A Primer on UMC Assets: Concluding Thoughts

Today's post is by UM & Global blogmaster Dr. David W. Scott, Director of Mission Theology at the General Board of Global Ministries. The opinions and analysis expressed here are Dr. Scott's own and do not reflect in any way the official position of Global Ministries. Dr. Scott is neither a lawyer nor an accountant, and thus the following should not be interpreted as legal advice.

Over the past three months, I have examined the assets of The United Methodist Church in a series of posts. I have tried to explain what those assets are, who owns them, what restrictions apply to these assets, and what might happen to them under a variety of scenarios for the future of the denomination.

Having done all this investigation, I would like to offer some concluding thoughts about United Methodist assets and how those intersect with the nature of the church.

1. UMC assets are part of a complex system that is strongly tied together and difficult to undo.
This complex system has its roots both in Western law and in Wesleyan tradition. Under Western law, property can only be owned by legal entities. Organizations can be legal entities, but as stipulated in the Book of Discipline, The United Methodist Church itself is not a legal entity. Thus, UMC assets are actually owned by thousands upon thousands of separate legal entities – local churches, annual conferences, jurisdictions, central conferences, church-related institutions, and general boards and agencies. This creates a complex system of property ownership in the UMC.

That complexity is further compounded when one considers the various forms of assets – money, property, intellectual property, etc. – and the various legal restrictions that the Western legal system places or allows individuals and groups to place on the use of these different forms of assets. These restrictions include endowments and donor-designated gifts.

Finally, all this complexity is tied together by the trust clause, which binds all these assets to the UMC. The trust clause, in combination with legal restrictions on how various assets can be disposed of, makes it very difficult to simply untangle the present system of UMC assets. This difficulty is in part exactly what Wesley wanted when he instituted the trust clause and in part a function of how institutions and financial systems developed over the course of the 20th century.

2. The chances for lawsuits abound in any attempt to undo the system of UMC assets.
Because the present system of UMC assets is difficult to undo, any attempts to undo it run the risk of being challenged in court. This danger reflects in part the role of Western law in holding together the system. But it also reflects two other factors:

First, different actors in the UMC have different incentives and goals when it comes to undoing the current financial system. Thus, there is no consensus about how to undo the system, leading different actors into conflict with one another.

Second, especially in the United States, the courts are where many financial conflicts are carried out. When US Americans cannot agree on something involving money, they sue each other. Thus, conflict among US American United Methodists about money is likely to lead to lawsuits.

Of course, while it may not be possible for all United Methodists to come to a consensus on issues regarding assets, well-crafted General Conference legislation that clarifies the financial rights and responsibilities of all parties and that is passed by a substantial majority of delegates can reduce the chances of lawsuits.

3. A variety of parties in the UMC can make legitimate ethical arguments about their claim to UMC assets. These ethical arguments usually overlap with self-interest.
Whether it is local congregations wanting to keep their building no matter what, annual conferences wanting to keep church buildings, United Methodists wanting to leave the denomination, or United Methodists wanting to stay in the denomination, most parties in debates about ownership and control of United Methodist assets are able to articulate ethical arguments that draw upon central moral rhetoric around fairness, equality, etc.

Yet these ethical arguments rarely reach the same conclusion, and the conclusions that different parties draw from their arguments tend to be ones that benefit themselves financially. Thus, ethical reasoning and financial self-interest usually go hand-in-hand in the positions that United Methodists take in these financial debates.

This doesn’t necessarily mean that the arguments people make are solely about self-interest. People do use significant and long-standing moral and ethical concepts in their decision-making. It is impossible to reduce the arguments that people make about UMC assets to either pure ethics or pure self-interest.

Instead, we are left with what I hope this series as a whole has shown: the church is a mix of the human and the divine. We pursue heavenly ends, but we use and must use earthly ends to pursue them. Our experience of the church reflects both our deeply held religious convictions and spiritual experiences but also the contentious politics, the drudgery of everyday tasks, the difficulty of gray decisions, and the scrounging for resources that is part of being human.

Part of me wishes that it was otherwise: That the church was a perfect place that reflected only the best of people and was free of infighting and the need to pay the electric bill. Yet part of me recognizes that if the church is to be a place where we work out our sanctification, it must be a place not only of holiness but humanity. Unless we can face the fullness of humanity in our churches and still love our fellow humans as God does, how can we do so in the world? Yet, it is to this very task that God calls us. Let us trust God’s wisdom in arranging it so.

Recommended Readings: The Impact of Coronavirus on UMC Mission

Along with most other areas of life, the practice of United Methodist mission has also been disrupted due to the impact of the coronavirus. Here's a rundown of some of the fallout:

Both the Southeastern Jurisdiction UMVIM and the Northeastern Jurisdiction UMVIM issued recommendations two weeks ago (the 10th and 12th, respectively) that UMVIM teams follow CDC guidance, check with airlines about cancelations, check with insurance carriers about trip insurance, and practice proper hygiene. The NEJ UMVIM also canceled the NEJ Mission Academy, originally scheduled for next month.

Global Ministries reported on Mar. 17 that it had moved its spring board meeting online, is working with hospitals and other health partners to prepare health systems for the virus, and is seeking to ensure the well-being of its missionaries amid the pandemic. Global Ministries also closed the Sager Brown UMCOR depot in Louisiana to visitors. This week, Global Ministries has closed its offices in Atlanta, following the stay at home order issued by Mayor Keisha Lance Bottoms. It announced on Mar. 27th that most mission and relief grants were put on hold because of the financial impact of the coronavirus pandemic.

