Million Dollar Problem Update

For the last several days I've been consumed with meetings at presbytery devoted to developing a solution to the million dollar problem.

Here's the most recent financial report on the New Covenant website, if you're interested.

It turns out to be more than a one million dollar problem.

The presbytery's investigation revealed that the former director of business affairs who diverted the special offerings money to presbytery's operating accounts also engaged in an elaborate sale-and-leaseback chain of copier contracts generating large cash rebates that were used to cover other financial shortfalls at the staggering cost to the presbytery of a total copier obligation through 2011 of over $700K. The contracts were reviewed by an attorney who advised that they are enforceable. Presbytery representatives have tried negotiating an early buyout but with no success. Additionally, the presbytery's own restricted accounts, many of which are held for third-parties, were diverted to operating costs to the tune of over $500,000. The million dollar problem has become a $2 million plus problem. Lately it seems as though the numbers are a constantly moving target, which is frustrating.

As a result, the presbytery also finds itself with a critical cash shortage which the aforementioned misallocation of funds was masking. The financial folks are developing migranes as they try to cut the proposed budget enough to balance the income and expenses going forward into the fiscal year 2007.

I've been working with a task force charged with developing a repayment plan that would include reimbursement to the PCUSA for the special offerings, payment of the copier contracts; and replacing the money in our own restricted accounts. We think it is important to bring a proposal for repayment to the February 10 presbytery meeting in order to restore credibility and confidence.

Fortunately, presbytery does have resources to help meet this daunting obligation. A couple of years ago it received an unrestricted bequest that is large enough to cover these debts. That bequest was set aside for the purpose of supporting the presbytery's vision -- "growing congregations that passionately engage their community to make disciples". We've already made a lot of progress planning programs that will help our churches fulfill this vision and are supporting more New Church Developments than almost any other presbytery in the country. The terms of the fund that were previously approved by presbytery will allow using the corpus for other purposes provided there are two super-majority votes by presbytery on different dates. Of course if the fund is depleted, then presbytery will not have the funds to continue supporting its vision in the future.

There are also three parcels of land on the market that were acquired for NCD use in the past but now are not deemed suitable for that purpose. The combined estimated fair market value of this land approximates our total liability. However, two of the parcels have been on the market for some time with little interest generated in them. The third and most valuable has more potential for an early sale and was only recently listed. A group has recently been formed to study the possibility of selling the property where New Covenant's offices are located as well, and that may be another source of money that could be used for repayment.

The challenge is to balance the need to begin making significant repayments to the special offerings and restricted funds, as well as covering the copier lease obligation, with the desire to keep moving forward with a vision that we think is critical not only for the presbytery but ultimately for the PCUSA. There is something very positive going on down here in southeast Texas -- and Heaven knows that the PCUSA needs all the positive developments it can get!

So the task force came up with a 5 year repayment plan that addresses all of these issues in the hope that within the next couple of years real estate sales will permit earlier retirement of all obligations and reimbursement to the Vision Fund of any advances made. It seems like the most prudent and responsible approach to take.

As I write and re-write the drafts of the task force's report and recommendations, I shake my head wondering how in the heck we got into this mess. Then I remember Sir Walter Scott's famous line: "O what a tangled web we weave when first we practice to deceive." Isn't it the truth? I'm grateful we have the resources to get ourselves out of it, but I am concerned about the consequences. I know that the budget cuts that will be necessary in the meantime are going to distress those affected by them.

Despite the difficulties ahead, though, I am not dismayed. Much good will come out of the million dollar mess. Sound financial controls have been implemented. Barnacles on the good ship New Covenant are being scraped off. Tall Steeple Churches have stepped up and assumed some critical NCD costs for the near future. Sessions and individuals are making contributions to presbytery to help with repayment. The General Assembly office is cooperating with the presbytery's proposed repayment schedule. Presbytery will find out which of its functions, programs and missions have the support of the churches and which ones do not. None of these things would have happened but for the MDM.

God can use any situation for good for those who trust in Him. And I believe that God will.