Dear Heritage Members and Friends,

We are now halfway through the 2020-2021 fiscal year, which will end on June 30, 2021. In an unusual, and even unprecedented, year for our congregation I’m very pleased to report that we remain on sound financial footing. This is in no small part thanks to the continued generosity of all of our members and friends who continue to support HUUC through your pledge donations.

We have been lucky to have been able to maintain our parking space rentals to Turpin High School and the rental of our space to our longtime Taekwondo renters. For all of the change and disruption during the COVID-19 pandemic, the financial health of our church community remains solid.

The HUUC Finance Committee has approved a new investment policy. Our new policy is to allocate funds in excess of 15% of our annual expense budget to a broadly diversified mix of 50% bonds and 50% stocks. Since approving this policy in December we have purchased $50,000 in the Schwab Total Stock Market Index Fund, $25,000 in the iShares Intermediate Government/Credit Bond ETF, and $25,000 in the Vanguard Intermediate-Term Corporate Bond Index Fund ETF. We will monitor these investments to ensure that they stay balanced according to the mix of investments called for in our new policy.

And perhaps I’m burying the lead here, but I am also very pleased to report that thanks to the diligent efforts of Michael Wilhite and Rae Jane Araujo, we have officially completed the forgiveness process for the loan that we received as part of the federal government’s Paycheck Protection Program (PPP). We entered into this program last spring. The loan that we received was in the amount of $43,500, and that loan has now officially been converted to a grant.

As we move from January into February the Finance Committee will be working closely with the Board of Trustees to establish our pledge goal budget for the 2021-2022 stewardship campaign. This campaign will be kicking off on Stewardship Sunday on March 21st. In preparation for our stewardship campaign, I hope you will plan to attend the HUUC Virtual Town Hall on February 21st at 1:30 p.m.

And once again, I’ll end by reminding everyone about the importance of paying your pledge via EFT or our new PayPal donation option, accessible by clicking the “Donate” button at huuc.net. This is especially appreciated during this period in which physical trips to the bank aren’t happening quite so frequently.

Please let me know if you have any questions. You can email me anytime at:

All the best,

Reid Hester
HUUC Finance Committee and Stewardship Chair

January 25, 2021.

Dear Heritage Members and Friends,

We have officially closed the books on our 2019-2020 fiscal year. We ended last fiscal year with a $14,250 deficit against our budgeted deficit of $2,479. Our Income & Expense report that represents the financial story for the 19-20 fiscal year actually doesn’t tell the whole story because we also received roughly $43,500 in funds from the federal Payroll Protection Program. These funds will help offset deficits in both last fiscal year and our current fiscal year in which we are budgeted to spend $5,725 more than we take in via pledge, rental, and fund-raising income.

As for the status of our current fiscal year, our first quarter ended on September 30, and we are showing steady finances so far. Our overall income is right at 25% of budget, and our expenses are also occurring as planned. The only surprises have occurred on the positive side, namely the fact that we’ve been able to sell out on parking passes to Turpin High School students. It really is saying a lot that we haven’t had any negative financial surprises so far given the uncertainty of the environment around us.

The final report for last fiscal year along with the latest Income & Expense report through 9/30/20 and the latest version of our Balance Sheet report are all now available in the members only section of the HUUC website.

In other financial news, the Finance Committee has recently approved a new cash management policy that will help to guide our efforts in monitoring and responding to changes in the church’s cash flow. Our policy comes down to one simple statement:

Liquid cash retention is calculated on an annual basis upon adoption of the HUUC Annual Budget. A liquid cash target of 15% (+/-3%) of the annual expense budget should be retained in cash reserves, allowing the rest to be invested.

Our next goal at our November meeting is to finalize an investment policy. This new policy will give us a framework around which we’ll base decisions regarding the investment, maintenance, and re-balancing of church funds in excess of the cash reserves outlined in the cash management policy. More to come on our investment policy in my next Heirloom article later this year.

I’ll end by reminding everyone of a recommendation that I made in my last Heirloom article. Your willingness to make payments via EFT or our new PayPal donation option, accessible by clicking the “Donate” button at huuc.net, is especially appreciated during this period in which physical trips to the bank aren’t happening quite so frequently.

Please let me know if you have any questions. You can email me anytime at:

All the best,

Reid Hester
HUUC Finance Committee and Stewardship Chair

October 25, 2020.

Dear Heritage Members and Friends,

My last contribution to the Heirloom to update everyone on HUUC financial matters was WAY back in March. It was only five months ago on the calendar, but it seems like much longer. The Finance Committee is now preparing to close the books on the 2019-2020 church fiscal year, and we are over one month into the new 2020-2021 fiscal year. I’ll use this letter to update everyone on what we know about the fiscal year that is now in the past and how things are going so far, albeit early, in the new fiscal year.

