4. Year End Financial Reports/2021 Operating Budget –Allan Watson

Elder: Allan Watson Staff Liaison: Pastor Jim Noble Members: Oran Brown, Scott Core, Lisa Loran, Kristen Micurescu

The Finance Committee is responsible for both stewardship (encouraging members and friends to make financial contributions to our Church) and for making the initial decisions on how contributions will be spent (subject to Session review and approval).

Independent Review Committee: At the direction of the Session an Independent

Financial Review Committee was appointed to provide a review of the Church’s finances and accounting practices independent of the Session and Finance Committee.

The review is conducted pursuant to the

Church’s Independent Financial Review

Guidelines and Procedures, updated December 7, 2018. Each year the IFR Committee focuses on the practices in the preceding year, so that the 2021 IFR Committee reviewed 2020 financial practices.

The 2019 IFR Committee recommended “the

Session consider having an accounting firm review the adequacy of the internal controls themselves at regular intervals.” They also suggested a further review of these controls every five years. The Session agreed and a

Financial Policies Review was conducted for a $4,000 fee by the same accounting firm that has prepared the audit for the

Church Foundation. The report has been submitted to the finance committee and received by the Session.

Those serving on the 2021 IFR Committee were Jenifer Zylwitis, Melissa Masles and

Gordon Gaddy. The Session and the Finance Committee welcome this independent study and intend to study and respond to the suggestions made in the Report.

Thanks to the members of the IFR Committee for their valuable oversight service to our Church. Stewardship Campaign: The 2022 stewardship campaign targeted a realistic goal of $880,000 in pledges from member’s and friends who were asked to prayerfully increase their pledges. When the drive came to a close we received $875,228 in pledges.

The 2022 requesting budget totaled approximately $1,180,000 for the campaign. At the January Session meeting the 2022 budget was approved as amended with projected receipts and expenses from various sources totaling $1,188,183 with $5,205 having been appropriated from the Excess

Funds Reserve.

Positioning: We ended 2021 with a surplus of $154,778 ($112,000 was PPP Loan Forgiveness).

Total receipts were $49,648 less than budgeted and expenses were $204,426 less than budgeted. Pledge income surpassed initial numbers submitted at the end of 2020 by $7,892. Non pledge offering was $928 less than budgeted. The church continues improving programs and initiating or finishing projects that position us for the future. We have updated our facilities to accommodate more children and youth and we have a very inviting atmosphere for everyone.

Uncertainty remains as COVID continues to be a presence in our lives but God continues to bless our Church’s finances even with additional costs. 2021 was a year of significant change for DHPC but positioning continues to bring us opportunity for the long term. With the addition of online streaming we continue to market our

Church for potential growth and outreach in several ways and be MORE PEOPLE,

MORE LIKE CHRIST!

Other Notable Event:

On May 1, 2020 the church received a $112,000 loan from the Small Business Administration as part of the Paycheck Protection Program in the first CARES Act. On

March 5, 2021 DHPC registered for PPP

Loan Forgiveness and on April 8, 2021 the church received notification that our loan had been fully forgiven. Then we removed the $112,000 liability on our balance sheet and claimed it as income.

Finance Committee: As Financial Elder, I have the privilege of chairing the Finance Committee which provides both the Church and myself with the benefit of the collective experience, practical wisdom and ability of the Committee’s members. I am very pleased that the wisdom and decisions of the Finance Committee always exceed what any one of us would have been capable of achieving on our own. Among other things, the Finance Committee reviews financial statements for each month promptly after they are prepared; assembles a suggested budget for each year based on requests by the Elders and Church staff covering their area of ministry and also based on an estimate of the resources likely to be available to satisfy budget expenses; selects the individuals responsible for each year’s stewardship campaign; and provides advice as requested or appropriate for many ministry areas of the Church.

Bobi Tomlon:

Bobi is the Church’s Controller. She records member contributions in the Church’s tracking software; keeps track of Church expenditures; prepares financial statements for the Church (including the statements which follow this report); assembles pledges and staff and Session expenditure requests into a coherent budget; organizes and maintains backup documents; and provides other information to the pastors, Session and Finance Committee as needed.

Bobi does all this with a very pleasant personality and is always eager to respond to the many requests for information she receives. She continues to be a key participant in the Church’s financial administration and the Finance Committee expresses its gratitude for the valuable resource Bobi is for our Committee, the Session and the

Church overall. Introduction to the Included Financial Statements: It should be noted that all numbers for 2021 in this report are draft numbers. Final numbers will be submitted for approval at the

February Session meeting. The first key to understanding the financial statements that follow is to understand the Church’s cash on hand as shown below:

Restricted Cash: The Church Session has established a number of notional accounts (the “dedicated accounts”) each devoted to a major need or area of ministry. Contributions by members directed to one of these dedicated accounts can be spent only for the purpose for which the account was established. Member contributions to these accounts is classified as restricted cash. The 2021 ending balance in these accounts was $651,096. This number has increased significantly this past year because of two major gifts – one being $100,000 for outreach to families and students and another a stock gift totaling $343,122 for establishing the

DHPC Music School.

Reserved Cash: The Session from time to time elects to allocate other cash held by the Church to dedicated accounts. For example, the Session has established a Capital

Replacement Fund dedicated account. The intention is that the money allocated to the capital replacement fund can be used to fund the maintenance/repair/replacement prioritized schedule developed and maintained by the Buildings and Grounds Committee. The 2021 year-end balance in the capital replacement fund was $144,461.

Since this fund was somewhat reduced by the repairs to the administrative building elevator and has other needs in the future this balance reflects an addition of $113,763 from PPP Loan Forgiveness and other income. The New Initiatives Fund is also a reserve account and its ending balance was $133,721. An additional reserve account (Excess Receipts Reserve) had an ending balance of $105,039. Some of these

Excess Receipts Reserve monies were to be consumed in 2021 but since there were

Finance

some spending cuts it was never needed. The Session reserves the right at any time to reallocate reserved cash among the dedicated accounts or to remove reserved cash from a dedicated account and return it to the status of unrestricted cash. The 2021 ending balance in these three accounts was $383,221.

Unrestricted Cash: In simplest terms unrestricted cash is all cash held by the Church that is not restricted cash or reserved cash.

For example, money deposited in the collection plate on Sunday adds to unrestricted cash unless the contributor specifically requests that it be credited to a dedicated account. The 2021 ending balance in these accounts was $303,536. There is an unwritten policy that the Church wants to maintain a three months’ supply of unrestricted cash to meet future budget needs.

With our ending balance we are in compliance.

Dedicated accounts are “notional” in the sense that they are created in the Church’s accounting software to keep track of the allocations of restricted and reserved cash but are not in the main established as separate bank accounts or accounts on the Church’s balance sheet or operating income statement. Rather most significant bank and investment accounts maintained by the

Church contain restricted, reserved and unrestricted cash. The second key to understanding the Church’s financial statements is that in almost all cases, neither the operating budget nor the operating statement includes receipt of restricted cash, the allocation of reserved cash to a dedicated account, or the expenditure of restricted or reserved cash. Those receipts, allocations, and expenditures are instead reflected in the separate Dedicated

Accounts Statement. If anyone in the congregation would like more detailed accounting information, a special meeting can be scheduled involving Bobi

Tomlon, the Church’s Controller, Allan

Watson and other Finance Committee members or other representatives who may want to attend.

Respectfully submitted, Allan L. Watson Finance Elder and Treasurer

Finance