more or less attractive to a parish depending on the individual financial circumstances of the parish. No one method will make every one happy. A method can be used on its own or in combination with other methods.

3.2 In the following sections [4.0-7.5] some of the more relevant methods of assessment are identified and their advantages and disadvantages discussed. Also discussed is how the assessment will affect parishes with differing financial positions. The advantages and disadvantages are viewed from the perspective of the national church. Parishes doing well or poorly are viewed from the perspective of the parish.

3.3 Each method of assessment was evaluated against the following criteria. Only those methods that meet a substantial portion of the listed criteria have been included in this paper. Numerous other methods were considered and rejected after being tested against these criteria. The ranking is in no particular order.

(i) Ease of administration (for both the parish and the national church), understanding and application.

(ii) Equity - are parishes in approximately the same financial position paying the same assessment?

(iii) Limits the scope for a parish to reduce the amount of the assessment by changing its financial structure.

(iv) Limits the scope for a parish to hide its true financial position and therefore its just assessment by marginal accounting or reporting practices.

(v) Ease with which the assessment regime can be audited or enforced.

(vi) How well the assessment calculation reflects the financial capacity of the parish to pay the assessment.

3.4 When considering an appropriate basis for assessment the paper has assumed that the fundamental principle of "sharing the burden" based upon capacity to pay remains in place. This paper does not advocate a move to a "user pays" principle. If the Assembly were to take the view that "user pays" was a more appropriate approach then the recommendations of this paper would need to be replaced with recommendations more appropriate to that regime. The paper does assume that while there may be no direct correlation between what a parish pays and what it receives in return a parish should feel that it gets at least some benefits from paying its assessment. If that relationship does not exist then it will invariably ask the question "why do I need to be a member of the Presbyterian Church of Aotearoa New Zealand?"

3.5 The assessment system recommended in this paper will not apply to co-operating ventures. A later section of this paper discusses the collection of Beneficiary Fund Assessments and Seniority Allowance Levies from cooperating ventures with Presbyterian ministers.

4. Fixed Percentage of Income

4.1 Under this method a parish pays a fixed percentage of its income to the Assembly. This method is currently used to calculate the National Services Levy.

4.2 Advantages

(i) Ease of calculation for Assembly Office when based on previous year's income.

(ii) Charge is related to income (and in the parish environment, cash flow) and therefore capacity to pay the charge.

(iii) Initiatives funded and directed by the Assembly Office that result in growing parishes provide a return to the Office.

(iv) Parishes on the same income receive the same charge.

(v) Income can be verified against audited parish accounts.

4.3 Disadvantages

(i) Donations in kind in lieu of offertory can reduce the income base used for the calculation.

(ii) Doesn't consider level of fixed expenses so income alone may provide a misleading indication of the ability of the parish to pay.

(iii) Charge does not reflect the actual level of service received by the Parish from the Assembly Office.

(iv) A complex definition of income is required to prevent parishes from manipulating returns to reduce leviable income.

(v) The definition of income has to mix gross and net income concepts to achieve an equitable assessment.

4.4 Favours

(i) Mature parishes with a large debt free asset base and low income.

(ii) Parishes in financial decline.

(iii) Parishes with large discretionary incomes.

4.5 Penalises

(i) New parishes acquiring assets to run services.

(ii) Fund raising initiatives to improve the financial position of the parish

(iii) Growing parishes.

(iv) Parishes with high income but little discretionary income (i.e. high fixed costs.

5. Assessment Based on Membership

5.1 Under this method congregations would pay a fixed fee for each member of the congregation. This method is used to calculate the Seniority Allowance Levy for parishes. An improved definition of what represented a member would be required as part of the implementation of this method.

5.2 Advantages

(i) Easy to calculate

(ii) Reasonably close relationship between the number of members and the ability to pay.

(iii) Initiatives funded and directed by the Assembly Office that result in growing parishes provide a return to the Office.

(iv) Parishes with the same membership receive the same charge.

