Where do Donations to UMCOR Go?
On Wednesday, October 11, 2017, a full-page ad by UMC.org/UMCOR (United Methodist Church/United Methodist Committee on Relief) was placed in the Wall Street Journal (WSJ) asking for donations with the statement:
100% OF WHAT YOU GIVE GOES TO HELPING US STAY UNTIL RECOVERY IS COMPLETE
100% OF YOUR DOLLARS GO TO RELIEF
United Methodist churches across the country participate in UMCOR Sunday, a special giving day on which all offerings are designated toward UMCOR administrative costs. That means 100% of your donations go to relief efforts.
“Relief efforts” can be interpreted many ways which is why it is always helpful to look at the IRS Form 990 and the audited financial statements of any organization that claims 100% of your donations go to “relief efforts.”
UMCOR – a non-profit 501 (c) (3) – is exempt from completing or filing an IRS Form 990 because it is a church (why churches that take both public and government funds are not required to file an IRS Form 990 is another issue). However, the organization did complete a 990 for informational purposes only but the most recent is dated 2015 – nearly two years old. UMCOR does make available audited financial statements for the year ending December 31, 2016 which reports the following information:
The auditors clarify that the United Methodist Committee on Relief of the General Board of Global Ministries of the United Methodist Church and affiliates is collectively known as “UMCOR”, a non-profit organization.
UMCOR reported $45.4 million in revenue in 2016 of which:
- $20.6 million (45%) came from Special Gifts from the General Fund of the United Methodist Church;
- $2.4 million (5%) came from “One Great Hour of Sharing” – which is now referred to as UMCOR Sunday, the one Sunday each year in which funds are raised to pay for UMCOR administrative costs;
- $9.2 million (20%) came from grants and contracts;
- $7.2 million (16%) came from Imagine No Malaria
- $4.7 million (10%) came from gifts; and
- $1.2 million (3%) came from Sager Brown Program and Other Income
As illustrated above, about half the revenue came from the United Methodist Church. By taking a full-page ad out in the WSJ (a conservative business newspaper), UMCOR appears to be targeting the readers of the paper to increase public support and the question is why? Not many non-profits take out a full-page ad in the WSJ – especially ones that raise less than $50 million a year.
UMCOR reported $44.6 million in expenses in two categories: Program Services ($40.2 million or 88% of revenue) and Support Services which totaled $.4 million (10% of revenue).
Analysis of Program Services
Program Services totaling $40.2 million comprises 4 categories:
- $18.2 million (40% of revenue): Advance Special Projects
- $10.0 million (22% of revenue): Relief Projects ($7.8 million pertaining to non-federal awards and $2.2 million to federal awards including $2 million “promoting access to Basic Services for New IDP’s in East Darfur State”)
- $9.4 million (20% of revenue): Special Ministries
- $2.6 million (6% of revenue): Health Projects
whose total expenses ($40.2 million) are further detailed as follows:
- $23.8 million (52% of revenue): Grants, Contributions and Other Direct Programs
- $8.1 million (18% of revenue): Salaries and Benefits
- $4.9 million (11% of revenue): Services rendered by other agencies
- $2.3 million (5% of revenue): Office Expenses
- $0.6 million (1% of revenue): Travel and Meetings
- $0.5 million (1% of revenue): Consultants and Miscellaneous
As stated above, more than half of revenue was distributed in grants, contributions and other direct programs (although the specifics are not provided). About 18% of revenue was used for salaries and benefits while 11% of revenue was used to pay for services rendered by other agencies. 5% of revenue was used for office expenses while 1% was used for travel and meetings and consultants and miscellaneous expenses.
Analysis of Support Services
Support Service Expenses totaled $4.4 million (10% of revenue) broken down into two broad categories:
- $3.9 million (9% of revenue): Management
- $0.5 million (1% of revenue): Fundraising
The total Support Service Expenses of $4.4 million are further detailed as follows:
- $2.6 million (6% of revenue): Services (rendered by other agencies)
- $0.8 million (2% of revenue): Office Expenses
- $0.5 million (1% of revenue): Salaries and Benefits
- $0.2 million: Grants, Contributions, and Other Direct Programs
- $0.1 million: Consultants and Miscellaneous
- $0.2 million: Depreciation (non-cash expense)
As illustrated above, most management services were rendered by other agencies and presumed to be The United Methodist Church although the statements do not reveal details.
