"Moreover it is required in stewards that one be found faithful" (1 Corinthians 4:2).
Recently, in a meeting with our bankers, we explained that all our literature is offered free of charge. They were amazed, and said, "We really need to talk to you folks about your business model for the Church!" We quickly explained to them the biblical principle, "Freely you have received, freely give" (Matthew 10:8).
The Living Church of God takes very seriously its responsibility to properly account for the tithes, offerings and donations given by members, prospective members, coworkers and donors. As part of our "business model," we undergo an independent audit each year, to verify our financial activities and to validate our numbers and our procedures. This year, we engaged a well-known accounting firm in Charlotte to perform an independent audit. Its detailed report is reprinted here for your examination.
The auditors were generally very pleased with our procedures, recordkeeping and methods of doing business, but did make some recommendations regarding areas where we might improve. For example, the auditors suggested a change in how we document "restricted donations" (e.g. for disaster relief). We have already implemented that recommendation.
Pensions and retirement benefits are, as you know, a hot topic in the business world today, because some companies have abandoned established retirement plans when faced with financial difficulties, while others have used retirement plan funds to offset current business costs. As a result, legislation such as the Sarbanes-Oxley Act has imposed on businesses a set of stringent rules and regulations concerning the reporting of pensions and retirement benefits. The Church has a number of retirees and ministers' widows who receive benefits funded by third tithe. Third tithe income is currently sufficient to cover the cost of these benefits, which are reviewed annually and paid at Church discretion based on criteria set by the Board of Directors. Our auditors observed that our accounting practice does not record an accrual to reflect future payments. This has not been an issue in our previous audits, and at this point we are comfortable with our position on how retirement benefits are funded and paid.
Our Accounting Department follows generally accepted accounting principles. However, the auditors noted that while we have a well-trained staff, and have documented many of our procedures in writing, we have not yet pulled those procedures together into a comprehensive procedural manual. The auditors recommended that we complete such a manual, and we are working on this as a priority project, which we plan to complete within the year.
Another requirement of the Sarbanes-Oxley Act is that we put in writing a policy regarding how we will handle any reports of activities or accusations of fraud by Church employees. With this policy in place, everyone will know how to respond properly to any allegations of fraud that may arise. Of course, we have always endeavored, and will continue to strive, to operate in an open and transparent manner that encourages honesty and integrity at all levels. A written fraud policy will help us better achieve this long-standing goal.
This year, we underwent our first formal Information Technology audit, to assess the state of our information systems and procedures. Overall, our practices and procedures were found to be good. The auditors made a few specific recommendations in areas such as information security, which we will be implementing as soon as we are able.
The Work continues to look for ways to control costs and improve quality. For example, we recently negotiated a printing contract with BANTA, a large multinational printing firm. Thanks to BANTA's expertise and cost-saving technology, we will reduce our Tomorrow's World magazine printing costs by as much as 25 percent, while maintaining equivalent or greater quality—and we will be able to improve quality and even expand the magazine in the future at costs far below what our previous printer was able to offer.
Although the United States Postal Service does a good job over all, we are trying to address several chronic problems regarding mail processing and delivery. We recently installed new software in our Mail Processing Department that will help us track mail flow and delivery time so that we can more precisely identify areas causing and experiencing delays in delivery. We are also exploring ways to speed mail delivery without adding substantially to the cost.
Our income so far in 2006 has been steady, and generally on budget. We carefully monitor expenses so we can stay within our budget. As a result, several important projects remain "unfunded"—meaning that we would like to pursue them, but only if our income increases or our other expenses decrease, and funds thus become available. Among those unfunded items are ministerial hires, office equipment and additional stations airing the Tomorrow's World telecast.
So far in 2006, Holy Day offerings— which account for almost 20 percent of Church income—have been very close to our projections. We ask for your prayers that the Work receive generous Holy Day offerings in the fall, so we can make our budget.
In 2005, the Work increased its spending to better accomplish its mission of preaching the gospel and feeding the flock around the world, while delivering the "Ezekiel warning." We hired several ministers, and moved several others. We greatly expanded Tomorrow's World television coverage. As a result, our "net income" after expenses for 2005 was just $809. We truly are a "non-profit" organization! Thankfully, though, we ended the year "in the black," having balanced our income and expenses quite well. We hope that a larger budget surplus in 2006 will allow us to expand our "strategic reserve" and further strengthen the financial position of the Work to set the stage for even greater growth in the future.
One hopeful sign of future growth is viewer response to the Tomorrow's World television program. In 2006, so far, response has been phenomenal! As a result, our list of co-workers is growing steadily. To encourage these faithful supporters, and to deepen their understanding of this Work, we recently offered the Living Church News to co-workers who have been donors for 18 months or more.
We are also receiving an increasing number of requests for ministerial visits. More and more people with no previous Church of God background are asking to attend services. These developments are very exciting, but we can only respond to them if we have the resources to meet the growing demand. Please pray fervently that God will send many more laborers to the harvest, and that He will grant us the resources to accomplish the Work he has given us to do.
Thank you all for your continued, generous, prayerful support of the Living Church of God.