At the time of my last financial update back in March we were very close to fully on track with our pledge payments, and we were anxiously wondering what the last few months from April through June would hold as we all headed into lockdown. As it turns out we stayed very close to our pledge goal with $209,000 in pledges being paid (as of the end of June) on a pledge goal of $221,000 (95% of goal). This amount does not include $8,325 in unbudgeted pledge payments that were also received during the fiscal year. We are currently wrapping up follow-up on a few outstanding pledge payments, so when we do close the books we will be even closer to 100% in pledge payments, which is an amazing result.

Now, we did end last fiscal year with a significant deficit, just over $14,000. The much higher than budgeted deficit is attributable to shortfalls in fundraising and rental payments. However, thanks to very diligent efforts on the parts of Michael Wilhite, Rae Jane Araujo, Rebecca Pace, and Denise Martinez we successfully received $43,500 in funds from the federal Payroll Protection Program. These funds have been applied across both last fiscal year and the beginning of our new fiscal year (5/8/20 through 7/31/20), but there is no doubt that these funds more than compensated for the deficit that we experienced last fiscal year. We are currently in the process of applying for loan forgiveness, and we fully expect the funds that we received through PPP to be converted to a grant very soon.

As we start our new fiscal year, I’m very pleased to report that pledge payments are looking very good. I am very thankful to all our members and friends for their generous support of the church. We do have a deficit budget for the 2020-2021 fiscal year given the challenges all of our members and friends are facing this year and the challenges we will face with fundraising, but thankfully we are continuing to work with our Taekwondo renters who are back to using our facilities, and we have had very healthy sales of parking slots for Turpin High School students (thank you Denise!). Challenging as this year is, we are off to a good start.

While the day-to-day finances of the current fiscal year are unpredictable in times like these, we have very solid financial resources to see us through trying times. The Finance Committee is working with the Board to finalize a new investment and savings policy that will guide our decisions with regard to the funds in our church checking and investment accounts, which currently amount to well over $100,000 after accounting for committed funds. We will be sure to maintain a healthy amount of liquid, easily accessible savings while looking to invest funds in excess of “rainy day” savings in a sensible way.

So there’s a lot going on with our church finances, even as we all remain sequestered and unable to spend time together in person. Your willingness to make payments via EFT or our new PayPal donation option, accessible by clicking the “Donate” button at huuc.net, is especially appreciated during this period in which physical trips to the bank aren’t happening quite so frequently. Please let me know if you have any questions. You can email me anytime at:

All the best,

Reid Hester
HUUC Finance Committee and Stewardship Chair

8/25/2020

by Reid Hester, Finance Committee and Stewardship Chair

The best of times and the worst of times. We’re experiencing challenges in 2020 that are bringing our church community together in new and innovative ways, and those same challenges are straining our day-to-day finances quite considerably. Here’s the good news, our church rests on a very solid financial foundation, and the leadership of the church has taken a number of steps to strengthen that foundation even further.

For those who attended the congregational meeting on April 5th, you will know that we applied for federal support via the Payroll Protection Program. As of this posting to the Heirloom, we do not yet have final word from our contacts at Fifth Third Bank on whether we’ve been approved. We are continuing to be asked for supporting documentation, so we’re taking that as a good sign that we might still receive funds via this program. Any loan amount received via this program will be converted into a grant if we use the funds to cover payroll and utility expenses over the three months that follow the receipt of the funds.

The Finance Committee made the decision in early April to redeem funds that were invested in the Dodge & Cox Balanced Fund and the Vanguard STAR Fund. We did see a decline in the value of our investments, but we missed the market lows at the time of our withdrawal. These investments returned substantial gains over many years, and they had gotten far out of balance. We were planning to rebalance our investments in the weeks prior to the onslaught of Covid-related market gyrations, and the extreme volatility of the markets over the course of late March and early April added considerable urgency to our decision-making process. We redeemed about $17,000 from Vanguard STAR and $52,000 from Dodge & Cox. We had also redeemed $15,000 in funds from Dodge & Cox earlier in March. We do expect to leave a considerable buffer in our primary church checking account, as commitments on our church balance sheet already lay claim to a share of these funds of roughly $30,000. We are in the process of writing a new investment policy and expect to re-invest accordingly when the markets settle down.

