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UCG elders say constitution, not blown budget, the issue

By John Robinson

The United Church of God, an International Association, has blown its 1996-97 fiscal budget. But many elders say it's not the money issues that concern them as much as the administrative style of the home office.

Elders from around the United States said they are concerned about what they perceive as a cavalier attitude on the part of the home office toward the UCG's general conference of elders and the church's constitution and bylaws.

Although estimates of the extent of the current budget excesses vary, even the most conservative interpretations project a multi-million-dollar budget deficit compared with the one approved by the church's general conference.

The UCG's constitution calls for its general conference, all paid and unpaid UCG elders, to approve a budget each year. In December 1995 at its general conference to ratify the newly formed church's constitution, UCG elders also approved the first budget, submitted by David Hulme, UCG president (In Transition, Dec. 18, 1995, page 1).

The problem since then has not been income, which is obviously more unpredictable than expenses and is regarded by financial experts as more difficult to accurately project.

The budget, approved by the 402 elders in attendance at Cincinnati, projected income for the 1996-97 fiscal year at $15.2 million. If current trends continue, the UCG's income projection will be remarkably accurate, within a few percentage points of the original projection.

In fact, in a recent letter from Bob Dick, chairman of the council of elders, to UCG elders he projected this fiscal year's income at $14.8 million.

The challenge, instead, has been for the home office to control expenditures.

The UCG elders at the Cincinnati conference approved expenditures of $11,985,000. (A copy of this approved budget, as well as a report of proceedings of that conference, was reprinted in the Dec. 18, 1995, issue of New Beginnings, the member newsletter of the UCG.)

In the Dec. 9, 1996, issue of New Beginnings, UCG treasurer Steve Andrews issued a report for the first eight months, through Nov. 30, 1996. His report, although not contrasted to the approved budget, showed that the home office has deviated dramatically from its constitutionally approved budget.

The release of these figures prompted a flood of questions from UCG elders and other members about the home office's handling of tithes and offerings.

Among those with questions is Ron Weinland, pastor of the UCG's Toledo, Ohio, and Detroit, Mich., congregations. Mr. Weinland sent a 4,000-word letter dated Dec. 27, 1996, to the majority of all members of the general conference (those who are part of the organization's electronic-mail network). In his letter Mr. Weinland said he was beginning to have "concerns about the [home office's] stewardship of the finances."

He appealed to fellow elders to openly consider the points he raised rather than to automatically dismiss him as a troublemaker. He wrote that "Pollyanna attitudes of blind faith begin to see any questioning of direction, administration, etc., as threatening or divisive."

Mr. Weinland said that more than 20 percent of the UCG's paid elders had encouragingly responded to his first letter, indicating that they shared many of the concerns raised in his letter.

On Jan. 28 the home office distributed to elders via cc:Mail, the UCG's electronic-mail network, a report to the general conference of elders from the council's budget committee and letters from both Mr. Hulme and Mr. Dick. Mr. Dick extended an "apology" for the council's part in the "creation of this [financial] problem."

Mr. Hulme "apologized" for his failure to "communicate clearly" what he was trying to accomplish.

In addition to these E-mail transmissions, home office employee Gerald Seelig contacted elders via E-mail to say that a budget/analysis comparison for the fiscal year through December would be mailed to all elders Jan. 30.

Mr. Seelig wrote: "We are not able to send this document [the budget/analysis] via cc:Mail, because it is done on an Excel spreadsheet and most of the ministry cannot import this type of document."
It is not correct to say cc:Mail lacks the ability to handle attached Excel files, and Mr. Seelig did not offer the budget/analysis comparisons electronically to those elders who do have Excel software.

$5 million in reserves planned

At the time of the Cincinnati conference, elders were given a financial report showing that the UCG had "cash or cash equivalents" of just under $2.8 million as of Oct. 31, 1995, the most recent reporting period before that conference. The general-conference-approved budget called for the UCG to have an estimated $2 million in reserves by the start of its 1996-97 fiscal year, April 1, 1996.

