We Depend on God for Guidance and Protection

Treasurer of the General Conference of Seventh-day Adventists, Juan R Prestol-Puesán, began the Treasurer’s report during the 2nd day of business during the 2020 Annual Council acknowledging that the Adventist Church depends on God first and foremost. During his presentation Prestol emphasized the overarching theme for the year 2020 is “survival”. The year 2021 will bring with it the question of “how do we respond to the new reality?”.

Financial Challenges

While at last year’s Annual Council, the Treasurer’s report included the touting of a break-even financial picture, 2020 has proved to be very different. “COVID-19 has brought a worldwide challenge to church operations. Between the months of March and June all divisions reported negative increases in tithe and mission offerings, year-over-year…”, emphasized Prestol-Puesán. The world is facing an economic slowdown and unemployment levels remain high in the United States. Coupled with this, many congregations are currently only able to meet in a virtual setting. The General Conference session, a major contributor to tithe and offerings, was also postponed due to the current pandemic. The entire impact of Covid-19 to the Church is still yet to be known.

According to reports received from division treasurers, the decrease in tithe income is estimated to be anywhere from 5% to 25%, while mission offerings have decreased by 10% to 40%, varying with location.

To help combat this significant decrease in budget, Seventh-day Adventist institutions and programs have “implemented significant budgetary adjustments in order to survive 2020.” In spite of these challenges, the Treasury Department of the Church remains optimistic that God is in control and the Adventist Church will have a brighter future in the coming months.

Financial Impact of Covid-19 for the year 2020

The operating statement through September 2020 shows a decrease in net assets of $5,869,863. On July 9th of this year, a series of actions were implemented to help mitigate the expected decrease in tithe and offerings of $26 million. There were budget reductions for several departments and programs, including a reduction of personnel, remuneration, travel budgets, along with redirection of funds and reallocations of income to areas in need. The planning of additional reductions is ongoing as circumstances demand them.

It was further noted that, in order to reduce costs amidst the current financial situation, the number of General Conference personnel recommended for election at the GC Session in 2021 may be affected.

The Impact of Covid-19 on the 2021 Budget

Undertreasurer Ray Wahlen presented on the detailed financial impacts of Covid-19 and other issues the church is facing in relation to the 2021 budget. He mentioned that, while normally the budget for an upcoming year is created based on the income received two years past, the Treasury Department had to take a different approach this year. The 2021 budget was planned according to the income projections for the year 2020. Three major factors were taken into consideration in the planning of the 2021 budget as follows:

• The Year 1 of the implementation of the Tithe Parity Plan, voted on at the 2019 Annual Council, which seeks to have all Seventh-day Adventist world territories contributing the same base percentage of their tithe to the General Conference, the denomination’s global headquarters. This will lead to a decrease in tithe-sharing percentage by the North American Division and an increase from the other 12 divisions at a rate of 0.1% per year between 2021 - 2030, leading to a rate of 2.1% for 2021

• The continuing volatility of currency exchange fluctuations is a significant factor as the Church continues to grow worldwide and provide larger financial support from areas outside of North America.

• The financial impact of Covid-19 was the single largest factor dominating the budget.

In short, the 2021 budgeted income is lower than 2020’s budget by a total of $26 million, that includes a reduction of $4.3 million due to the Tithe Parity transition (includes an increase from world divisions and a decrease from the North American Division), a $2.9 million reduction from anticipated currency fluctuation, and an $18.8 million decrease due to Covid-19 reductions. These reductions amount to a tithe income budget decrease of $9.9 million (an 11.4% decrease) and $16.1 million decrease in the World Mission Offering income budget (a 22.8% decrease).

Currency Fluctuations and Expense Reductions

Currency fluctuations continue to be an issue in addressing the financial health of the denomination. While the 2016 Annual Council brought with it a decision to guarantee appropriation amounts in the division’s local currency rather than US Dollars and has proved to be an effective internal hedge, the 2021 budget sees a major negative effect due to a 30% devaluation of the Brazilian Real (BRL), given that the South American Division provides roughly 20% of the General Conference income. The fluctuations of any currency against the US Dollar impacts the budget depending on whether the division is a net contributor to the budget or a net receiver of the budget.

Undoubtedly, given this significant reduction in income, decisions to reduce expenses had to be made. The following expense reductions were recommended:

• Appropriations – No change to appropriation amounts was recommended and a savings of $1.3 million is expected in this category largely due to exchange rate changes and the reduction of two GC institutions as part of the Tithe Parity plan.

• International Service Employees Allocation – The ISE allocation is based on a percentage of the budgeted income. As the budgeted income decreased, the ISE allocation decreased as well by $4.3 million. However, a $4 million supplement was utilized coming from a “foreign mission” specific donations fund that will now be fully depleted

• GCAS – The GCAS allocation is automatically reduced by $1.8 million

•  GC Administered Funds - Reduced by a net of USD 1.2 million by reducing the amount available for Departmental Special Projects, eliminating booths at GC Session, and cutting the contingency allocation by 50% to USD 500,000.

• Office Operating – Reduced by $7.6 million accomplished by personnel reductions, maintaining the 50% reduction of travel budgets implemented in mid-2020, decreased depreciation funding, and the elimination of the contingency budget.

 The offset to make up the deficiency in the budget will come from budget reserves that have remained untouched for several years.

2019 Use of Tithe Report

In keeping with the Church’s custom to have full transparency and accountability for the use of church funds, Wahlen presented the 2019 Use of Tithe Report. Wahlen emphasized that “the most important use of this report is to ensure that appropriate governance and administrative-level decisions are made regarding the use of this sacred resource entrusted to the Church.” The major uses for the tithe in 2019 was for the support of pastors, evangelists, and frontline workers, headquarters operating expenses, education, and media outreach (includes HOPE Channel and Adventist World Radio). Other areas that benefited from the tithe were the International Services Employees, discipleship projects and auditing costs.

God is at the Helm

It is evident that Covid-19 has impacted the Seventh-day Adventist Church and threatens to challenge its mission. However, Treasurer Juan R Prestol-Puesán concluded the Treasurer’s Report with these encouraging words from Psalms 121,

“Shall I look to the mountain gods for help? No! My help is from Jehovah who made the mountains! And the heavens too! He will never let me stumble, slip, or fall. For he is always watching, never sleeping. Jehovah himself is caring for you! He is your defender. He protects you day and night. He keeps you from all evil and preserves your life. He keeps his eye upon you as you come and go and always guards you. (Psalm 121:1-8 TLB)

Overwhelming Support

The Treasury Department received overwhelming support from attendees of the 2nd Business Session of the 2020 Annual Council. During these challenging times, the Department was recognized for making tough decisions and remaining optimistic and hopeful in the midst of it all.