5.3 Disadvantages

(i) Relies on membership numbers provided by parishes and those numbers can be manipulated

(ii) Membership numbers not subject to independent review as are financial results.

(iii) Parishes in the same financial position can pay a different levy

5.4 Favours

(i) Parishes in high-income areas.

(ii) Parishes without significant debt.

(iii) Parishes where the congregation is not on fixed incomes.

(iv) Parishes fund raising for a special purpose.

5.5 Penalises

(i) Parishes in low income areas

(ii) Parishes where a high portion of the congregation is on a fixed income

6. Variable Percentage of Income

6.1 Under this method the parish would pay a percentage of its income to the Assembly with the percentage being determined by the income of the parish. The higher the parish income the greater the percentage of income to be paid to the national office.

6.2 Advantages

(i) Charge is related to income and therefore ability to pay.

(ii) Recognises that for lower income parishes fixed costs will represent a greater portion of income thereby better matching the levy to the discretionary expenditure of the parish.

(iii) National income rises as a portion of parish income as parish income rises.

(iv) Income can be verified against audited parish accounts.

(v) Parishes on the same income pay the same amount to the national office.

6.3 Disadvantages

(i) Complex to calculate and understand.

(ii) Relies on income figures provided by the parish.

(iii) Encourages manipulation of income figures to put parishes into a lower percentage band.

(iv) National income falls more rapidly than parish income

(v) Encourages parishes with high levels of investment income to reduce the level of personal giving.

6.4 Favours

(i) Parishes with low incomes

(ii) Parishes owning their own property without debt

6.5 Penalises

(i) Parishes with high debt levels

(ii) Growing parishes.

(iii) Parishes with investments other than own use property

(iv) Parishes fund raising for special projects or capital expenditure.

7. Fee based on Assets

7.1 Under this method the parish would pay a fee with the fee being determined by the value of its assets. The fee would be the same over a range of asset values so the fee would go up in a series of steps.

7.2 Advantages

(i) Assembly income rises at a faster rate than assets accumulate in the parish.

(ii) Discourages parishes from accumulating cash.

(iii) Encourages parishes to put surplus cash into mission particularly if the rate of assessment is greater than interest being earned.

7.3 Disadvantages

(i) No relationship between the assessment and the income needed to make payment.

(ii) Difficult and costly to establish equitable asset values between parishes.

(iii) Levy can possibly be avoided by taking assets off balance sheet.

(iv) Church rules can make it difficult to dispose of assets thereby reducing an assessment that a parish cannot afford to pay.

7.4 Favours

(i) New parishes with limited assets.

(ii) Parishes raising funds to purchase significant assets

(iii) Parishes leasing or renting assets (depending on how rules are put in place for off

balance sheet assets)

(iv) Parishes with growing congregations

(v) Rural parishes with lower building values

7.5 Penalises

(i) Parishes with declining numbers

(ii) Parishes with buildings of historic significance

(iii) Urban parishes where building values are higher

(iv) Parishes with under utilised properties

8.Objectives of a Levy

8.1 From the above discussion it can be seen that there is no one right answer. Depending on the individual circumstances of the parish they will be favoured or disadvantaged by each assessment regime. There is no one regime that favours all parishes. Therefore in order to assess the best option for the church in total we need to consider which assessment regime best helps the church achieve its stated objectives.

8.2 The appropriate objective against which to measure the method of assessment is a healthy congregation. The drive to achieve healthy congregations lies at the heart of the Directions paper approved by the Council of Assembly. The Directions paper has determined the operating priorities of the service teams for the next three years. The characteristics of a healthy congregation have been defined as:

(i) Healthy relationships with the wider church

(ii) Having a sense of direction

(iii) Worship that is true to God

(iv) A lively faith

(v) A strong sense of community amongst all ages

(vi) An involving leadership

(vii) Newcomers and numerical growth within the congregation

8.3 Translating those signs of a healthy congregation into the language of financing the parish a healthy parish is likely to have the following financial characteristics:

(i) Offertory and current fund raising activities finance all aspects of parish life. No reliance is placed on past or future members of the congregation to pay for today's activities of the church.

