"You may say to yourself, “My power and the strength of my hands have produced this wealth for me.” But remember the Lord your God, for it is he who gives you the ability to produce wealth, and so confirms his covenant, which he swore to your ancestors, as it is today" (Deuteronomy 8:17-18 NIV).
God has been gracious to CBWC and the Foundation in 2018. It is a blessing and encouragement to see how our shared ministry priorities of “Cultivating Leadership, Investing in Relationship, and Engaging in Mission” are being lived out within our family. It is a privilege to use the resources we have been entrusted with to help others thrive in their ministry context.
The Foundation’s objectives are to provide financial support and counsel to CBWC and its associated ministries. We offer values-based investments, provide loans to CBWC constituents and like-minded organizations, provide education grants to theology students, and manage client investment portfolios. Our operating profits are reinvested in CBWC ministries. The services we provide and gifts we receive are prudently managed in order to provide a long-term benefit, and we work closely with our board of directors and CBWC leadership to ensure this goal is met. As financial administrators, we are held to a high standard of stewardship. We are obligated to provide exemplary fiscal management and a willingness to be held accountable for our financial decisions. This is in covenant to God and honours our church family’s stewardship commitment. We thank you for your generosity to our collective goals, and we trust our Lord will be glorified.
Staff and Board of Directors
We serve the denomination through a dedicated team of staff, board members, and committee members. Our talented staff includes Ray Chan (CFO, Investment Committee Member) and Christine Reid (VP Operations, Loans Committee Member). We are blessed with a depth of knowledge and experience provided by the following board members:
Michael Cantlon - Director, Board Chair, and Loans Committee Member
Richard Lange - Director, Secretary, and Loans Committee Member
Donna Johnson - Director and Loans Committee Member
Ken Ritchie - Director and Investment Committee Member
Eric Wipf - Director and Investment Committee Member
Jason Krueger - Director, Investment and Loans Committee Member
Donna Johnson and Ken Ritchie joined our board during 2018, as Peter Burnham’s and Jack Borchert’s terms expired. We are most grateful to Peter and Jack for their many years of service to the Foundation, and to Bruce Ratzlaff for his expert counsel to the Investment Committee. Jack and Bruce are also past-Presidents of the Foundation.
Ministry Impact Fund
The Ministry Impact Fund is a pool of monies comprised of deposits from churches, constituents, and affiliated charities. This pool of funds provides interest to depositors and invests in low-cost loans to CBWC churches, charities, and like-minded organizations.
We have the privilege of managing financial resources on behalf of more than 200 savings account clients and 43 loan clients. Our no-fee savings accounts earn daily interest which compounds monthly. We are careful to ensure that deposit rates are competitive, and we encourage depositors to be mindful of our shared ministry values. Depositors may choose to donate a portion of their earned interest in return for a charitable donations receipt. Borrowers are offered affordable commercial loans with generous prepayment privileges. A portion of the interest earned on loans is used to pay interest to our depositors.
During 2018 we implemented a 0.5% increase to the base lending rate we charge our borrowers. For context, the Bank of Canada rate has increased 1.25% since July 2017. A lot of planning went into our rate changes which were carefully communicated to our stakeholders. Although economists at major banks are convinced at least one more rate increase is likely this year, the Bank of Canada has stated the path towards higher rates is highly uncertain.
The management of our assets (loans) and liabilities (deposits) is challenging, as we endeavour to balance the changing needs of our borrowers with the capital placed on deposit with us. As at December 31, 2018, the Foundation managed approximately $17 million in savings and $14.3 million in loans. While meeting our missional objectives, a proper balancing of our deposits and loans reduces volatility and risk, and provides a greater degree of certainty for our operational profitability. In this regard, we continue to explore new ministry lending opportunities.
The Development Fund is a pool of long-term investments that supports CBWC operations and ministry initiatives. The Foundation’s board has appointed an investment committee which holds fiduciary responsibility for overseeing the management of assets on behalf of the Foundation’s clients. The investment committee sets investment policy, selects and monitors external fund managers, and oversees portfolio performance.
For the year ended December 31, 2018, the assets held in the Development Fund declined 8.8% to $13.0 million ($14.3 million – 2017). This decrease was comprised of CBWC dividend payments of $617,000, a capital loss of $512,000, and the ministry support levy of $140,000. Excluding budgeted withdrawals, the Development Fund experienced a 3.6% loss during 2018, which compares to a median global balanced benchmark loss of 2.2% and S&P/TSX Composite Index loss of 11.6%. Global stock markets plunged in the final quarter of 2018, resulting in negative returns for the year. In contrast, bonds acted as a safe-haven for investors and posted low, but positive returns. Rising interest rates and deepening fears of a China-US trade war contributed to the equity market sell-off in the fourth quarter.
The vast majority of our client-managed funds (including the Development Fund) are professionally managed by two Calgary-based firms. These firms acknowledge the protracted bull market in equities and generationally low interest rate environment have ended, and they believe we are well-positioned. The Foundation’s investment committee and board of directors monitor market conditions and the performance and opinions of its fund managers, with the dual objectives of meeting CBWC’s needs and achieving prudent growth within the Development Fund. Although privately-held legacy investments represent less than 5% of our Development Fund, they were responsible for one-third of the portfolio’s negative return last year. We endeavour to transition all Development Fund holdings to institutional managers.