The Norwegian Metodistkirkens Misjonsselskap announced on the 20th that its employees were working from home and that it was working with partners on how best to respond to the pandemic. It also launched a special fundraising campaign for partners in Liberia, Sierra Leone, and Zimbabwe, to support those partners' response to coronavirus.
In its March newsletter sent out on Mar. 20th, the Swiss Methodist mission agency Connexio noted that it was in close contact with its missionaries, at least one of whom was returning to Switzerland because of the pandemic.

The German WeltMission announced on the 25th that it was recalling all of its missionaries and volunteers, following guidance from the federal government. At the time of the announcement, WeltMission was still working with the German government to arrange the return of two missionaries stranded in Namibia, which had canceled all flights to Germany.

The Swiss UMC also reported on Mar. 26 on the impacts of the coronavirus on local mission effects in Eastern Europe. Some institutions have been forced to shut down, but others are continuing valiantly to serve others amidst great difficulties and shortages of resources.

In the United States as well, many local mission and ministry organizations have been facing both increased demand for their services and increased challenges in providing those services, as in this Mar. 26th report about the Urban Mission in Steubenville, OH.

These certainly will not be the last impacts the coronavirus has on mission, but nonetheless, they demonstrate the impact of the virus on not just church services, but also the mission of the church.

Updated 2:00pm CDT, Mar. 27th.

Lisa Beth White: Short-term Mission in a Time of Coronavirus

Today's post is by Rev. Lisa Beth White, founder of Sister of Hope Ministries, an organization that exists to equip and support short-term mission teams, churches and non-profit organizations with training, resources and evaluation tools with the aim of enabling the faithful practice of Christian mission. This piece is reposted with permission from the author's personal site.

John Wesley established three general rules for the earliest Methodist societies. The modern phrasing of his rules is: Do no harm, do all the good you can, and stay in love with God. The societies were small groups of people who sought spiritual renewal through gathering in small groups to pray, study scripture together, and to go out into their daily lives to intentionally help others. These groups were in addition to usual Sunday worship, and many United Methodists today still gather in small groups to pray, to study, and to be in mission together. But now we are told that to protect the most vulnerable among us we are to NOT meet in groups, we are not to gather together for worship, and we most certainly should not travel. We should practice social distancing. A hard thing to do for faithful people who desire to show love for God and neighbor by being present with one another. How do we do no harm and still do all the good we had planned to do?

One of the underlying assumptions about short-term mission work is that we have the freedom to travel and be with people in their time of need. This is why Early Response Teams have trailers packed with equipment and tools to go at a moment’s notice to an area affected by an earthquake or tornado. This is why teams of volunteers keep their passports up to date and stay in communication with their denominational partners in other countries. Yet in this moment in which a virus has spread across the globe, we are told that we must not travel, we must restrict our freedom so that others will be safe. We must practice social distancing to reduce the curve of infection spread so that hospitals and doctors’ offices can cope with the numbers of those who fall critically ill, and hopefully to keep those who are most at risk safe.

In the last week, there are many United Methodists who are coming to terms with the news that our next General Conference, in which we were to take up legislation that might result in our denomination splitting, is to be postponed. Many of my United Methodist friends have shared their initial reactions on social media. But there are other stories that aren’t making headlines or being shared widely on social media - particularly, conversations being held in churches about whether or how to proceed with their planned short-term mission trips. Is it safe for our team and our hosts if we go? How can we help if we don’t go? How can we show the love of God and neighbor if we don’t go?

Now is a good time for people to reflect on the deeper meaning of mission.  We can still gather via phone calls or video conferencing. We can still pray together and study together. This is a good time to pause for a deep dive into scripture and mission theology, to equip ourselves for when we return to showing God’s love through our sweat and labor. This is a moment of holy opportunity.

Recently I visited Haw Creek Commons in Asheville, North Carolina. They have a small labyrinth painted on the floor of the coworking space. The nearby elementary school had just let out and a few children came into the room on their way to piano lessons, others to take a break from the playground outside. They were drawn to the labyrinth, and all of them ran around the path. Run to the center, laugh, turn around and run back out again. They were enthusiastic and joyful!

Short-term mission work can draw us in like those joyful children on the labyrinth. Our enthusiasm and joy in the work of helping our neighbors are shown in how quickly we respond to needs and how eagerly we set aside our usual routine for hammers and nails, saws and paintbrushes. Our time is used up in planning meetings, traveling, dividing up into work teams, working hard to finish tasks for our new friends, and then traveling home to wash laundry and get back to our regular routines. Like school children running the labyrinth, we rush in and out, not resting in the center.

This is a moment in which we can stop and rest in the center, to prayerfully consider how it is that Christ is calling us to be the church in mission. It can be a time to reflect together on your mission engagment - with members of your church, with your mission partners, and with outside facilitators like Sister of Hope Ministries. Be prayerful and patient, friends. God is with us, now and always, dispersed or together, and we are the sheep of God’s pasture.

A Primer on UMC Assets: Challenges in Dividing Assets

Today's post is by UM & Global blogmaster Dr. David W. Scott, Director of Mission Theology at the General Board of Global Ministries. The opinions and analysis expressed here are Dr. Scott's own and do not reflect in any way the official position of Global Ministries. Dr. Scott is neither a lawyer nor an accountant, and thus the following should not be interpreted as legal advice.

This post further explores the topic of dividing general church assets in the event of a division within The United Methodist Church. As indicated in my previous post, there are a variety of ways to define general church assets, and these different definitions are not just actuarial but reflect differing political and policy objectives. Moreover, there is an important distinction between General Conference designating future revenue to go to groups departing the denomination and General Conference asking the agencies to part with money that they already own as legal entities and have a fiduciary obligation to protect.

Within these big-picture questions about what “division of assets” actually means are a variety of equally significant procedural questions: Who negotiates the division of assets? What constitutes a fair share? And what claim do the central conferences have on general church assets?