Throughout the next current fiscal year, the budget called for the home office to add an additional $3 million to reserves.

The plan was to build reserves that could be used to preach the gospel.

The home office, with the blessing of the council of elders, declined to provide In Transition with a balance sheet this newspaper had requested, which would indicate cash on hand at the beginning of the fiscal year, April 1, 1996, but UCG insiders tell In Transition that the fiscal year will end with reserves at only a fraction of the $5 million budgeted.

The council's Jan. 29 report to elders revealed that reserves as of the start of the current year were $1,032,000, more than $1 million short of estimates.

In Transition, in an effort to report on the financial situation, has created with the help of several people with extensive business experience, including certified public accountants and UCG elders, an analysis of the financial state of the church.

The In Transition-prepared document builds on UCG data. A "statement of activities," presented by Mr. Andrews, in New Beginnings gave some figures for the first eight months of the fiscal year but did not compare the figures to the approved budget, nor did Mr. Andrews' document project income and expenses through the end of the year. (See related chart, page 9.)

The CPAs who consulted with In Transition said Mr. Andrews' report was difficult to analyze and lacked key information to properly determine where the organization stood financially.

(An IT staffer personally delivered a working draft of the In Transition-prepared analysis to Mr. Hulme and Mr. Andrews Tuesday, Jan. 14. As of press time Jan. 30 neither man had responded other than to initially say the analysis was in error.)

Which expenses are up?

Although the UCG-published report shows that expenditures in virtually all categories, except evangelism, are significantly over budget, one of the largest areas is salaries, wages and benefits, projected at almost $8 million, or about half the UCG's budget. This figure does not include about $800,000 in additional health-care benefits for employees and retirees.

According to the Dec. 9 New Beginnings, the UCG has 206 employees. With health-care benefits included, In Transition estimates that the average UCG employee costs the home office more than $42,000 per year.

When the current budget was approved, the home office had 22 employees. The budget called for the addition of two employees. By December 1996 the home office ranks had swelled to 34 full-time on-site employees, eight on call plus another seven "remote" employees who work from their homes or other offices.

Some UCG elders, especially those interested in seeing the home office relocate outside of Southern California, note that by almost doubling its staff Mr. Hulme and Mr. Andrews may have made it prohibitively expensive to relocate the home office because of the expense of moving that many employees.

Some noted that repeated delays in efforts to find a new home-office location have undermined the desires of many elders at the original Indianapolis conference that the office relocate before a large staff could be hired and become entrenched in Southern California.

Still other elders say the estimated costs for moving the home office are ridiculously overstated and include bonuses for all involved. (See In Transition, June 24.)

We're new at this

One of the justifications mentioned by those who defend the budget excesses is that the council of elders is new to governance and fiscal responsibility, therefore no one should expect the church to hit its financial targets.

But an elder in the Midwest disagrees. "I hope they're not going to use the 'Oops, we're new at this' defense," he told In Transition recently.

Rather, the elder said, Mr. Hulme and Mr. Andrews are experienced administrators.

Mr. Andrews, a CPA and lawyer, before being hired by the UCG as its treasurer, was for years the chief financial officer for the Worldwide Church of God. Several UCG elders say they consider Mr. Andrews to be extremely bright and the most talented and able financial officer the WCG ever had.
"Steve was involved from the beginning with the planning of the UCG, even before and during the Indianapolis conference," the elder continued. "He obviously had access to and firsthand knowledge of all the WCG historical data. Church budgeting was certainly not new to him.

"To suggest that Mr. Andrews and his staff of long-time former WCG employees, with their vast knowledge, is an inexperienced group is simply a false characterization."

Another defense: Didn't you want us to help others?

In question-and-answer sessions with East Texas members the weekend of Jan. 11, UCG council members Peter Nathan, Bob Dick (chairman) and Mr. Hulme were among those who defended the blown budget. The rationale was that the home office saw a need and met it. Would anyone want them not to help the brethren? (See "UCG Council Fields Big Sandy Brethren's Questions")

In an interview with In Transition Jan. 14, council member Jim Franks said all money spent was spent to "help people."