(ii) Ministry costs are not much more than 60% of annual operating costs. (Note: this

figure is based upon research done by the Mission Resource Team)

(iii) Surplus funds are directed to mission in the wider church and the local community and not accumulated without purpose

(iv) Any fund accumulation is to meet a specific objective(s) agreed by the congregation and will cease once the objective is obtained.

(v) Offertory will be growing as a result of increasing numbers and because members of the congregation are giving an increasing portion of their income as their faith grows.

(vi) Giving is not at the minimum level to operate the parish but is based upon the maximum each member can give according to their financial circumstances.

8.4 If the Assembly is to play a part in parishes achieving the financial position noted above it will need an assessment system that:

(i) Discourages the accumulation of reserves to meet current or future operating costs.

(ii) Discourages the accumulation of under utilised assets.

(iii) Encourages church mission in the wider community

(iv) Not discourage special fund raising activities by taking a portion of the money raised

as a windfall gain for the Assembly.

(v) Penalises parishes that are unable to fund their current operations from current income.

9. The Different Assessments

9.1 The Assembly currently raises four levies or assessments. A different calculation base is used for each. The assessments are National Services Levy, Mission and Ministry, Seniority Allowance Levy and Beneficiary Fund Assessment. While Mission and Ministry is a voluntary payment it still forms part of the funding base of the Assembly so needs to be considered by this paper.

9.2 The National Services Levy is set at 5% of parish income after deducting income raised for work outside the parish. To make the levy work some income is taken on a gross basis (such as offertory) while other income is net (such as fund raising where fund raising costs are deducted). The principle being applied is income available to meet parish expenditure.

9.3 Mission and Ministry giving is voluntary though targets are set for each presbytery by the Assembly Office. Historical performance is often the basis of the target. The presbytery allocates its target to individual parishes within the presbytery. Different presbyteries use different methods of allocation. Some parishes do not contribute to the Mission and Ministry fund. It is not known until the end of the year if targets have been achieved. As expenditure is incurred in anticipation of receiving money any failure to meet target has to be met from the reserves of the General Assembly.

9.4 Seniority Allowance Levy is charged at the rate of $9.80 per person on the roll. The Levy is paid by all parishes even those without ministers. Cooperating Ventures with a Presbyterian minister also pay the levy. The levy is paid in a lump sum annually. Our experience shows that many congregations struggle to get their roll numbers correct and many question their own numbers once invoiced for the levy. In practice administration of this levy is extremely time consuming particularly considering the amount of income it raises ($395,000). In practice the Assembly Office has to over charge the levy. It makes allowance for the fact that some parishes do not pay so additional money to cover the shortfall must come from the remaining parishes. Were this approach not taken General Assembly reserves would be used to pay the seniority levy to ministers.

9.5 The Beneficiary Fund assessment is a percentage of the basic stipend with the percentage being determined by the income of the parish. The levy is charged regardless of whether the parish has a minister. Parishes without ministers tend to pay the levy at lower rates due to their low income. For the 2002/03 year parishes with an income of under $19,000 pay 0.5% of the basic stipend. The percentage increases by 0.2% for each $1,000 increase income to reach a maximum of 14.5% of the Basic Stipend at an income of $89,000.

9.6 It can be seen that of the four levies, one is based on income (NSL), one is voluntary (mission and ministry), one is based on the roll (seniority levy) and the other is based on both income and expenses (Beneficiary Fund). Therefore each is subject to a separate calculation and charging regime increasing the workload of the Financial Services Team and the confusion in parishes. Based on the conversations FST has with Treasurers the basis on which levies are calculated is not widely understood in parishes.