In answering these questions, I will draw examples from the Protocol of Reconciliation and Grace through Separation, the New Expressions Worldwide (NEW) Plan, the Next Generation UMC Plan, a proposal by the Wesleyan Covenant Association (WCA), and legislation from the Liberia Annual Conference. While those promoting the Next Generation UMC Plan and the WCA legislation have pledged to support the Protocol instead, those plans are still useful for illustrating some of the issues involved.

Let’s begin with the question of who negotiates. In the case of the Protocol, that question has already been answered – a team of 16 people, including bishops from around the world and representatives from most major advocacy groups in the US. Much of the debate over the Protocol has been about who was and was not part of that group of 16 people. I have read commentaries from people from a variety of theo-political and social settings arguing that the group negotiating the Protocol left out representatives of important groups – liberationists, Africans, US racial and ethnic minorities, young people, laypeople, etc. Those involved in the Protocol process have responded, in part, by pointing out that it is difficult to have successful negotiations with a group size much over a dozen.

This debate over the Protocol highlights a fundamental challenge to answering the question of who negotiates – how do you have a group that is sufficiently representative while also being small enough to yield successful negotiations?

A related challenge is shown in the NEW Plan, which calls for “equitable distribution of common assets,” overseen by a Transitional Council composed of 21 people. These 21 people include the President of the Council of Bishops and five representatives from each of four successor denominations – traditionalist, centrist, progressive, and liberationist. Yet these denominations are not likely to be the same size. It is quite possible that, under this plan, 200,000 Americans could have more representation than 3.5 million Congolese, if the former were a small liberationist denomination and the latter were part of a larger centrist or traditionalist denomination, along with others.

Thus, the challenge of determining who negotiates is compounded: How do you balance having a group of negotiators that is broadly representative of all parties with the desire to make sure all parties are proportionally represented?

The issue of membership leads to the question of what constitutes a fair share of assets. The Next Generation UMC plan calls for “Grants for New Denominational Expressions of Methodism” that would be based on the number of churches, the membership, and the amount paid in apportionments for groups departing the UMC. The WCA plan provides for the division of assets based solely on membership of the successor denominations. Both past contributions and membership could be seen as “fair” criteria, but they are likely to give different results.

Moreover, one challenge for any system of division based on membership is that it gives participants an incentive to report as high membership numbers as possible. Membership figures are notoriously tricky, even in the absence of such financial motivations. US pastors already have reason to report high membership to reflect well on themselves on dashboards. There are noted differences in understanding formal membership, both internationally and within the United States. Tying large amounts of money to membership increases the chance that numbers may not reflect on-the-ground reality and therefore may be less “fair.”

Interestingly, those involved with the Protocol have said that the $25 million for departing Traditionalists and $2 million for others did not reflect some magical “fair share” calculation but rather just a number they could all agree upon.

Finally, if the UMC splits into multiple bodies, some of which do not include US Americans, what legal and ethical claims do non-Americans have on the common assets of the UMC? Regardless of where assets originally came from, are current United Methodists from outside the US entitled to some financial support if they decide to seek autonomy?

Certainly, US Americans have paid in the overwhelming majority to the apportionment system and given the most in additional gifts to the boards and agencies. Thus, most of the assets being divided were originally American assets. Yet, the trust clause does not say that the assets of the UMC are held in trust for its American members. It says that they are held in trust for the denomination as a whole, which also includes non-Americans, who are equal members of the denomination.

The Liberian Annual Conference’s legislation clearly indicates that United Methodists outside the US are entitled to some share of the denomination’s resources if there is a split. It calls for the $120 million in unrestricted general church assets (from agencies and apportionment funds) to be split evenly among the jurisdictions and central conferences. Each of these regional entities would receive about $10 million under this proposal.

Under the WCA asset division plan, the only assets that central conferences are eligible to receive if they become autonomous and unconnected to the American church are those assets associated with Africa University. Otherwise, any central conferences becoming autonomous would receive no general church assets. Yet, if the central conferences remain connected to a US successor denomination, they make a significant impact on how much assets that successor denomination receives – as much as $150 million.

Under this plan, while United Methodists in the central conferences are largely shut out of receiving assets themselves, they are very powerful players in the contest for assets among US Americans. Certainly, being such a valuable prize would give United Methodists in the central conferences some leverage in negotiating a shared future with a branch of American Methodism. Yet this arrangement could be seen as treating them as second-class members of the denomination. They are valuable, but they cannot receive that value directly themselves by becoming autonomous, and if they remain tied to the US, their value will be realized by the US-based structures of whatever denomination they stay with.

These three questions – Who negotiates the division of assets? What constitutes a fair share? And what claim do the central conferences have on general church assets? – are all tricky questions without clear answers. Where one comes down on these three questions depends on personal judgment as well as personal interest.

This does not mean that, should there be a denominational split, United Methodists should not try to figure out how to divide denominational assets. It does mean that General Conference delegates and others should not be blasé about the difficulties involved in negotiating a plan to do so.

Go To Church in Europe This Weekend

As United Methodist churches around the world are suspending Sunday worship due to the coronavirus outbreak, many churches are experimenting with online worship as an alternative to meeting in person. Readers are certainly encouraged to engage with their home congregations to keep those connections strong despite social distancing guidelines. But a transition to online church attendance also holds an opportunity to explore worship in new forms.

Thus, United Methodists in the United States may want to consider joining their European sisters and brothers for worship this weekend. Several churches or annual conferences across Europe are conducting some sort of online worship. And while time zone differences may make it difficult to participate in realtime, a number of those services can be viewed later in the day.

Many of these options happen via Facebook and YouTube. Both Facebook Live and YouTube allow viewers to see streaming videoes later after the live broadcast has ended. Also, Facebook includes a built-in translate feature that can allow you to decipher posts in captions in languages you do not read. Google Translate is also useful for navigating the web in foreign languages.