"We spent much more for the conference of elders in Cincinnati that we thought," he said, "and $500,000 more for third-tithe assistance than we budgeted for. And overseas subsidies were underestimated by about $500,000. Would you have us simply say no [to requests]?"

But others say using that line of reasoning is to miss the point.

"That logic is a smoke screen," a Texas elder said in a Jan. 24 telephone interview with an In Transition staffer. "The issue is not that they spent the money to help brethren. The point is the home office's attitude and approach. They just did it.

"Mr. Hulme should have gone to the council and explained that he couldn't live within the budget. The council could then have gone to the general conference and asked it to approve a new budget. The bylaws clearly state that if a new budget is not approved the old one stays in effect.

"Mr. Hulme has plainly and simply violated the constitution and bylaws. This situation needs to be openly dealt with."

The UCG constitution and bylaws agree with the points made by those elders. Article 10.6 of the bylaws states, regarding the annual budget: "This budget must balance projected income and expenditures and shall then be presented to the General Conference for its ratification. If not ratified, the Council [of Elders] shall submit a revised budget for ratification as soon as practicable and, pending a ratified budget, the corporation shall operate under the constraints of the previously ratified annual budget."

Observers point out that the only general-conference-ratified budget is the one passed at Cincinnati, thus home-office administrators have violated church bylaws by not operating under the constraints of that budget.

They also point out that, even if the 12-member council of elders approved additional expenses not spelled out in that approved budget, they did so, according to this provision, with no legal or constitutional authority.

"We have not only a financial crisis, but also a constitutional crisis," said one paid elder who lives in the western United States. "What are the rest of us to do when those charged with administering the constitution and bylaws-namely the corporate officers and council members-act in violation of that very constitution and bylaws? As it now stands, it appears that none of the council will be replaced for another year.

"They can solve the situation with the corporate officers, but will they solve their own problems? The code of ethics they agreed to requires that they adhere to our constitution and bylaws, and if any are not willing to do that they should do the honorable thing and resign so they can be replaced with elders who will."

Another elder of more than 30 years' service noted that while "it's nice" that the home office wants to help people but "when you say yes to one expenditure you automatically are saying no to another."

"For example, when the home office chose to say 'yes' to regional ministerial conferences, they were saying 'no' to the general conference, at least to the length of it and the total money available for travel and lodging.

Different philosophy

Top UCG insiders, who spoke with In Transition only on the condition that their names not be used, said that, regardless of the details of specific budget excesses, a core issue is that Mr. Hulme apparently sees himself as a pastor general in the mold of Herbert W. Armstrong rather than a president who reports to the UCG's 12-man council of elders.

Several UCG elders say that permitting Mr. Hulme to act in such a unilateral way is a concept that some segments of the UCG membership and elders would welcome.

"We grew up in an organization where we were accustomed to one-man rule with no accountability," a minister with more than 25 years' service, who is highly placed in the UCG, said recently. "That's what Mr. Hulme is used to, and it's not unexpected that he would approach his job that way. I assume he has felt free to spend as he sees fit in his judgment. I'm sure he's very sincere and believes he's doing the right thing. I doubt he saw any need to inform the council about the budget problems, much less to go back to the general conference for approval.

"Mr. Hulme has a strong sense that God is directly leading him. I think he sees himself as assuming the mantle of Mr. Armstrong. I don't believe any of his actions are malicious. He just thinks he's right and that God is blessing him."

Several influential UCG elders told In Transition that the UCG council should at least publicly censure Mr. Hulme for his failure to respect the budget. Others said they felt both Mr. Hulme and Mr. Andrews should resign as a result of their mismanagement of the finances.

A highly placed source told IT emphatically that if the council were voting for a president today, it would not select Mr. Hulme. "He would not get eight [of the 12 council members] votes [needed to approve his appointment].