10. A single Assessment

10.1 The approach that has been taken by the Church to setting assessments is to use the virtue of the expenditure to justify the impost of the assessment. In other words we identify a good cause then use that good cause to justify an assessment. Taking this approach gives rise to multiple assessments each calculated differently because the method of calculation must reflect the nature of the cause being financed. Taking this approach leaves the door open for parishes to determine that the cause that justifies the assessment is no longer a good cause thereby freeing the parish from any moral obligation to pay the assessment. This approach takes the focus away from achieving the objectives of the church to justifying the expenses paid by the assessment.

10.2 A preferable approach is to state that the Assembly has a defined set of goals or objectives to achieve as set out in its mission statement. Funding should be directed to the attainment of those goals rather than picking individual components of activity and funding those. Taking the approach of funding the goals should focus the debate at General Assembly to the setting of goals and monitoring progress towards achieving the goals. The Assembly should make the Council and the staff of the Assembly Office accountable for the use of funds to achieve the goals of the church.

10.3 The following analysis of each of the four current assessments shows that they can simply be amalgamated into one single assessment. Not one of the assessments has such unique characteristics that it must remain separate from the other assessments.

10.4 The Seniority allowance levy is not calculated on a user pays basis so it can be included in a general assessment. If this occurs it will save probably 10 days of FST time spent calculating the charge for each parish and dealing with the disputes and queries that arise once the parishes receive the invoice. The rules set by the 1973 General Assembly on Seniority Allowance require that it be paid from the Assembly Office from a levy on all parishes. Including the levy as part of a single levy would comply with those rules. Making this levy part of one national levy would also spread the cost of the levy over a full year. Many parishes struggle to make payment of this levy in one installment.

10.5 The Beneficiary Fund assessment is also not calculated on a user pays basis and could be incorporated as part of a single assessment. Certainly the Beneficiary Fund Work Group and the Church Property Trustees tend to see the responsibility for meeting Beneficiary Fund contributions lying with the Church rather than individual parishes. Also having the church in total responsible for the payment would eliminate the current problem we have with unpaid Beneficiary Fund assessments. Incorporating the Beneficiary Fund assessment into a national assessment would reduce the amount of work required of FST. The portion of a single assessment needed to meet the employer contribution to the Fund is easily calculated.

10.6 The Beneficiary Fund Assessment for a parish is capped at a maximum of 14.5% of a basic stipend. Therefore any parish that has more than 1.5 ministers is making no contribution to the Fund for the additional ministers based on an average parish contribution of 9% of stipend. Large wealthy parishes can obtain the services of additional ministers without a Beneficiary Fund contribution while parishes with no minister at all have to meet part of the cost of operating the Beneficiary Fund. By making the Beneficiary Fund Assessment part of one overall levy the large parishes are losing this shelter. Parishes with lower incomes will effectively pay a greater contribution because it is likely that a single assessment will extract more funds from them than the total of four current assessments. This is because contribution rates for mission and ministry and Beneficiary Fund are concessionary for such parishes.

10.7 Moving to a single assessment will make the mission and ministry portion of the current assessment compulsory where it is currently voluntary. However the proceeds of mission and ministry giving are used to finance permanent parts of the operations of the Assembly Office namely the School of Ministry and the Mission Resource Team as well as such things as hospital chaplaincy. Including this assessment in a compulsory assessment will ensure that funding is received for these vital parts of the operations of the Church. A general rule on the effect on parishes of making mission and ministry compulsory cannot be established as the contribution to be made is determined by presbytery and different rules are applied within each presbytery.

10.8 Within our current system we operate separate debtor accounts for National services levy, Beneficiary Fund Assessments and Mission and Ministry giving. Using one levy would significantly reduce the number of accounting entries required and the number of account queries we receive. Having only one assessment would result in administrative cost savings at a time when the Church's budget is under pressure. Parishes should also make savings on their bank charges with fewer payments being made.

10.9 Splitting the national levies into several components allows parishes to pick and chose which levies they pay. For example they may decline to pay National Services Levies on a matter of principle but continue to pay Beneficiary Fund assessments because that money is for the benefit of ministers rather than the national church. By rolling all the levies into one it makes it more difficult for the parish to select just the assessment they like for payment. Where a parish refuses to pay an assessment an additional financial burden is placed on other parishes.