Among the possible ways to worship cross-culturally this weekend are the following:

Estonia: The Estonia Annual Conference has this list of five churches that will be holding worship via streaming on Facebook.

Macedonia: The UMC in Macedonia has promised a half-hour live broadcast of a message at 10am and 6pm local time this coming Sunday on their YouTube channel.

Austria: Here are links to a variety of sermons and services (some in English!) from several Austrian congregations for last Sunday, Mar. 15th. It is also worth checking in on the Austrian UMC's blog to see if fresh links have been posted for the 22nd.

Switzerland: The Swiss UMC is collaborating with the TV station musig24 to live stream a worship service this Sunday from 10-11am local time. It has also put together a page of links to live streams and sermon recordings from 10 local churches.

Germany: Several United Methodist churches in Germany will be live streaming their worship services, as listed at the end of this article.

Denmark: The UMC in Denmark has been posting daily prayer and worship services on their Facebook page.

Norway: The UMC in Norway will have a live-streamed worship service on its Facebook page this Sunday. Those who tune in live are invited to participate in communion, although the consecration of home elements only applies to those who watch in realtime.

Recommended Readings: United Methodist Around the World Respond to Coronavirus

Cancelations and closures in response to coronavirus have been extensive among United Methodists in the United States, but the virus has been affecting United Methodists around the world. Here's a quick rundown of some of the responses.

The Philippines Central Conference has suspended all upcoming annual conference meetings - 17 of them. Other large gatherings, such as the United Methodist Young Adults Fellowship, have also been postponed, and local churches have been given permission to suspend worship and are being encouraged to have worship online.

United Methodists in several European countries have canceled church services and all other church meetings. These include the following, with links to the respective announcements:
 * Germany, including the North Germany Annual Conference meeting
 * Austria
 * Switzerland
 * Norway, including a recommendation that all small groups cease meeting as well
 * Denmark
 * Poland
 * Latvia
 * Estonia
 * Bulgaria
 * Hungary
 * Slovakia
 * Macedonia
As of last Friday, Swedish-speaking United Methodists in Finland had issued a set of recommendations that stopped short of canceling all church services.

In Cote d'Ivoire, Bishop Benjamin Boni has postponed annual conference, closed all local churches, and prohibited other church meetings, following advice from the national government.

In Liberia, the United Methodist University of Liberia (UMUL) has suspended classes for two weeks.

A review of Facebook pages from other branches of The United Methodist Church in Africa shows that several are sharing information about handwashing and other precautions, but there have not yet been major cancelations of church events. There have been fewer cases of COVID-19 in Africa thus far in the outbreak.

The information above may not be a comprehensive list of global United Methodist responses to coronavirus, and as has been seen in the past several weeks, the situation is rapidly changing. Thus, additional closures, cancelations, and postponements may be happening around the world.

* Updated 2:00pm CDT, 3/18/2020. *

A Primer on UMC Assets: What Does It Mean to Divide Assets?

Today's post is by UM & Global blogmaster Dr. David W. Scott, Director of Mission Theology at the General Board of Global Ministries. The opinions and analysis expressed here are Dr. Scott's own and do not reflect in any way the official position of Global Ministries. Dr. Scott is neither a lawyer nor an accountant, and thus the following should not be interpreted as legal advice.

Having examined the assets held by various legal entities within the system of The United Methodist Church, I want to examine one of the hottest issues surrounding church assets at this moment in the life of the denomination: asset division. This post will examine the different possible interpretations of the term “asset division,” and a subsequent post will examine considerations and challenges that would affect any process of asset division.

First, when talking about asset division, it is important to specify which level of assets is being discussed. As this series has shown, assets are held by local churches, annual conferences, jurisdictions and central conferences, church-affiliated institutions, apportionment funds, and boards and agencies.

Technically, allowing local churches to depart with their property is a form of asset division. Assets that were previously tied to the UMC through the trust clause are divided among successor bodies (based on the choices of those congregations or their annual conferences). The same is true for annual conferences, jurisdictional conferences, and central conferences – any time one of these departs the denomination with their assets, it is a form of division of assets.

Still, when most United Methodists refer to dividing denominational assets, what they are talking about is general church assets. Yet even within that clarification, there are important questions about what a “division of assets” actually is: What assets are included? What does it mean to divide them?

People often assume that general church assets are equivalent to assets owned by the agency, but it’s worth pointing out that there are actually two groups of assets that might be termed “general church assets.” There are the assets of the boards and agencies. But there are also collected but not yet disbursed or sent apportionment fund monies, and these count as general church assets, too. In their summary of general church assets, GCFA includes both groups of assets – agency assets and apportionment funds on hand

According to a GCFA report, there is a net of $32 million ($85 million in assets minus $53 million in liabilities) in yet-to-be spent apportionment funds in GCFA bank accounts. That’s not because GCFA is hoarding apportionment money or is collecting more than is needed. It’s because sending money through the system takes time, and it’s typical for any bureaucratic organization to have more money on hand than they intend to spend in the next week. That’s sound fiscal management.

I have examined board and agency assets previously, but to briefly summarize, these assets are divided among donor-designated assets with legally-binding stipulations on how that money can be used; endowments, wherein the interest but not usually the principle can be spent; board-designated assets, which may be earmarked to cover other legally-binding financial obligations such as pensions; property such as buildings; and undesignated funds, which generally amount to 3-4 months’ worth of operating expenses, a standard margin for a business or non-profit.

Collectively, the apportionment-supported boards and agencies have about $86 million in undesignated funds. They have around $589 million in net assets (assets minus liabilities), but that additional $500 million is either in endowments and donor-designated funds where it cannot be touched, earmarked for legally obligated pension funds, or in the form of property.