"What I have a problem with is the spending with abandon. I'm more concerned with the attitude behind the spending rather than the numbers themselves."

Not a few unpaid UCG elders and other members with extensive business experience told In Transition that both Mr. Hulme and Mr. Andrews would probably have been fired for poor stewardship if they had handled stockholders' funds in the business world as they have managed the funds of the UCG.

Most elders would not talk on the record, however. Several said they would hold off on commenting to give the council of elders time to deal with the problems.

"The council needs to do more of its work in the open so that the general conference can have confidence in it," a former WCG-headquarters employee and now an elder in the UCG told In Transition. "We need the council to act responsibly, not circle the wagons and protect their own. I'm afraid that if we [UCG elders] push them [the council members] that's precisely what they'll do. We need to encourage the council to take charge and do the right thing."

To be fair, UCG insiders knowledgeable of the council's actions see signs that the council is beginning to take charge. The council's finance committee established at its Boston, Mass., meeting last November drafted several resolutions governing administration of church finances. These were approved by the council at its meeting in Tyler, Texas, Jan. 8-14.

The resolutions include requiring council approval for adding employees not already in the budget and any programs not included in the strategic or operating plan (both of which are yet to be approved) as well as requiring more-specific monthly reports by the treasurer and a separate report for the executive office.

Members of the finance committee, council members Dennis Luker, Burk McNair, Peter Nathan (chairman) and advisers Les McCullough and Tom Kirkpatrick, met with home-office staffers Jan. 22 in Arcadia for budget discussions.

The other committee member, Leon Walker, was absent because of a death in the family.

One sources told IT that most of the committee's time was spent editing multiple drafts of its report.

Is there an agenda?

Some highly placed sources speculate that a possible reason that Mr. Hulme and Mr. Andrews spent with such abandon is that they were not afraid to provoke a cash-flow crisis.

One such person said: "I can see two reasons the home office could conceive of a benefit should there be a crisis with cash. First, it could make it easier to stay in Southern California by forcing elders to choose between funding a move or, for example, funding international versions of The Good News magazine [the UCG's bimonthly magazine].

"Second, a cash crisis could pave the way for asking the local congregations to bail out the home office. Mr. Andrews is very aware of the more than $1 million sitting in the bank accounts of local congregations earmarked for building programs or other purposes."

In at least one UCG congregation that has a six-figure building fund, Mr. Andrews gave a sermon pointedly addressing the needs of brethren in the third world. Several members said after the sermon that, although they strongly support the need for an international work, they also saw a need to have a building in which they could meet regularly.

Unfortunately, they said, they perceived Mr. Andrews' message about needs in the international areas as a code for "send all your money to Arcadia."

Cash-flow problems on the horizon?

In recent weeks several UCG elders told In Transition they see signs of an impending budget crisis within the UCG.

Mr. Weinland, in his letter to United elders who subscribe to the church's E-mail service, wrote that the ministry is being told it is facing a "cash-flow crunch" and that the "problem is exacerbated by the fact that [the UCG has to meet] three [every-other-week] payrolls in the month of January and the fact that the Holy Days come later than normal."

In Transition has learned that salaries of paid elders have been reduced by 9 percent, with the full accumulated amount of the cut to be restored prior to the Feast of Tabernacles. The 9-percent figure is linked to second, or festival, tithe.

(The WCG historically gave paid elders a 9 percent bonus in lieu of having them save a festival tithe. In more recent years the WCG added 9 percent-a tithe minus a tithe to cover festival administration-to each minister's gross that was intended to be used for the minister to set aside a tithe. Until last month the UCG had adopted the more-recent WCG policy of having the minister save his tithe. See the March 25, 1996, In Transition,"Churches Decline to Discuss Ministerial Compensation")

Paid elders in United were recently told that in effect their second tithe is being held for them and will be given to them before the Feast.

This decision, however, has been characterized by some as the home office "borrowing from second tithe," a practice historically condemned by the WCG.

