On the eve of a presidential election, President Harrison and others reported good financial news regarding the retirement of some LCMS debt. While some see this as a boon to the LCMS (who can be against reducing debt?), others have grave concerns about these reports.
You see, this isn’t the first time President Harrison has reported “zero debt” to the LCMS.
And these reports fail to mention the great price to our future mission work in Hong Kong and China, the betrayal of donor dollars and the ongoing red ink the Harrison administration racked up this year all reported in the May 2019 Board of Directors Minutes (page 205) that necessitated the “secret sale” of Hong Kong mission properties:
- Office of International Mission (net -$696K loss – down from a -$954K loss last year);
- Office of National Mission (loss of -$167K); and
- Mission Advancement (-$996K loss),
That’s more than -$1.8M of departmental losses this year alone.
A further report by Chief Financial Officer Wulf states that these deficits “reflect slower than anticipated revenue.” This department red ink and lower revenue comes at a time when the President Harrison was just given another 3% raise to his salary (page 217). The minutes also note:
“Discussion noted that cash and net assets have been significantly increased—and will continue to be increased—by the sale of real property, by a dividend, and by a repayment, all related to overseas operations.” (page 205)
In other words, it seems the LCMS is selling assets in the overseas mission field to settle long-term debts and short-term deficits because income is lower than expected.
The Board of Directors See a Problem, Too
In the same May 2019 board meeting, Chairman Kumm relinquished his role as chair to make a motion. That doesn’t happen every day. The motion reads in part that the Synod President’s administration team “…shall present to the Board of Directors the strategy and tactics that will be implemented and supported by the budget request for the upcoming fiscal year. Such plans shall be delivered to the CAO, as staff for the Board of Directors, prior to the same Board of Director meeting at which the Chief Financial Officer submits the annual budget for approval” (page 212).
In other words, the Synod Board of Directors doesn’t see the strategic plan that the budget is supposed to support. Given the operating deficits experienced in the Harrison administration (again!), the board wants to know the plan for the future before passing any future budgets.
A simple conclusion is this: if the board is asking for a plan, the Board of Directors of Synod knows of no strategic plan today. That’s how Synod can get into a mess like this to begin with.
Who Acts Like This?
Many dying congregations sell their physical assets (and their future) in order to fund their debts because they can’t make annual budgets. Everyone understands the fear —some have experiend it. It happens with businesses, too. Think about KMart and Sears.
No plan. Growing operating deficits. Selling off mission properties to pay debts and cover cash flow and looming operating deficits.
That’s no way to run a Synod.
And more. Synod, just like many struggling congregations, hid the information from members until the last possible moment. In this case, it’s days before the Synod President election. That’s what seems to have happened here.
Follow the Money — and the Minutes
Following along with the reports from President Harrison and others below will show a simple truth. The Hong Kong property sale for $22M wasn’t a strategic, mission-driven decision. It was a necessity to rescue Synod leadership from their decisions over the past decade. Here’s a summary:
July 3, 2012:
President Harrison reports to the Michigan District convention the ongoing challenges dealing with Synod cash flow and operating deficits. He states the cash flow deficit he inherited was $15.5M.
February 17, 2015:
President Harrison in his blog reports the inherited deficit is now $0 with a cash reserve of three months. Praise God!
November 15-16, 2018:
The Board of Directors meeting minutes report only 32 days of operating cash flow available — and the auditors report that the operating fund deficit has ballooned back to $13.3M (page 175).
February 15, 2019:
The Board of Directors detailed financial report summary was given in Executive Session, however CFO Wulf noted a higher than average cash balance on December 31, 2018 (fifth highest of the last eleven years) (pages 188-189).
June 19, 2019:
President Harrison and the Reporter announce the LCMS “external debt” paid off, his “internal debt” paid down to $7M (that’s down from $13.3M and up from $0M), all at the price of Hong Kong mission property and mission dollars with ANY input from Synod congregations in convention…or otherwise.
Keep reading below for more details.
Finance and Elections
It certainly seems strange that this financial announcement was made four days before the Synod President election. Although this was “in the works” as far back as the Milwaukee Convention – when President Harrison could have asked delegates if they would consider selling mission properties purchased with mission dollars to fund Synod debt – Harrison and other Synod leaders waited until now to make the announcement.