The apportionment-supported boards and agencies have about $43 million in property, though there are many different ways to calculate what the value of the property is – at cost, net book value, fair market value, insurable value. Most of that $43 million in property, however valued, is in the form of headquarters buildings.

Despite chatter about Global Ministries owning property around the world, that property is almost always held in trust for mission partners, not property that Global Ministries is free to dispose of as it wishes. It can’t just sell the church buildings of one of the United Methodist Mission Initiatives and give that money to someone else.

What this review of general church assets shows is that there are many different possible ways to determine the total value of such assets depending on what categories of assets are included and the monetary value assigned to property and other tangible assets.

Thus, determining a total amount of general church assets isn’t a simple actuarial calculation; it’s a political and policy decision. Various parties in a division of church assets will have an incentive to include or not include various categories of assets or to value them differently in ways that will help them pursue their own financial interests in the negotiations.

If the question of what assets is complicated, so too is the question of what it means to divide them. In a simplistic understanding, a certain percentage of total assets, or perhaps a certain percentage of each asset would go to each party in the negotiation. Yet that view overlooks many significant legal questions that could prevent such a simple, proportional division of existing assets.

Here again, the distinctions between apportionment funds and agency funds and between restricted and unrestricted assets are important. There are solid legal cases to be made that General Conference cannot act to take away funds already owned by the agencies as legal entities and, even if General Conference could instruct the agencies to give some of their assets to another legal entity, restricted assets could not be transferred from one legal entity to another. At the very least, restricted assets could not be divided on a proportional basis, with a certain percentage being transferred to another legal entity. These theories could, of course, be tested by lawsuits, but that course of action involves extra expense and time.

If both apportionment funds and agency funds are included in the calculations for a division, and especially if both restricted and unrestricted funds are included, that gives the departing group claim to a much larger share of apportionment funds and possibly of unrestricted funds, since restricted funds and agency funds, in general, would likely be legally required to stay with the continuing United Methodist Church. A departing group could take all the cash and leave the remaining group with the untouchable money in the bank.

Yet this distinction between apportionment funds and agency funds also yields what is the legally least risky way to achieve some division of assets: a payout. In a payout, no board or agency or other legal entity is asked to part with money they already own. This avoids the lawsuits that would challenge the legality of General Conference instructing boards and agencies to violate their fiduciary responsibility to use their assets for the purposes stated in their articles of incorporation.

Instead, an amount is earmarked out of future revenue to be given to departing groups. Since that future money has not already been committed to a particular use, General Conference is free to direct that money as it sees fits. It is clear that General Conference has this budget-setting power, and this power does not conflict with the fiduciary responsibilities of other church legal entities since it applies to future income, not assets on hand.

This is the approach that the Protocol of Reconciliation and Grace through Separation takes, and this is likely why it takes that approach. It is legally much clearer that General Conference can designate where future apportionment revenue should go than it is that General Conference can require agencies to part with money that they already own as legal entities. The Protocol earmarks $25 million for Traditionalists and $2 million of other groups out of future revenues but does not try to reassign assets already owned by legal entities in the general church.

Of course, the Protocol is not the only possible approach to a payout. My next piece will examine a variety of questions related to the process of negotiating any division of assets.

Recommended Reading: Christmas Covenant Legislation

The legislation from the Christmas Covenant group is now publicly available online.

As the subtitle for the legislative package indicates, this legislation is intended to create "An Equitable Structure of Global Regionalism." The eight petitions draw upon but go beyond the Connectional Table's proposal to create a US Regional Conference. The Christmas Covenant legislation also converts central conferences into regional conferences, thereby establishing parity across the world.

The legislation was developed primarily by United Methodist leaders outside of the United States, especially from the Philippines. The principles of the Christmas Covenant have been endorsed by leaders from the Philippines, multiple African countries, and Norway. The Philippines Annual Conference - Cavite voted last month to endorse the legislation and send it to General Conference. In so doing, PAC - Cavite linked the Christmas Covenant and the Protocol of Reconciliation and Grace through Separation together.

The Christmas Covenant proposal has also received support from within the United States. General Conference delegates from Florida and the Western Jurisdiction have indicated their intention to support it, in conjunction with the Protocol. The Inter-Ethnic Strategy and Development Group has asked that the Christmas Covenant be the first item of business to be considered by General Conference, to be followed by the Protocol.

The Christmas Covenant regionalization plan is thus one of the central proposals that will come before General Conference, and this legislation deserves to be closely read and carefully considered by all General Conference delegates.

Renewing Our Relationships with Affiliated Methodist Churches

Today’s post is jointly written by Rev. Dr. Kyle R. Tau, Ecumenical Staff Officer for the Council of Bishops, and Dr. David W. Scott, Director of Mission Theology for Global Ministries. The opinions and analysis expressed here are the authors’ own and do not reflect in any way the official positions of the Council of Bishops or Global Ministries.

The United Methodist Church is one of over 70 Methodist, Wesleyan, and United denominations around the world that have their roots in the Methodist movement beginning with John and Charles Wesley. These churches include traditionally African-American churches such as the African Methodist Episcopal (AME) Church and the AME Zion Church, holiness denominations such as the Church of the Nazarene and Free Methodist Church, united churches including former Methodists such as the Church of South India and the Uniting Church in Australia, and independent, nationally-based Methodist churches, most of which have a historic connection to either British or American Methodist mission.

The United Methodist Church continues to have on-going ministry partnerships with many churches in these last two categories that are based on historic ties. Many united churches and independent, nationally-based Methodist churches were once part of The United Methodist Church or its Methodist Episcopal, Methodist Episcopal South, Methodist, and Evangelical United Brethren predecessors.