Our Endowment Fund exists separately from all of the funds discussed above. It has its own investment policy and will stay invested in the markets. The policy associated with the Endowment Fund states that we cannot draw any funds from the Endowment into the operations of the church until it has reached a balance of at least $100,000. It is currently at a balance of about $40,000.

Now, back to our day-to-day finances. From a pledge and other income standpoint, we had received about 73% of budgeted income at the end of March, which was 75% of the way through the fiscal year, so we came into the Coronavirus crisis running just a bit behind on income but looking pretty good. The final quarter of our fiscal year will be more challenging given that rentals and fund-raising make up a substantial portion of our budgeted income. Both of these activities are at a standstill through the end of this current fiscal year on June 30. It is very likely that we will end our 2019-2020 fiscal year with a deficit.

The pledge drive for our 2020-2021 fiscal year could not be occurring in a more challenging financial environment for our members and friends. I want to thank all those who have pledged their support to the church for next fiscal year. We seem to be tracking towards a total amount of pledge income of approximately $200,000, but we could come in below or above this number when all pledges are in. And it is very difficult to say when we will be able to re-open the church to resume rental and fund-raising operations. So devising a budget for 2020-2021 will be challenging. If you have questions or suggestions for how we might approach our budgeting process for the fiscal year that will run from July 1, 2020 through June 30, 2021, please reach out and let me know.

Jenn and I started attending Heritage in 2005, and we became members in 2006. We have seen the church through some pretty challenging times, and there is no doubt that significant challenges confronted this church many times before we came along. We’ll get through this too, and we’ll support each other all along the way. After all, love is the spirit of this church.

Reid Hester
Finance Committee and Stewardship Chair

4/24/2020

by Reid Hester, Finance Committee Chair

Greetings Heritage Members & Friends!

I am very pleased to be writing this fall to share the first in what will become a regular quarterly update on our church finances.

We closed the books on last year’s finances in October, and we finished the year healthily “in the black”. You can see for yourself by visiting the new Financial Statements page within the password-protected area of the HUUC website here: https://huuc.net/members-area/financial-statements/. Click on “FY 2018-19 Income and Expenses Closed Books”.

We ended the year with very strong pledge income and some expenses that came in lower than they had been budgeted. Even with lower than budgeted fund-raising and rental income we were able to close out our 2018-2019 fiscal year with an excess “Net Income” of $5,073.39. That surplus allows us to bolster our church finances against unexpected expenses in the new church year or farther out into the future.

For the current fiscal year, we’re right on track overall for income (pledges, rentals, and fund-raising), but our budgeted pledge payments in particular are running behind for this time of the year. This is a good time for all members and friends to evaluate where you are with regard to your 2019 tax situation. If you do aim to itemize your taxes, then you’ll want to make sure you’re on track with your pledge payments or even pay ahead if you’d like more of your pledge donations to be counted as part of your 2019 tax year.

On the expenses side this year we’ve had a couple of unbudgeted maintenance expenses come up. New flooring was determined as a critical need in the Religious Exploration rooms. Also, our outdoor shed was in dire need of being replaced. Our new shed will allow our Taekwondo renters to store some of their supplies in addition to providing more spacious and organized storage for the church. We’ve covered these expenses partly through the Furnishings lines in our current year budget. We’ve also tapped into the Memorial Garden and Maintenance funds that are not directly associated with this year’s budget, a move that was made at the discretion of the Board of Trustees.

The Finance Committee is meeting regularly on the Sunday before each Board meeting. We’re currently evaluating the church’s investment strategy to determine whether the funds that we’ve been invested in for many years now are ready (or perhaps overdue) for re-balancing and re-allocating. We’re working with the Board to try to bolster our maintenance funds as we confront an aging church building that is likely to require upkeep expenses in the coming years.

Thanks for taking the time to read this column and keep up with our church finances. If you have questions or would like to see specific topics covered in the future, please let me know.

Reid Hester
Finance Committee Chair

by Reid Hester, Finance and Stewardship Chair

Many thanks to our Board President, Jaime Castle, who reminded me that at last year’s Annual Meeting, several questions were raised about how exactly we maintain our finances and close the books each year on our annual budget. I hope this article will provide some answers to those questions as well as a timely precursor to our spring pledge drive, which will formally kick off in March.

First off, a little background. We’re a “program size” congregation that has only recently grown from what’s known as “pastoral size.” For many years HUUC stayed within the pastoral size membership range of 50-150 members before we finally made it over the hump to the 150-350 program size level of membership in 2014. Members who have been around for a little while (like more than 25 years) might remember when most of our church budget was funded by the earnings of a large endowment. In those days, which were before my time, we didn’t always have to put much of an emphasis on soliciting pledges from our members. Breaking free from that endowment (i.e., cashing it in to make a big bet on the future) is what allowed us to pay off the mortgage on our beautiful facility that we’ve inhabited for almost 35 years now.

