Identifying the full and true cost of ministry can be difficult, but important
by Melody K. Smith | Presbyterian News Service
LOUISVILLE – The Overhead Costs Ministerial Team of the Presbyterian Mission Agency Board (PMAB) will present broad recommendations for consideration at the September 21-23, 2017 meeting, in relation to the how overhead – or ministry support costs – for the Mission Agency should be managed, allocated, and communicated.
The team is making five initial recommendations. The first directs the Leadership Cabinet to integrate consultation between Finance and Accounting and ministry directors and other program managers as part of the budgeting process.
The second recommendation involves streamlining PMA’s ministry support costs with a single flat rate. The current actual run rate for administrative costs is 19 percent. Ministry area costs for support services are currently based on usage, with a variety of cost recovery rates ranging from 11 percent – 19 percent. The team found that 19 percent for support services is well within the average for similar organizations.
If the PMA switches to a flat rate of 19 percent, this will increase the rate for some ministry areas. However, the impact of a 19 percent flat rate will result in freeing up $2.4 million in unrestricted funds, which may be directed to the negatively impacted areas to smooth the transition. The team used 19 percent as an example, but if approved, leaves specifics and implementation up to PMA staff to propose for board approval as part of upcoming budgets.
The third and fourth recommendations commit the PMA to increased transparency in communicating overhead or ministry support costs with a policy of openness, and a communications strategy. This directly responds to a recommendation made in the PMA Agency Review Report, which was adopted by the General Assembly in 2016.
The last is for evaluation of the process, calling for a PMA progress report a year from now.
“We often make the distinction between ministry and overhead – or direct and indirect ministry costs,” said Wendy Tajima, chair of the team. “But we know that our ministry would be greatly hampered, or even made impossible, without ministry support services such as facilities, communications and information technology, and finance and accounting to ensure we are managing our resources with good stewardship. We would be irresponsible not to account for these services. The great news is that our findings show that PMA does fine as compared to other similar nonprofit and church organizations, but we haven’t done so well at communicating them.”
Currently, the primary factor that determines whether something is direct program or indirect program, is which office does the work. Allocating the full and true cost of ministry enables the church to communicate more clearly both the need for funding, and accountability for how the funds have been used.
According to Charity Navigator, PMA overhead costs are in line with to similar organizations. 7 out of 10 charities evaluated spend at least 75 percent of their budget on the programs and services they exist to provide. And 9 out of 10 spend at least 65 percent. In 2015, PMA’s program expenses were 86.6 percent.
When the system was first introduced, cost recovery and cost allocation percentages were the same. Each year since, costs have increased, but rates have remained the same. These recommendations are intended to correct that imbalance.
There were additional recommendations for further review with one being the cost recovery model for Special Offerings. Currently, the costs for staff and promotional expenses are taken out of donations given to Special Offerings, in addition to the cost recovery rate for ministry support. The recovery of all costs related to Special Offerings was mandated by a General Assembly directive. Giving to PC(USA)’s Special Offerings was about $10.7 million in 2016.
The Overhead Costs Ministerial Team will meet in committee on Thursday, September 21 and present their recommendations to the full board in plenary on Friday, September 22. The team’s complete report can be found in the Meeting Papers on the PMA website.
You may freely reuse and distribute this article in its entirety for non-commercial purposes in any medium. Please include author attribution, photography credits, and a link to the original article. This work is licensed under a Creative Commons Attribution-NonCommercial-NoDeratives 4.0 International License.