One District President expressed his disappointment this way:
“For the sake of debt retirement we have forsaken our Hong Kong headquarters in Asia’s Gateway City and moved the LCMS Asia Headquarters to Chaiyi City Taiwan where the closest major international airport is Kaohsuing International Airport, 119 kilometers away! It certainly seems that finance, and the timing of the debt retirement announcement the same week as the LCMS presidential election, is more important than the mission. We have a significant confusion of priorities.”
Members of Synod have a right to wonder what other Synod properties are on the block without our knowledge for the sake of deficits and debt.
The Detail: We’ve Been Down This Road Before
This isn’t the first time President Harrison reported positively about Synod finances. After his first two years in office in 2012, he said this at the Michigan District Convention (click here to watch the video):
President Harrison: “When I became President, we were borrowed against designated monies about $15.5 million dollars. That is, borrowed against youth event monies – youth gathering monies, disaster money, other available cash. This is nothing new. The Synod has for decades been spending designated money for operations until that designation is to be spent. So you get several million in for a disaster and you spend that until it has to be spent for all the disaster. And then you hope the next youth gathering is coming along. But when you have the Synod accountant coming down the hall saying ‘We need another disaster,’ you know you’re on the wrong track.”
So that’s $15.5M from previous administrations.
However, less than three years later on February 17, 2015, President Matthew Harrison wrote the following in his blog:
President Harrison: Tomorrow is Ash Wednesday….Yes, even during our Lenten fast, joy abounds!…That’s why I want to share two important things with you…First, our Synod treasurer, Jerry Wulf, shared at our Board of Directors meeting last weekend that together as the Synod we have reduced internal borrowing of restricted funds to cash flow operations from some $16 million four years ago to zero. You read that correctly. Zero! And we’re not stopping there. To get our financial house in order, we have also achieved a three-month cash reserve for operations, which is the minimum for a responsible non-profit.
The minutes for the Board of Directors meeting on February 13-14, 2015 reflect the same:
Fiscal Year 2014−2015 Financial Report: “Chief Financial Officer Jerald Wulf and Executive Director of Accounting Ross Stroh began the financial report with the good news that as of this day’s date, no internal borrowing is included in the report, due largely to current spending below budgeted levels. This good news was offset by their report of a shortage of $4 million in anticipated designated restricted gifts at year’s end (2014).”
The Board of Directors entered into executive session both for the financial report and for the budget preparation outlook, so there are no more detailed reports from the meeting. It is impossible to know what was discussed and since these sessions are private, it would seem impossible that President Harrison was referencing anything from executive session.
One could easily argue that President Harrison is excited about a few months of numbers which to him indicated a major accomplishment. Congregations Matter believes President Harrison. A $0 operating deficit was achieved with 3 months of cash flow on hand.
As bright as February 2015’s report was, the future turned out to be much different. The November 15-16, 2018 Board of Directors minutes say in part:
“At the end of the first quarter, cash on hand stood at a “healthy” 32 days of spending; of $5.2 million (M) in cash on hand, $1.3M belonged to related entities. Current operating cash is $8M, with $760 thousand (k) of that held for related entities.
A board member noted that a quick ratio of 0.70, despite its improvement from 0.42 a year ago, is still less than 1.0, and therefore not what he’d call a “healthy” position; also, that more reporting on designated funds would be helpful, and that a better rate might be hoped for on Synod’s $10M line of credit than “cost of funds plus 2.5%.”
So, the 3 months of reserve cash is gone and some are trying to say that 32 days of cash is “healthy”.
From Bad to Worse
Later in the meeting, the numbers look even worse. The Synod’s auditors reported that over the past five years (that’s roughly 2013 to 2018):
Auditors: “The deficit in operating reserves (undesignated, unrestricted assets) has increased from $5.8M to $13.3M. This deficit exceeded board-designated cash assets (not subject to donor restrictions) by $1M at the beginning of the period, and now by $4M.”
Deficits Come With a Price to Mission
From $15.5M to $0 to $13.3M in operating deficits! What a change!