11. Co-Operating Ventures

11.1 Currently co-operating ventures under the oversight of the Church pay a Beneficiary Fund contribution and a seniority allowance levy. Both are calculated by applying the same rules as applied to Presbyterian parishes. No contribution is made to either the mission and ministry fund or National Services Levy. In place of these contributions co-operating ventures contribution to a joint mission fund run by the Forum. The Forum distributes the money received into the joint mission fund to the partner churches.

11.2 If the Presbyterian Church moves to one assessment then it will need to change the basis on which it charges cooperating ventures for beneficiary fund contributions and seniority allowance. Charging just the one assessment would have the effect of making the cooperating venture contribute not only to the joint mission fund but also to what would have previously been the national services levy and the mission and ministry fund.

11.3 It is proposed that cooperative ventures move to a user pays basis for the payment of Beneficiary Fund contributions and seniority allowance levies. This will mean that cooperating ventures with a Presbyterian minister will contribute to the Beneficiary Fund at 9% of a basic stipend and pay the actual cost of their minister's seniority allowance. Such a change will either increase or decrease their costs depending upon their role numbers and income. However in a number of cases a reduction in payments will occur. Those parishes without a minister will make no contributions where they currently make a contribution. Parishes with an income over $61,000 will pay a reduced beneficiary fund contribution. There are very few parishes with an income under $61,000 that can afford to pay a minister.

11.4 Moving to this basis of charging will also remove an anomaly in the current rules for charging co-operating ventures. The rules of our Beneficiary Fund require that all cooperating ventures under Presbyterian oversight pay a contribution to the Beneficiary Fund. This rule applies if the parish has a minister other than a Presbyterian minister. Under the proposed regime there would be not requirement for payment in such circumstances.

12. Assessment Recommendation

12.1 Considering all the above factors it is recommended that the Church use one assessment that is calculated using two components. The first component would be calculated on the parish roll, the second component would be calculated on parish income. The split could be 50/50 though some other split could prove a little more effective.

12.2 Using assets as a base for calculating the assessment would be difficult and expensive. Asset values would have to be calculated on a consistent basis across the entire church. This would require the use of independent values, as historic cost could not be relied upon because of the variety of ages of our assets. Rateable value could be used for land and buildings but that would still leave a problem in relation to chattels. It is likely that there would be a significant under reporting of assets. The lack of connection between asset values and income to pay any asset-based assessments also counts against this approach.

12.3 It could be argued that using members as part of the base for calculating the levy would deter growth. However membership used for the calculation will lag a year behind the assessment charge. Membership at June 30 2002 will be used to calculate the assessment for the year commencing 1 July 2003. New members will be in the congregation for at least a year before they contribute to the assessment. The reverse of course applies when members leave the congregation.

12.4 Splitting the assessment between income and members reduces the impact on the amount of the assessment of special fund raising efforts. As membership is relatively stable from year to year this will limit the fluctuations in the assessment. A congregation with declining numbers but stable income (increased giving by remaining members) will have a reducing contribution to the Assembly.

12.5 If an assessment based 50% on income and 50% on roll numbers was introduced in place of national services levy, mission and ministry giving, seniority allowance levy and Beneficiary Fund parish assessment the rate of the assessment would be 7.5% of income and $56.30 per member. High-income parishes receive a significant increase in assessment because the new regime removes the shelter from the Beneficiary Fund levy they currently receive. The assessment at this rate also affects low-income parishes because they may not be paying a mission and ministry target and they lose the benefit of the sliding scale for Beneficiary Fund contributions.

12.6 Another effect of one uniform assessment is to make giving to mission and ministry equitable over every parish. The impact of the new assessment on a parish will be influenced by its past giving to the mission and ministry fund. Those parishes not making a contribution in the past are likely to see an increase in their contribution to the Assembly.