Starting in 1909 and most recently in 2012, annual conferences outside the United States and occasionally entire central conferences have chosen (or have been pushed) to separate from The United Methodist Church and its predecessors. This has happened for a variety of reasons, including the desire for ecumenical mergers, local political pressures, and post-colonial impulses.

The Book of Discipline includes provisions whereby an annual conference outside the US or a central conference can, with approval by the General Conference, leave the denomination and become “autonomous,” a church polity term that means self-governing. All independent denominations are autonomous, but the process in the UMC and its predecessors often spoke of “granting autonomy” to departing portions of the church.

The Book of Discipline, however, also provides a variety of possibilities for on-going relationships between The United Methodist Church and separate Methodist denominations. Part of the process for an annual or central conference to become autonomous includes establishing the terms for such an on-going relationship.  Yet there are also other relationships that can be established between the UMC and any other separate Methodist denomination.

The Council of Bishops and Global Ministries are both primary agents of The United Methodist Church in maintaining these ecumenical partnerships with our sibling denominations. These partnerships are in many cases vibrant collaborations that facilitate a great deal of joint mission and ministry. Both the Council of Bishops and Global Ministries value other Methodist denominations as essential mission partners.

The Book of Discipline uses a variety of language to describe these partner denominations, but much of that language has not been updated in decades, and in some places, it is unclear or no longer reflects the realities of 21st century global Christianity. Therefore, the Council of Bishops and Global Ministries have jointly proposed two resolutions to General Conference 2020 to update that language - Petition # 20651 (pp. 962-964 of ADCA) and Petition 20645 (pp. 991-992 of ADCA).

These two petitions work together to change the term “affiliated autonomous Methodist church” to simply “affiliated Methodist church” and to eliminate the term “autonomous Methodist church,” a term that presently does not have a clear meaning or function in the Book of Discipline. An explanation of both changes is in order.

By changing “affiliated autonomous Methodist church” to “affiliated Methodist church,” The United Methodist Church sends a signal to its partner denominations that what is important is our on-going mutual ministry, i.e., our affiliation, and not the status of those partners as previously subject to the General Conference, i.e., having been granted autonomy. We feel that to continue to emphasize the term “autonomous” in these relationships functions primarily to re-emphasize these denominations’ previous role in a system dominated by United Methodists in the United States. In this regard, the term feels outdated – a product of the de-colonization of the middle of the 20th century and not a reflection of the equality and mutuality that we hope will characterize relationships between The United Methodist Church and partner denominations in the 21st century.

The term “autonomous” is also unnecessary in the phrase “autonomous affiliated Methodist churches.” Affiliation already implies that the two parties are separate. We do not describe annual conferences, jurisdictional conferences, or central conferences as “affiliated Methodist churches.” We reserve that language only for separate denominations. Since “affiliated” already implies separate, self-governing denominations, it is not necessary to repeat that implication by including the term “autonomous.”

The term “autonomous” is unnecessary for another reason – all denominations are autonomous, so it does not add any definitional clarity to the ecumenical relationships described in the Book of Discipline. This is a reason not only to remove it from the term “autonomous affiliated Methodist church” but to do away completely with the term “autonomous Methodist church.” That term does not have a clear and consistent meaning in the Book of Discipline, and in most instances can be either simply removed or can be replaced by more explicit references to other Methodist/Wesleyan churches.

In submitting these two petitions to General Conference, the Council of Bishops and Global Ministries hopes that these changes will create greater clarity about these valuable ecumenical relationships – greater clarity in the technical language of the Book of Discipline, but more importantly, greater clarity about the spirit of humility, equality, and partnership with which the UMC should engage other Methodist/Wesleyan denominations.

A Primer on UMC Assets: Board and Agency Assets

Today's post is by UM & Global blogmaster Dr. David W. Scott, Director of Mission Theology at the General Board of Global Ministries. The opinions and analysis expressed here are Dr. Scott's own and do not reflect in any way the official position of Global Ministries. Dr. Scott is neither a lawyer nor an accountant, and thus the following should not be interpreted as legal advice.

Having looked last week at the range of sources of income for boards and agencies (hereafter just agencies), I will now turn to the several categories of assets an agency may hold. These categories of assets are not unique to United Methodist agencies but are characteristic of nonprofits generally. In addition to this post, the “Definitions of Assets, Liabilities, and Net Assets” from GCFA is helpful reading on this topic.

First, I will look at financial assets, since these tend to be the bulk of agency assets.

Within financial assets, there are unrestricted assets, which are financial assets that can be used for any purpose and may be stored in a variety of bank accounts or investments until they are needed. When many people hear the term “denominational assets,” this is what they think of: a bank account with money just waiting to be spent on whatever the denomination wants.

It is worth noting, though, that even though these assets are “unrestricted,” agencies may still not be free to spend them in any way they want and may not be free to give them to other legal persons at will. Agencies are still bound by the terms of their articles of incorporation, the legally binding documents that establish them as legal persons. The terms of those articles of incorporation may restrict what the agencies may do with even their unrestricted assets by stipulating that the agency exists for a specific purpose. Thus, for instance, GBHEM may not be able to take its money and begin operating a chain of frozen yogurt shops, since it is supposed to be in the business of supporting education. (I don’t know the specifics of GBHEM’s articles of incorporation; this is just a hypothetical example.)

Beyond undesignated assets, there are board-designated assets, which the board of directors has taken from unrestricted assets and earmarked for specific purposes. Again, these board-designated may be stored in a variety of accounts or investments.

In some instances, these board-designated purposes include meeting legally binding financial obligations such as paying for retirement funds. Thus, while a future board of directors could theoretically change how this money is designated, it may not be possible to re-allocate all of that money without a board or agency defaulting on its legal financial obligations. Boards of directors could not ignore these obligations without violating their fiduciary responsibility to the agency, and the agency could not ignore these responsibilities without risk of a lawsuit.