And now, with the sale of our mission property in Hong Kong and at the price of our relationship with the Lutheran Church Hong Kong Synod, on June 19, 2019, the Harrison administration reports “Synod’s External Debt Is No More” — our financial problems are over — with no mention of the millions of dollars of “internal” debt run up by President Harrison’s administration!
An Error or Exaggeration?
Was this an error on the part of President Harrison which was spread through his personal blog? If so, has he taken any steps to correct the misperception that his administration has made the LCMS financially stronger?
It seems that our financial situation has changed greatly in the past couple of years. “The deficit in operating reserves (undesignated, unrestricted assets) has increased from $5.8M to $13.3M.” February 2015 to November 2018 is a little over 3.5 years. What changed from the glowing report of President Harrison in 2015 to the reality of today?
Either the blog was a major exaggeration meant to provide a glowing picture of his administration or it was an error meaning he reported things which turned out to be false.
In either case, the red ink continued to flow in St. Louis. We continue to borrow from restricted funds, hoping that there will be a bail out. The income from the KFUO sale is about to run out, so we need to sell other assets. We haven’t had another hurricane or other disaster to add to the cash flow of Synod. And with lower registration at the National Youth Gathering (May 17 Board of Directors Minutes, page 209), there won’t be as many excess funds to help future balances as President Harrison suggested way back in 2012.
Is this the way congregations run their operations? Is this the leadership we need from our President?
PRAY AND ASK GOD FOR GUIDANCE!
Given this lack of financial transparency, sacrifice of mission dollars for debt, and up-and-down deficits of the Harrison administration, David Maier would be an excellent choice for Synod President. He has the support of many across the Synod who are hoping for a positive change, transparency, trust and leadership. This is a vital moment for our Synod. Watch David’s videos. You can see others on the ImagineLCMS website — or follow the Imagine Facebook Page — or watch David’s “A Visit With….” interview done by the Southeastern District.
As Pastor Maier says, “Its about transparency. Its about collaboration. It’s about trust.”
Imagine if those where the first words all of us used when we talked about the Synod President’s office, his leadership, and his actions!
Read Maier’s words. Watch his videos. Pray. Talk to your pastor and lay elector about the importance of this election. Read what others are saying about the candidates.
Then ask God’s Holy Spirit to lead your congregation’s electors. They will vote from June 22nd through the 25th and cast their electronic ballots for our next Synod President and the future of our Synod.
Congregations — and mission-driven, transparent and responsible finances — matter!
ORIGINAL BLOG POST:
On February 17, 2015 President Matthew Harrison wrote the following in his blog:
Tomorrow is Ash Wednesday, when the Church begins her slow and measured journey to the cross, where we see Jesus: the Savior who hangs — bloodied and scourged — for us. It is a time of reflection and repentance for me and also for you, for all of us as the LCMS, and for the Church throughout the world.
And yet in the midst of our dusty Lenten ashes, we also look forward to Easter, when our Lord is raised from the dead, triumphing over sin and Satan, all for us. Yes, even during our Lenten fast, joy abounds!
That’s why I want to share two important things with you, so that you may see and know that our Lord is at work in and among each one of us, and is using us collectively as the LCMS to bear witness to Him.
First, our Synod treasurer, Jerry Wulf, shared at our Board of Directors meeting last weekend that together as the Synod we have reduced internal borrowing of restricted funds to cash flow operations from some $16 million four years ago to zero. You read that correctly. Zero! And we’re not stopping there. To get our financial house in order, we have also achieved a three-month cash reserve for operations, which is the minimum for a responsible non-profit.
LATEST BLOG POST:
On June, 19. 2019, President Harrison wrote the following Facebook post:
“Ding Dong the Debt is Dead. Nine years ago we began our tenure with $21,000,000 external debt, and some $15,000,000 internal debt. As of today we have ZERO external debt (first time for the LCMS in a century?), and some $7,000,000 internal debt. 5.5 or so of this 7 million is “board designated” so is not borrowed from other designated funds. All in all, a most wonderful development. Thanks be to God and all our great LCMS staff and beyond. Thanks to the BOD for being deficit hawks.
I’m thankful to have seen this day.