Grace Episcopal Church: Dispelling the Myth of a Balanced Budget

By | November 15, 2018

One of the things that’s troubling about Grace church’s governance is the enduring myth that the church has been running a balanced budget.The reality, however, is that it’s been running a deficit for many years.

Per the Financial Accounting Standards Board’s Statement of Financial Accounting Standards No. 93, issued in 1987, all nonprofits must include depreciation and amortization in their financial statements in order to receive an unqualified opinion during an audit. (Another reason Bob Malm’s claim of repeated “clean” audits is inherently suspect.)

What does that mean in practice? It means that while including depreciation and amortization in the financials doesn’t alter the church’s cash flow, it does hit the statement of financial activities, or SOA. The SOA is the nonprofit equivalent of an income statement. 

Thus, if we use a value of $1.5 million for the 1995 renovations and simply allocate them on a straight-line, annualized basis over the next 20 years, through 2015 there was an extra $75,000 every single year that was not included in the SOA. In other words, most years the church has operated on a loss basis due to its failure to cover the “using up” of its fixed assets.

The matter, of course, gets worse when one considers the value of the renovations to the organ and the choir loft. Roll these into the mix, and Grace has been losing well over $100,000 annually.

Of course, some will say, “Well, we raised money before, and we’ll do it again.” But that’s a foolish argument, for attendance continues to drop, and the really generous members of the parish, who have long helped hold the whole house of cards together, are fast reaching an age when their generosity will soon be coming to an end. Yet Bob Malm, the vestry, and the church as a whole largely ignore these issues.

It will be interesting to see what the future brings.