General Church and Academy of the New Church Financial Initiatives Frequently Asked Questions

December 8, 2010

1. What is happening?

Like many organizations today, the General Church, including the individual Congregations and Societies, and the Academy are undertaking an expense reduction effort. This initiative balances our need to curb expenses while continuing to support the growth of our church and schools over the long term. Senior leaders throughout the Church and Academy have already begun to carefully analyze their budgets to identify opportunities for expense reductions or postponements. This will impact many of our programs and may in some cases result in the elimination or consolidation of jobs. In fact, some jobs have already been eliminated as part of cost containment efforts during the past fiscal year.

2. Why are the General Church and Academy undertaking this expense reduction initiative?

There are many factors behind the decision:

• Perhaps the most important to understand is that our current funding model depends too heavily on our endowment; in fact, even before the economic crisis, we were struggling with a wide-spread lack of understanding that to be sustainable for the long term, the Church and schools need to be paying substantially more of their own way for regular operating expenses. There has been a lack of understanding in many areas of the church and school organizations that we have been living off past generosity and have not accepted the financial responsibility for what we receive. At the current spending level, the endowment could be depleted in 10-12 years.

• Certainly the stock market deterioration did have a major impact on our endowment, and while there has been some recovery, the endowment is still down significantly from its previous level. The overall economic situation also has no doubt affected the level of contributions.

• There have also been increased expenses as a result of our growth initiatives and investments in our core programs and services. In deciding to undertake these initiatives, both Church and Academy leadership as well as the boards recognized and agreed to deficit spending, recognizing how critical these initiatives were to the General Church’s long-term health and its commitment to serve the New Church in this world. We continue to believe this is true.

• When we embarked on these investments and initiatives, we also decided to manage and track three specific areas of focus:

1. an anticipated increase of engagement in the Church and Schools, with a corresponding growth in annual giving; with the exception of the Capital Campaign, we’ve actually seen a decrease in overall contribution levels, with very many continuing to be supported by very few;

2. the various capital campaign initiatives (e.g., increased minister training, Healthy Church match, expanding student capacity at the Academy, New Church Live, etc.) and expected cash inflows from those efforts; while these initiatives have produced encouraging growth, it has not been as strong as anticipated, thus requiring an adjustment to expenses;

3. overall expenses in relation to expected measures. We agreed to look for efficiencies, making appropriate expense reductions, where necessary; which is what we are undertaking now.

• Under the current circumstances and given current and foreseeable economic conditions, our realistic pace of growth, and issues with the current capital campaign, it is clear that deficits of $3.5 million on a budget of $8.8 million for the General Church and of $13.5 million on a budget of $31 million for the Academy are simply not sustainable.

3. Who made the decision to cut costs?

The decision to embark on this expense reduction initiative was made by both General Church and Academy leadership and the finance and budget committees of both boards. However, decisions on specific cuts or changes will still be made “locally,” by leadership of the various central church departments, Congregations, Societies, and Schools.

4. How will this be accomplished?

Both the General Church and the Academy are trying to achieve specific cost reduction goals (in dollars) to be accomplished over the next few years. Church and Academy leadership are working with their finance departments and board finance and budget committees to determine how this will be accomplished within their respective organizations. For instance, within the General Church, each area of the organization will be given a specific reduction goal and then it will be up to their leadership to determine how to accomplish the reduction, including what to cut, when and how. Within the Academy, each of the schools and central administration will be given reduction goals and their leadership will determine how to meet those goals.

5. What is the scope? How many people will be affected?

At this point, we don’t know the exact nature of all the needed changes. It is likely some programs and jobs will be eliminated or changed. In terms of jobs, we hope to manage the effect on employees through job transfers, consolidations and attrition wherever possible.

6. What is the timing? When will I know specifics?

The timing will vary from one area to another. However, we expect that the various areas will have at least some preliminary decisions made and communicated in the next few weeks; implementation of those decisions will probably be spread out over the next 12 to 18 months.

7. What will happen to me if my job is affected? Will the Church or Academy provide me with any support to make the transition?

The General Church and the Academy are committed to providing employees with support during the transition. While the decisions about specific jobs and programs are being handled at the local level, support for transitioning employees will be managed centrally through HR. Employees also will have the opportunity to post for other jobs within the General Church and Academy. More will be communicated regarding this in the coming weeks.

8. Are other things being affected besides jobs in order to save money?

Yes, we are also looking at programs, spending for outside services and supplies. We will be looking at both our core programs and newer initiatives to strike a balance that will maintain a strong foundation for the Church and Academy’s future, recognizing that both long-held activities and new initiatives can foster growth.

9. What about all the money the Church and Academy are spending on expansion? These initiatives are not universally seen as the right thing to do?

One outcome of the strategic work being done by the boards of both the General Church and the Academy has been a realization that if the Church and Academy are to remain viable into the future they must actively work to serve more people. This means welcoming new members to the Church and attracting more students, including students who do not come from current New Church families, to our schools. While funds earmarked for expansion activities are fair game for cost reductions, such expenses may be scaled back or stretched out rather than being completely eliminated.

10. How much support is there for these growth initiatives and changes to core programs and services?

When it comes to any change, not everyone is going to embrace the new direction wholeheartedly, but the General Church and Academy leadership and boards are committed to growth in both new initiatives and enhancements to existing programs and services. We encourage you to voice your opinions and add your ideas to these efforts and will continue to work to build understanding and support going forward.

11. How will I get answers to any questions I submit?

If you are an employee, please address questions to your manager or leader or send them directly to Karen Stoeller, Director, Human Resources, Karen.Stoeller@anc-gc.org, 267-502-4661. If you are a Church member, send them directly to Alaine York, Alaine.York@newchurch.org, 267-502-4998. Karen and Alaine will forward your questions to the appropriate people for answers, and then we will publish the answered questions in follow-up FAQs.