The revenue not spent – nearly $1 million or 2% of revenue – was added to the net fund balance which had $102 million in net funds at year-end. It is important to note that $58 million of those assets are restricted to the following:
- $23.5 million: Other Projects and Funds
- $15.9 million: Haiti Emergency
- $12.1 million: Harry R Kendall Fund – health, housing, and training grants
- $6.9 million: USA National Disaster Fund
- $3.8 million: Philippines Emergency
- $3.2 million: Disaster Response International
- $0.8 million: World Hunger/Poverty
- $0.6 million: Material Resource Ministry
- $0.2 million: Japan Emergency
- $0.1 million: Hurricane 2012
- $0.1 million: United Methodist Global Aids Fund
- $0.1 million: Hope for the Children of Africa
UMCOR reimbursed Global Ministries for certain administrative services provided by its financial services division in the amount of $4.4 million in 2016. These fees are part of program expenses and specifically special ministries, management and general expenses which means that donors need to remember that administrative service expenses are part of Program Services .
UMCOR made a $3 million contribution to Global Ministries towards the construction and rehabilitation costs of the new headquarters in Atlanta, Georgia in 2016.
UMCOR holds an unsecured note receivable (accruing interest at 4%) from Church World Service, Inc. (a cooperative ministry of 37 Christian denominations) that had a balance of $1.2 million at year-end 2016, which appears to be paying down at about $400,000 annually.
UMCOR makes semi-monthly contributions to each eligible employee’s account held by Wespath based on 8% of annual employee compensation. Additionally, UMCOR matches up to 2% of each employee’s contribution to their United Methodist Personal Investment Plan (UMPIP). Total contributions made by UMCOR for both components during 2016 were $238,560 or about $4,000 per employee.
UMCOR provides health, life, and other employee benefits for its active employees and health, dental, and life benefits to retirees through a group plan which qualifies for treatment as a multi-employer plan under ASC 715, Compensation-Retirement Benefits. Substantially all retired employees are eligible to participate in the plan if they have attained normal retirement age while in the employ of UMCOR. This is important to know before reading the next paragraph.
The General Agencies of the United Methodist Church Benefit Plan (the “Plan”) provides medical, dental, life, and long-term and short-term disability defined benefits to participants of the General Agencies. The Plan’s unfunded accumulated postretirement benefit obligation was approximately $91,600,000 and the Plan’s unfunded expected postretirement benefit obligation was approximately $127,500,000 as of December 31, 2016. That “The Plan” is unfunded by nearly $128 million dollars may be one of the reasons the organization is seeking greater public support. A key question is why the post retirement benefit obligations have not been funded?
All of UMCOR’s active employees are covered by “The Plan.” The cost of the benefit is recognized as expense as premiums are paid. The total cost of benefits for active employees was $413,574 for the year ended December 31, 2016, or about $7,000 per employee.
UMCOR reported 64 employees in 2015. The number in 2016 was not provided but it appears to be similar based on a comparison with 2015 figures.
UMCOR has granted conditional support to related and unrelated organizations (details not disclosed) through 2019. The aggregate commitment under these agreements is approximately $5.9 million at December 31, 2016.
Conclusion and Bottom Line:
UMCOR took out a full-page ad in the Wall Street Journal (WSJ) on October 11, 2017 to attract more donations from the general public. Readers could conclude by reading the ad that 100% of donor dollars go to “relief” but the answer is more complicated. The ad also states that United Methodist churches participate in UMCOR Sunday (a one day fundraiser annually) to cover administrative costs so that “100% of your donations efforts go to relief efforts.”
In 2016, the UMCOR Sunday fundraiser raised $2.4 million while management and fundraising costs were $4.4 million so these costs were not completely covered which means 100% of your donation efforts could not go to relief efforts in 2016 (no information for 2017 is available).
In addition, there are functional administrative costs within the program expenses (18% to salaries and benefits, 11% to services rendered by other agencies, 5% to office expenses) that many donors may not realize unless they read the financial statements – a 30 page document. And, donors need to realize that 52% of revenue goes towards grants, contributions and other direct programs but the specifics are not provided. If these funds were given in grants, then the recipient agency also has administrative costs that have to be paid.
And finally, of greatest concern is that “The Plan” has nearly $128 million in unfunded expected post retirement benefit obligations.