We are incredibly grateful for the vision and generosity of those desiring to support post-graduate funding in theological studies. These matriarchs and patriarchs were committed to the value of educating pastors, and put faith into action through planned giving initiatives that continue to bear fruit today. It is our intent to honour these financial legacies by balancing present financial needs with a sustainable focus on the future. Management of the Education Grants program is guided by well-defined policies and relational collaboration with CBWC executive staff. During 2018, the Foundation provided 17 education grants totalling $27,000. Each recipient used this money towards tuition costs and expressed gratitude for the financial assistance.
Gift-in-Kind Securities Donations
We are qualified to assist those wishing to donate shares and mutual funds. Once received, securities are sold and cash proceeds are directed to the donor’s ministry or charity of choice. In addition to empowering a ministry, the donor may avoid capital gains tax. Administration costs are low and donor anonymity (if desired) is guaranteed. During 2018, the Foundation facilitated $177,000 of gift-in-kind securities donations directly to churches, agencies, and other valued charitable activities.
Review of 2018 Operational Results
Note: All figures described below were estimated at time of writing, as audited financial statements were not yet available.
Interest revenue (earned from loans) increased 7% to $520,000 ($483,000 – 2017). Interest expense (paid to depositors) decreased 5% to $322,000 ($338,000 – 2017). Although a significant loan was extended at the end of 2018, our loan and deposit bases remained constant for much of 2018. The profit margin from our savings and loans business increased 35% to $197,000 ($145,000 – 2017), due primarily to the implementation of small rate changes. The ministry support levy provided revenue of $219,000, calculated as 1% of owned and managed investments. The levy is a needed financial support to meet our ministry objectives, and it is our goal to see this substantially reduced in the coming years as our Ministry Impact Fund strengthens.
Total administrative expenses increased 15% to $439,000 ($381,000 – 2017) due to the hiring of a president, but were 12% below budget due to various cost-saving measures. The Treasury portfolio experienced an unbudgeted $93,000 capital loss, largely offsetting the $62,000 improvement in our interest margin and $60,000 of administrative savings. As with the Development Fund, our Treasury portfolio was subject to high volatility during 2018 (please see the Development Fund Review for further discussion). Steps were taken in the fourth quarter to mitigate future volatility. Prior to extraordinary items, the 2018 operating surplus was $61,000 ($275,000 – 2017), exceeding our budget by $11,000.
During 2018 the Foundation gave $350,000 to Carey College and $40,000 to CBWC and its ministries. The gift to Carey was funded from the Foundation’s Reserve account, so as not to affect the Development Fund. As all donations are expensed (regardless of how we fund them) they necessarily affect our income statement. For the year ended December 31, 2018 the Foundation showed an operational deficit of $330,000 versus a budgeted surplus of $50,000.
Review of 2019 Budget and Outlook
We anticipate a 7% increase in interest revenue and 4% decrease in interest expense. We have assumed a nominal increase to our loan portfolio and no change to our deposit base. Our revenue expectations may prove to be low, as we gain clearer line of sight on new lending opportunities. Administrative expenses are budgeted to increase 6%. We anticipate an operational surplus of $162,000 for the year. The Foundation board of directors has agreed to provide CBWC a $700,000 dividend for 2019 ($617,000 – 2018), funded by withdrawals from the Development Fund.
In the final months of 2018 we were presented with two interesting opportunities: giving $350,000 to Carey College in support of their Vision 2020+ strategic plan, and funding five Next Generation scholarships totaling $6,500. Our support of these opportunities demonstrates a commitment to CBWC’s ministry priorities of Cultivating Leadership, Investing in Relationship, and Engaging in Mission. Our decision on how best to fund these gifts required courage and a collaborative process with our partners in ministry, and I hope it inspires discussion. I believe these experiences will help guide another important conversation that we need to have.
“Cultivating ministry, one talent at a time…”
Until 2018, we had enjoyed a few years of above-average returns in the Development Fund. Although we employ prudent portfolio management practices, we recognize we cannot always generate the returns needed to offset the budgeted dividend to CBWC. Sustainably supporting ministry needs is a significant challenge in today’s low-return market environment. We must examine how to balance today’s needs with those of tomorrow. With this in mind, we are preparing to lead a discussion on the sustainability of the Development Fund. During 2019 we will focus on describing and delineating the construct of a sustainable dividend, and evaluate the resultant implications for fundraising. This necessarily involves all CBWC stakeholders. Recently I read an interesting commentary by Adam Grant, a highly-regarded organizational psychologist at University of Pennsylvania. He describes psychological safety as a culture of respect, trust, and openness where it’s not risky to raise ideas and concerns. Psychological safety is present in the Foundation, as we invite participation, emphasize purpose, and share expectations and meaning. I believe trust is felt by everyone I interact with in the CBWC family, whether they are staff, ministers, serve at Carey, volunteer at our camps, or attend our churches. I am thankful for all of our leaders. I am humbled and excited by the opportunity to help discern what sustainability of the Development Fund can look like and how this will impact future generations.
I respectfully request your prayers for:
Guidance so that our plans and actions are God-pleasing and supportive of CBWC ministry objectives;
A continuance of collaborative decision-making with CBWC and its ministry partners;
Wisdom as we seek to expand our savings and loans program;
The identification of additional Foundation board members;
Clarity on how best to increase the size of the Development Fund to support CBWC ministries and objectives for the long-term;
Whether you are being called to support the Development Fund or Grants programs.
Please contact us should you wish to discuss any of our programs or how you can help us support CBWC.