Fast forward to January 2019, and we’re a congregation of more than 170 members. We set our budget each year at our Annual Meeting, typically in late May or early June. Every year for roughly the last 8-10 years we have passed a balanced budget at our Annual Meeting, meaning that we go into a new church year intending to spend only what we will bring in. A budget is a projection, on both sides of the ledger. We never spend exactly what we say we will, and we never receive exactly the income that we expect to receive. We have plenty of buffer within our church accounts to cover those fluctuations (see below for more on the health and structure of our church balance sheet).

The church budget is the roadmap for the day-to-day financial functions of the church. When we need to do something big, we take on a capital campaign. But for our day-in and day-out expenses we rely on pledges, rental income, and fund-raising efforts. Here’s a little more detail on those income categories:

Pledges are now our biggest source of income by far, and, thanks to the dedication of our members, pledges are a predictable and reliable income stream. This is especially true as we move to more pledges coming in via Electronic Fund Transfer (EFT), an automatic way to have your pledge deposited into Heritage’s checking account each month. Members sometimes move away halfway during the pledge year, or maybe they can’t keep up with the pledge that they thought made sense for them financially when they first made it. But overall, we routinely receive at least 95% of the pledge income that we’re expecting each year, and pledges make up about 85% of our budgeted income.

Rental income has been quite reliable, and in fact it’s been an area of growth (notwithstanding deliberate changes that reduce rental income, like when we decided that it no longer made sense for the church to serve as a polling location). Overall, rentals make up about 7.5% of our budgeted income.

Fund-raising is a substantial part of our budgeted income each year, but a less reliable one. We’ve fallen short of our projected fundraising goal by double digits in some years and exceeded it in others, so it’s a challenging projection for the Board and Finance Committee to make. Like rental income, fund-raising income currently makes up about 7.5% of our budgeted income.

We’re in a very healthy place with steady, reliable, and generous pledges serving as a strong part of membership at HUUC. We are all stewards of this church, financially and through our volunteer efforts. The church isn’t something other than us. It is us.

How about the other side of the ledger? Expenses consist primarily of our people costs: the salaries and benefits of our two Ministers, our Church Administrator, and our Music and Childcare staff members. Our next single biggest expense is utilities, then office & technology costs, then denominational dues. The amounts drop off very quickly from there with the top line items for church programming going to Religious Education and the Music Program, which I think nicely reflect the priorities and values of our church community.

In most of our fiscal years we come in right at or just under our budgeted expenses. We are a frugal congregation. The variances occur on the income side of the ledger, and as I suggested earlier, those variances tend to be associated with our fund-raising income. While our budgeted pledges might come in at 95% of our projection, we always have an unbudgeted line for new pledges that come in throughout the year, and those usually more than make up the difference. We don’t have a back-up for our fund-raising or our rental income, so if either or both of those numbers is off, then we can end the year at a deficit of a few thousand dollars; or if either or both of those numbers is high, then we’ll end the year with a surplus.

How do we figure out whether we’ve ended the year “in the red” or “in the black”? First, Denise Martinez, our Church Administrator, balances the church checking account through the end of the fiscal year to make sure that all income and expenses have been accounted for. Next, I check in with the Church Treasurer, Rebecca Pace, to make sure that pledges in QuickBooks have been assigned to the right pledge year (some pledgers pay the following year’s pledge all at once before the end of the current fiscal year, and some pledgers catch up on a deficit in pledging for the prior year after that fiscal year has ended). I print the final Income & Expense report for the fiscal year and present it to the Board, and they vote to officially close the books for the prior year. This tends to occur somewhere between August and October after the prior fiscal year has ended on June 30.

We have a very healthy balance sheet with a checking account and CDs that tend to carry an extra $10,000 to $15,000 (this fluctuates depending on the proximity in the year to the church auction, our biggest fundraiser of the year). We also have investments of roughly $95,000, only about $25,000 of which is committed to certain funds, like the Barbara Howe Fund or the Social Justice Fund. These investments are the legacy of a larger endowment that continues to be a source of great financial security for our congregation.

Please contact me directly at the email address below if you have any questions or suggestions about the financial operations of Heritage Church. Going forward, I’ll try to keep up at least a quarterly column in the Heirloom. I’d love to go into our next Annual Meeting with everyone a little bit more informed about the latest in the state of our current year’s income and expenses. You can contact me at:

January 2019.