12.7 While it is easy to assess whether you support the new assessment regime by looking at the effect on your parish this should not be the basis for your decision. The decision should be determined by asking this question, is the proposed assessment going to make it easier for the church to meet its objective of healthy congregations. If it is then the change should be supported. There is no point in opposing the change just to reduce the amount of your parish payment if the end result is the demise of the Presbyterian Church because the current assessments discourage the activities needed to grow numerically and spiritually our congregations.

13. Definition of Income

13.1 To define parish income that is subject to assessment, the following principles should be applied. They are broad principles designed to make clear what income is subject to assessment and what is excluded.

12.2 For some types of income the costs directly associated with earning the income should be deducted when calculating the amount of income subject to assessment. The concept recognises that for certain types of fund raising the parish will need to spend money outside the normal parish purposes in order to raise income for parish purposes.

13.3 All income should be calculated net of GST.

13.4 In the following definitions any reference to the purpose of the parish includes any outreach of the parish performed in the name of the parish with the support of the Session.

13.5 For the purpose of calculating the assessment to be paid to the national church the following classes of income should be included:

(i) Offerings whether by Sunday collection, automatic payment, direct debit, EFTPOS or credit card.

(ii) Where a person or corporation donates goods or services to the parish instead of a cash offering the value of the goods or services provided should be included as part of the income of the parish. If the goods or services are donated for resale then their value should be the sale proceeds.

(iii) Any gift, donation, bequest legacy made by any person or corporate body that is available either for the general purposes of the parish or for a purpose that provides either directly or indirectly a benefit to parishioners.

(iv) Any interest earned on any investment held by the parish where that interest is available either for the general purposes of the parish or for a purpose that provides either directly or indirectly a benefit to parishioners.

(v) Any excess of income over expenditure in any charitable trust operated by the parish where the terms of the trust allow distribution of the surplus back to the parish.

(vi) Any grant received from any charitable trust operated by a parish where the terms of the trust do not give the parish automatic right to access any surplus of income over expenditure.

(vii) Any gifts, grants' donations etc given for the purchase of capital equipment including the value of any donation of capital equipment.

(viii) Income from the rental of property where that property is also used for parish purposes.

(ix) The proceeds of the sale of any goods or services by the parish (GST paid is deemed to be a cost of raising the funds). This class of income includes fund raising activities of the church conducted through fairs, garage sales, cake stalls fund raising events etc. Any direct costs incurred in gaining sales can be offset against those sales for the purpose of calculating the income subject to assessment.

(x) Income from property held as an investment by the parish. This should include manses rented while not occupied by a minister. Expenses incurred on maintaining or financing the property can be deducted from rental income. Depreciation should not be offset against rental income. Any capital gain on disposal should not be subject to assessment.

13.6 Except for income from investments only amounts that have been received in cash or kind should be included as income. Only investment income should be accrued for the purpose of calculating income subject to assessment. Grants, bequests etc given for a special purpose should be included as income when received except where it is a requirement of the grant etc the money be returned if not spent on the intended purpose. Such grants should only be recorded as income when the required expenditure is made.

13.7 The following receipts should be excluded from the calculation of income subject to assessment:

(i) The proceeds from the sale of any asset or investment owned by the parish.

(ii) Any grant given by an agency of either the government or a local authority for the purpose of reimbursing the parish for expenditure it incurs in the implementation of government or local authority policy.

(iii) Any legacy, bequest, grant, gift or donation from a person, (or corporate body) who is not on the roll of the parish, that is subject to conditions that prevent the parish from either paying the assessment that would otherwise arise from the amount of the gift, or from using it in a manner that would release general funds for the payment of the assessment.

(iv) Any money collected by the parish, where the parish is acting as agent for another external body, and the parish must account to the external body for all money so collected.

(v) Any money collected by the parish from its members to offset the costs incurred by the parish in running social activities on behalf of members.

13.8 A presbytery may reallocate the total assessment for all parishes within its bounds so as to recognise the differing financial circumstance of each parish.

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