Response to FIN 103 - Assisting Honduras
Resolution text
Resolved, That the Executive Council approves the forgiveness of the $163,617 of past due interest as of 12/31/2019 on the loan extended in 2014 by the Society to the Diocese of Honduras, thereby fully extinguishing the loan; and be it further
Resolved, That an additional $75,000 be granted to the Diocese in three tranches of $25,000 subject to:
a. Marketing and sale of the storage facility property and reinvestment of the proceeds
b. Payment of past due contributions to the Church Pension Fund that exceed 720 days
c. Analysis by an independent consultant of the continued viability of the diocesan schools (funded by TEC)
Explanation
The loan forgiveness will have no immediate cash impact on either Honduras or the DFMS. It will, however, improve the Honduran Diocesan balance sheet, while worsening the DFMS balance sheet (due to the write-off of a receivable.) This forgiveness should be conditioned on sale of unused property that will be otherwise costly to redevelop.
The cash grant partially supports payroll costs of $359,912 identified in the original request from the Diocese. Our investigation identified additional other external sources of support to the Diocese not previously known to the Society.
At the June 9, 2020 meeting of the Executive Council EC approved Resolution FIN-103. This resolution approved the recommendation of the Finance Committee of Executive Council (i)) granting the sum of $50,000 to the Diocese of Honduras and II) asking the presiding officers to appoint a short-term task force to work with the diocese to develop strategic management plans that can enhance Honduras’ sustainability business plan. The grant of $50,000 was a short-term response to their request of $409,912.06.
The task force met on four occasions, three with task force members and one meeting with Bishop Allen and three of his senior staff – all meetings taking place on ZOOM.
2014 Loan from the DFMSs to the Diocese of Honduras
In 2014 as a result of a request from the diocese a loan was negotiated from the DFMS that allowed the diocese to refinance existing high interest loans This refinancing realized an annual savings of $300,000, however, at the same time the Honduras schools --- the major source of income for the diocesan budget failed to produce their anticipated income, and the diocese continued to support the operation of the schools.
Property Held by the Diocese
The Diocese of Honduras holds a few properties, most of these properties are undeveloped. The two properties that are quasi-developed are (i) a property that provides storage facilities – the lease on this property (with an estimated market value of $2.5 to $ 3 million expired in June and they are currently seeking a replacement lessee and (ii) a property currently the site of the diocesan retreat center – this site is in need of refurbishing. The remaining properties are possibilities for future development, however, many of these properties will not produce a long-term solution for financial stability.
Diocesan Schools
Honduran schools – the major source of diocesan funding have been closed because of COVID 19 since March 2020. Prior to then, the schools are reported to have operated close to breakeven but were in serious arrears in repaying loans that the diocese had provided (via loans from the DFMS). In effect, the schools were a cash drain on the overall operations of the diocese. Diocesan schools face formidable competition from other multi-language schools. Parents of the students who attend the diocesan schools are not interested in any form of virtual teaching – primarily because of lack of childcare and the added cost of internet service; so they are waiting for schools to reopen for in-person learning.
Potential Income and Fundraising Efforts
Since March 2020 Bishop Allen has successfully raised 84, 386.28. This successful outreach to the Diocese of Central Florida represents about twice the amount received annually during 2016-2018. Additional outreach to other partner dioceses and ongoing relationships is currently being made and has the potential for additional income.
The EC Committee on Finance believes that these recommendations can serve as a model for evaluating other dioceses that find themselves in ongoing distress exacerbated by the more immediate effects of the COVID-19 pandemic. And we believe that these issues are much larger than a diocese in distress because of the pandemic alone. We believe that it is a question of mission in Province IX and can best be served in the long term by a collaboration of conversations with Mission Within TEC, the Office of the Presiding Bishop, the Finance Committee and the Treasurer. The final decisions would always be made by the Diocese of Honduras.