Financial Statements |
The Connecticut Conference has two financial arms: The Missionary Society of Connecticut (“MSC”) and The Trustees of the Fund for Ministers (“TFM”). MSC is also the trustee of the Consolidated Trust Fund of the Missionary Society of Connecticut (“CTF”.) While CTF is not an independent entity, the financial statements are presented separately for convenience. The MSC audited financial statements consolidate the activities of Silver Lake Conference Center and the Now For The Future: The Campaign for Silver Lake capital campaign with other Conference activities.
Audited financial statements are completed according to Generally Accepted Accounting Principles (“GAAP”.) As identified in Note 1, there are significant differences between GAAP financial statements and the budgeting and reporting format adopted by the Conference’s Board of Directors. The two most important differences regard accounting for endowment proceeds and capital purchases.
The Conference has adopted a total return spending policy, which is described in detail in Note 2 of the MSC and TFM statements. This policy requires the sale of assets in order to reach the spending policy goal. The sale of assets does not count as revenue under GAAP accounting, but is considered revenue by the Board for budgeting and reporting purposes. This amount is identified on page 3 of the financial statements as “Investment return designated for operations” and is included in the “Surplus and revenue over (under) expenses” but excluded from the “Net change in net assets.”
The Conference has adopted an operating policy to fully expense the purchase of capital assets in the year of acquisition. This “pay as you go” approach is used by most churches and ensures that the burden of paying for capital assets is not deferred into the future. GAAP accounting requires the depreciation of capital assets over time, which helps to maintain accurate balance sheets. For example, the Conference acquired adjacent residential property at Silver Lake Conference Center in 2007. The Conference considers the entire purchase price to have been a 2007 operating expense, while GAAP accounting requires that this expense be spread out over 40 years using depreciation accounting. The adjustments for capital additions and depreciation are shown on the financial statements.
Readers of these financial statements should also be aware of the impact of donor restricted funds, Board designated reserve funds, and the planned use of unrestricted net assets.
Donor restricted funds are not necessarily used in the year they are received. An example is capital campaign contributions. Over the long-term, there will be no net impact on surplus, as all contributions will be utilized. However, in some years there will be a net surplus of contributions and in other years there will be a net deficit. This should not be confused with operating gains or losses. In 2008, the Conference received a number of restricted gifts as well as contributions to the capital campaign in excess of spending, which increased the operating surplus.
The Board may designate some or all of the operating surplus in a given year for reserve funds. The use of reserve funds in future years will reduce operating surplus or may result in an operating deficit. For example, in 2007, reserve funds set aside in previous years for hosting General Synod were used as planned, reducing the operating surplus.
The Board may fund certain expenses out of unrestricted net assets, that is, accumulated surplus from prior periods that had not been designated for any specific purpose. In 2007, the Board funded the purchase of property added to the Silver Lake Conference Center from unrestricted net assets, which reduced the operating surplus.