Together, unrestricted and board-restricted assets function as “reserves,” a cushion of money that allows for some fluctuations in spending and emergency expenses, in the same way that individuals often have more in their checking account than they intend to spend in the next month. GCFA recommends that all boards and agencies have 3-6 months of operating expenses in their reserves. https://www.gcfa.org/media/2084/final-report-of-reserves-task-force_nov2019.pdf If an agency is left short of reserves, it could end up in a situation where it was in danger of not being able to pay its bills.

Next, there are endowments, which are a specific type of investment wherein the principle is preserved, but the interest from that principle can be placed into unrestricted funds. Such endowments are subject to a variety of state laws, but these laws often prohibit the principle of the endowment from being spent. Thus, while the interest may be spent at the agency’s discretion, the agency may not be able to spend or give away the principle.

Agencies also have donor-designated assets, which a donor has stipulated how they are to be used. Some donor-designated assets are intended to be used within the near-term, and some of them are long-term investments, the interest of which is to be used for the purpose designated by the donor. These designations are legally binding, especially when gifts are given as part of a will. Were an agency to use a designated asset for a purpose other than that originally intended by the donor, it might be sued for doing so, especially by relatives of the person who gave them money. US law has a long and strong tradition of upholding such restrictions.

Finally, there is tangible, physical property, which includes land and buildings, but also things like computers, desks, books, etc. Without going into the details, there are different approaches to assigning monetary values to such physical property. For buildings and land, there is a difference between the “at cost” value and the fair market value. Moreover, while land and buildings may make up the majority of the physical property assets (for those boards and agencies that own them), it’s important not to forget about other forms of physical property. Finally, depreciation affects the financial value of physical property, but may or may not be included in a description of assets.

While there are conspiracy theories that agencies are secretively hiding money, a variety of information about agency finances is publicly available, including through the GCFA website. In particular, GCFA provides a report on general church reserves, a summary of General Church assets, liabilities, and net assets. GCFA also lists the at-cost value of agency headquarters buildings, for those agencies that own their own headquarters. Additional financial information about the income, assets, and expenditures can be found in agency reports or auditing statements and sometimes in IRS 990 forms filed by the agencies.

Aside from Wespath, the largest pools of net agency assets are those held by Global Ministries and UMCOR, GBHEM, and Africa University. Many of these are in the form of endowments and donor-restricted assets. Pension obligations eat up a significant amount of the non-restricted assets as well.

Thus, a large portion of agency assets across all agencies are not general assets that can be spent at will but rather assets set aside for specific, legally binding purposes. According to GCFA, the apportionment-funded agencies collectively have $589 million in net assets (assets minus liabilities). However, only $86 million of this is money that is not tied up in endowments, property, or pension obligations.

$86 million in cash is not nothing, but it is worth setting in three contexts: The first is the scope of the overall budgets of these agencies, which in 2018 was about $263 million dollars. $86 million is about four months’ operating costs in reserves, in line with what GCFA recommends. The second is the legal complexities around what agency money can legally be used for, even when it is unrestricted. The third is the over $50 billion in local church property owned by local congregations, which still represents the overwhelming majority of United Methodist assets.

Recommended Reading: Michigan-Liberia Partnership

The Michigan Annual Conference recently posted this report about signing a new covenant to continue a 20-year long partnership between United Methodists in Michigan and those in Liberia. What makes this story particularly interesting is the way in which it honestly acknowledges the deep differences between Michigan and Liberia about the place of LGBTQ persons in the church and the tensions that those differences bring to the partnership. Moreover, the story indicates that those tensions exist for both parties - Liberians, as well as Michiganders, debated whether to reaffirm their partnership. Ultimately, both parties did, for the sake of the mutual mission and ministry that their partnership has facilitated and will continue to facilitate, despite the real potential that the two groups could end up in separate denominations. While it may or may not appear in official press, the sorts of conversations, tensions, and reassessment of missional relationships described in this article are certainly occurring for many such partnerships across the denomination.

Recommended Readings: Methodist Women Leaders in Africa

United Methodists are justly proud of Bishop Joaquina Nhanala, the first African woman bishop in the UMC. In addition to breaking that gender barrier, Bishop Nhanala has been a skilled leader for the Mozambique Episcopal Area.

But she's not the only Methodist woman to take the reins of leadership in Africa. Looking beyond the UMC, there are at least two other Methodist denominations in Africa that have women as their top leaders: the Methodist Church of Southern Africa and the Methodist Church of Togo.

The Rev. Purity Malinga was elected last year as the 100th Presiding Bishop of the Methodist Church of Southern Africa, the first woman to hold that position. With nearly 2 million members, the MCSA is one of the largest Methodist denominations in Africa. It is also one of the oldest. At the same time as Bishop Malinga was elected, three other women were elected as regional bishops, meaning that 1/4 of the church's 12 districts are now led by women. Dr. Dion Forster has written this article about Bishop Malinga's election, the history behind it, and what it means for the MCSA.

The Methodist Church of Togo (Eglise Methodist du Togo) is a much smaller - about 40,000 members - and younger - independent since 1999 - church, but it too is currently led by a woman. In fact, it's led by two women. Rev. Grace Lawson is President, the highest-ranking clergy in the church, and as General Secretary, Rev. Angele is responsible for leading the work of the church. This partnership visit report by Dr Bunmi Olayisade, Africa Partnership Coordinator for the Methodist Church in Britain shares more about the ministry of these two women.

With episcopal elections coming up for United Methodists in Africa later this year, the question now stands: Will African United Methodists elect more women as episcopal leaders, as their fellow Methodists across the continent have?