Mr. Franks said that it was not proper to characterize the decision as "borrowing from second tithe." Mr. Franks said that ministerial salaries were already subsidized by 9 percent from the festival fund.

One UCG elder not quoted earlier said that, although he initially had some doctrinal concerns about the decision to withhold the wages, he has also now come to see the problem as "yet another example of a cavalier and presumptuous management style" used by the home office.

Another sign of financial stress comes from a recent letter from Chairman Dick to elders (mentioned earlier) initially proposing that the annual conference be cut to one day and that all elders, with the exception of a few international representatives, pay their own way to and from the conference and pay for their rooms and meals while there.

The conference is now scheduled to begin on a Saturday evening and end on a Monday evening.
The last general conference cost the UCG $950,000. The church paid all costs for elders and their wives to attend from around the world.

The UCG's approved 1996-97 budget included $588,000 to fund this year's conference, but Mr. Dick made no mention of this budget item in his letter.

Mr. Dick's letter also noted that the UCG's current financial commitments will consume an estimated $14,124,000 of its $14,800,000 annual income, not including any media or promotional efforts to expand circulation of The Good News or even maintain it at its current level.

Also not included in the estimated expenses listed in the letter were any additional printed materials previously discussed by the UCG (booklets, a correspondence course, educational materials for youth), foreign-language editions of The Good News and booklets other than Spanish, any media efforts at preaching the gospel, a 1998 general conference of elders and funds to relocate the home office.

Presumably all of these expenses would have to come from the $676,000 left over once the committed expenses are subtracted from the estimated $14.8 million annual income.

"I was stunned when I added up those numbers," said one elder who also wished to remain anonymous. "Those financial commitments are stated as fact when no such budget authorizing that level of expenses has been submitted or approved by the general conference as called for in our constitution and bylaws.

"The sad thing about it is that the decisions made by some have painted us into a corner. By hiring so many people ostensibly to help in preaching the gospel, we have actually spent whatever funds we had to begin preaching the gospel.

"Not only that, but those expenses seem to be committed for years into the future. We have not only compromised our ability to proclaim a message now but for years into the future, unless those expenses can be brought under control and drastically cut.

"Even if all the noncommitted funds were spent to preach the gospel, only about 5 to 6 percent of UCG expenses will be spent on what Jesus Christ told us to do: take this message to the world."

The scope of the concerns

In preparation for this and other articles about the UCG in this issue, In Transition staff members have directly communicated with scores of elders (including members of the council of elders) and other members of the UCG. Most did not want to speak on the record.

Off the record, they spoke passionately about the challenges facing the UCG in general, but they focused on the issue of financial stewardship, noting that Mr. Hulme has become a lightning rod.
Mr. Hulme, several pastors told In Transition, characterizes criticisms of the home office as "reflecting only 2 percent of the members and ministers" and thereby dismisses requests for fuller disclosure and discussion.

A pastor serving on the West Coast said: "It's ridiculous to say only 2 percent have questions. Virtually every elder in my region [of the United States] is concerned."

Another elder told In Transition Jan. 26 that in the previous week he had heard from four paid field ministers who independently expressed grave reservations about the church's financial situation and the home office's management of financial and other matters.

"Unfortunately," he noted, "most elders and members don't really pay attention to the financial reports and have no idea of the seriousness of the situation. They are, and want to be, trusting of the home office and the council, but it's obvious that the trust has been and is being abused."

Two other pastors, not previously quoted, said they would like to talk on the record but that the home office had made it plain to them that those who questioned the office's practices would find themselves at a disadvantage when it came to salary reviews and transfers to more desirable regions of the country.

In virtually every case, those who spoke with us who had concerns and criticism remained supportive of the UCG and still saw it as their choice of the WCG offshoots. They repeatedly told In Transition that their motivation in talking about the church's problems was to help fix the problems, not be divisive.

As one elder put it, "we need to make sure we don't repeat [WCG] history. We need to address our problems and move forward, no matter how painful it may be."

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