REFERRED: First Proposed Amendment to the Canons

Text of Proposed Amendment:

Title I. Canon 14: Of the Diocesan Fund

Sec. 1. At each Annual Convention an assessment shall be made upon all Parishes in the Diocese, according to the formula set forth in Section 2 of this Canon.

Sec. 2. Beginning January 1, 1998, and in the calendar years thereafter, there shall be an annual assessment made upon all parishes in the Diocese as follows:

10 percent of the first $100,000 of normal operating income (NOI) of a parish;
12 percent of that portion of the normal operating income (NOI) above $100,000 and up to $200,000;
14 percent of that portion of the normal operating income (NOI) above $200,000 and up to $350,000;
16 percent of that portion of the normal operating income (NOI) above $350,000.

Normal Operating Income is defined in the Line-by-Line Instructions for the preparation of the Parochial Report as provided by the national Episcopal Church.

Sec. 3.

(a) By February 20, 1998, each parish shall estimate its annual assessment based on projected or budgeted Normal Operating Income for the current year, and shall use that estimate to calculate an average annual percentage rate of assessment to be used as described in Section 3. (b). below. The average annual percentage is determined by dividing the estimated annual assessment to the Diocese by the total estimated Normal Operating Income of the parish for the year. Annual estimates shall be filed with the Treasurer of the Diocese by February 20 of each year. Any parish which encounters unusual changes in anticipated income may file a revised estimate.

(b) Beginning February 20, 1998 and on the 20th day of each month thereafter, each parish shall pay to the Diocese a monthly payment determined by applying the average annual percentage rate of assessment for the parish to the parish’s Normal Operating Income for the preceding month.

(c) No later than February 20 of the succeeding year, each parish shall calculate an end-of-year reconciliation of its assessment using the formula set forth in Section 2 above. Any overpayments may be applied to the parish’s assessment for the following year and/or may be recorded as additional support of diocesan program at the discretion of the parish. Any underpayments of assessments shall be due no later than February 20 of that succeeding year.

Sec. 3.

(a) In determining the assessment due from a parish for a calendar year, the rates specified in Sec. 2 shall be applied to the NOI shown on the parish’s parochial report for the second preceding year.

(b) Beginning February 20, 2009 and on the 20th day of each month thereafter, each parish shall pay to the Diocese a monthly payment determined by dividing the amount determined in Sec. 3. (a) by twelve (12).

Sec. 4. No Parish that is reported by the Treasurer of the Diocese as being in arrears on its assessment shall be entitled to representation in any Convention of the Diocese.

Sec. 5. A reserve fund will be developed by the Diocese for use after the three-year transition period for the purpose of assisting parishes with unforeseen expenses to meet their financial commitments to the Diocese. Such financial assistance would be administered through the Congregational Development Commission of the Diocese, which may provide an appropriate level of short term (maximum of 1 year) financial assistance. Should this assistance be necessary, a parish will be required to: request such financial assistance from the Congregational Development Commission; and work with a diocesan support group who will assist in evaluating the parish’s financial needs and strengths and in implementing a plan, which will result in the parish being able to meet its financial obligation.

Proposers

Canon Christina Monreal, Trinity Cathedral, Cleveland
The Rev. George M. Tarsis, St. Andrew’s Church, Barberton

Rationale of the Proposer

History

The current assessment system has been in effect since 1998. It was passed at a special Convention after much debate and study.
In his Episcopal address at the 2005 Diocesan Convention, Bishop Hollingsworth noted, “I have learned the assessment process is felt to be fair and reasonable.”
At the request of Bishop Hollingsworth, a study was conducted in 2006 by Lee Irving, a member of the Finance Committee and Christ Church, Hudson.
He compared our assessment process, rates, and reporting with all other dioceses. Our assessment rate was in the middle of the range of assessment rates across the country. A complete overhaul of the assessment system is not deemed necessary at this time.

Computation of Assessment

A graduated rate system, ranging from 10-16%, is applied to the parish’s Normal Operating Income (NOI) to determine the assessment due.
Normal Operating Income is defined by the parochial report instructions issued by the National Episcopal Church. These definitions apply both to the assessment system and parochial report computation of NOI.
A parochial report should reflect NOI = Normal operating expenses. NOI is funds used to pay operating expenses of the parish. Receipts are not characterized as operating (vs. nonoperating) and reportable as NOI until spent. The level of operating expenses ultimately determines NOI and the amount of the assessment due. As operating expenses increase, the assessment due increases proportionately, and vice versa. The assessment is not directly correlated with changes in receipts.
Under the proposed new canon, NOI would need to be computed only once a year, on the parochial report, instead of every month.

Reporting and Payment

Currently, a parish completes an annual estimate of the assessment, 12 monthly reports, an annual reconciliation, and a parochial report. The process of reporting and paying each year’s assessment averages about 15–18 months from start to finish. It is a time-consuming process for both the parish and finance office staff.
The new canon would significantly reduce the number of reports filed. The annual estimate, reconciliation, and monthly reports would no longer be required. The administrative burden connected with the assessment would be reduced significantly.
Once a parish completes and files its parochial report for a year, the assessment for the following calendar year would be known. For example, once the 2008 parochial report is completed in March 2009, the assessment due for the 2010 calendar year is computed based on the NOI on that report. The assessment is a fixed and determinable expense for the 2010 budget that is prepared later that year.
An equal monthly payment is useful for planning and budgeting purposes also.

Economic Impact

If the new canon is approved, assessments for calendar year 2009 will be based on 2007 parochial report NOI.
If the new canon had been in place for 2007, assessments due would have been based on the 2005 parochial report NOI. The total assessment would be $2,395,969 based on 2005 NOI. The actual assessment due under the current system, based on 2007 parochial report NOI, is $2,412,666. The decrease in assessments due from the proposed change is about $16,000, or .7%.
The financial impact for future years is unknown.

Rationale of the Committee’s Recommendation to Refer

The Committee on Constitution and Canons recommends that this proposed amendment, and the amendments to follow, be referred to a committee appointed by the Bishop. Such committee would undertake a comprehensive review of the Diocesan Fund and make recommendations to the 193^rd Annual Convention of the Diocese of Ohio. Such a comprehensive review would include, but would not be limited to, the current funding mechanism for supporting the mission and ministry of the diocese, the system of reporting and making payments, and consequences for non-compliance with the diocesan canons.