A Primer on UMC Assets: Board and Agency Income

Today's post is by UM & Global blogmaster Dr. David W. Scott, Director of Mission Theology at the General Board of Global Ministries. The opinions and analysis expressed here are Dr. Scott's own and do not reflect in any way the official position of Global Ministries. Dr. Scott is neither a lawyer nor an accountant, and thus the following should not be interpreted as legal advice.

Part of the discussions around the future of The United Methodist Church has been a possible division of denominational assets. When people talk about denominational assets, they are discussing those assets held by denomination-wide boards and agencies (hereafter agencies). This includes not only the thirteen official boards and agencies but also entities like the Connectional Table, the Office of Christian Unity and Interreligious Cooperation, and the Africa University endowment, which are also legal persons with assets and denomination-wide responsibilities.

Again, The United Methodist Church as a whole is not a legal entity capable of owning assets itself. Agencies, however, are legal persons, incorporated as 501(c)3 organizations under various US state laws, and thus they can hold assets in trust for the denomination.

This post and the following one will attempt to add some clarity to what agency assets are, where they came from, and the legal restrictions that may apply to them. First, this post will talk about where agency assets come from and the associated restrictions. A subsequent post will talk about the categories of assets and the restrictions on them.

One source of revenue for agencies is direct giving – donations made by individuals, foundations, and other entities to those agencies. Usually donations come in the form of financial gifts, but donors also may give gifts-in-kind, another way of saying that they may give tangible assets such as land, buildings, equipment, medicine, foodstuffs, etc. Sometimes these donations are made to the general expenses of an agency (or “area of greatest need”), but often they are given to support particular programs or for particular purposes, such as building up an endowment. Agencies must use donations as directed; they cannot use a donation designated for one purpose for another purpose.

Another source of revenue is investment income. Some of the donations given to agencies are invested rather than spent, and those investments generate income through interest or dividends. That investment income is treated as revenue. Income from an endowment can generally be used as the agency sees fit, whereas income from donor-designated investments must be used for the purpose designated for that investment.

A third source of revenue is business income generated by sales, fees for service, or other contract work. This source of revenue is really quite broad, because it applies to everything from the fees that GCFA charges other agencies for tech support to the income the Publishing House receives from selling books to the money that Wespath makes by managing the denomination’s investments. Business revenue is also generally available to be used as an agency sees fit (once the costs of operating that business are covered). Since the agency earns it, the agency can decide how to use it.

Agencies can also earn money through grants from foundations and governments. Grant money is almost always tied to programs, and the income received from grants must be spent on the operation of those programs. However, many grants allow a small percentage of the grant funds to be spent on overhead, so grant money can be used to offset the general costs of an agency such as office space, utilities, and senior leadership.

Most agencies, but not all, receive some money from general apportionments, the subscription fee that local churches in the US pay to receive the bundle of denominational services provided by the UMC. (For more on apportionments, see “A Primer on United Methodist Apportionments.”) While people often think of agencies as apportionment-funded, that is not true in all cases, and even for those agencies that do get apportionments, the magnitude of apportionment funding compared to other sources of funding varies. Some agencies rely almost entirely on apportionments, some have a mix of income streams, and some are not funded by apportionments at all.

Notably, the United Methodist Publishing House (UMPH), Wespath, and United Methodist Women are not and never have been supported by apportionment giving. UMPH and Wespath are self-funding through revenues generated, and United Methodist Women is self-funding primarily through the generous donations of faithful women.

The General Council on Finance and Administration and the General Commission on Archives and History are funded out of the General Administration Fund. The Interdenominational Cooperation Fund pays for the work of the Office of Christian Unity and Interreligious Cooperation (OCUIC). The World Service Fund supports the work of Global Ministries, Higher Education and Ministry, Church and Society, Discipleship Ministries, United Methodist Men, the General Commission on the Status and Role of Women, the General Commission on Religion and Race (GCORR), and the Connectional Table, along with other expenses. For those agencies that are apportionment-funded, the amount of apportionment funding is projected to drop steeply in upcoming years.

Some agencies also administer other apportionment funds. For instance, GBHEM administers the Methodist Educational Fund and Black Colleges Fund. Moreover, GCFA administers all apportionment funds before they are disbursed. Such funds, however, must be used for whatever purposes are attached to that fund, perhaps minus a small administrative fee. Thus, GBHEM cannot decide to use Black Colleges Fund money to support higher education in the Philippines; it must be used to support UMC-affiliated historically black colleges and universities in the US. In this way, agencies serve as “pass-throughs” for these other funds. They administer them, but the funds are in a separate pot from the rest of their revenue streams.

Whatever source the money (or gifts-in-kind) comes from, once an agency receives it, it becomes an asset. For financial assets, agencies may then spend them, save them, or convert them into tangible assets (by buying new desks or computers for its employees or purchasing books for the GCAH library, for instance).

What an agency does with the assets depends a lot on where that asset came from and why it was given, as noted above. Again, grant monies must be spent on the project described in the grants, donations to an endowment must be added to the endowment, and donations for a particular program must be used for that program. To do otherwise would be to break trust with the person giving the asset and expose the agency to lawsuits.

Moreover, the use of an agency’s income and assets is governed by the complex set of foundational documents and decision-makers that include, on one hand, the General Conference and Book of Discipline, but also include, on the other, the agency’s own articles of incorporation, by-laws, board of directors, and staff leadership. (For more, see “A Primer on Board and Agency Organization”). General Conference, thus, does not have completely free reign in telling an agency what do to with its assets.

Information about agency income and expenses can be readily found online from GCFA in the form of audited financial statements for apportionment-funded agencies. Additional financial information about the income, assets, and expenditures can be found in agency reports or auditing statements and sometimes in IRS 990 forms filed by the agencies.

Next week, I will take a different perspective on agency resources and look at asset groups instead of income streams.