Sunday, 4 January 2009

A bank-like fund

The diocese does, of course, have a mechanism to deal with mission areas which overspend in 2009, but it is one which is likely to unravel quickly, and I’m not sure what it will do then.

The mechanism is this. Those mission areas which generated a surplus in the transitional period are told this money is retained for future spending by them. In the meanwhile, those mission areas which overspend in 2009 or a subsequent year can ‘borrow’ from this ‘bank-like fund’; in these circumstances it is anticipated the money will be paid back in future years when surpluses can be generated in these mission areas from posts which are vacant.

But there is no fund. There is nothing bank-like. There is no money other than diocesan capital assets. Over all the diocese roughly broke even in the transitional period (the surpluses in some mission areas were balanced by the deficits in others) so no real money was paid across into any separate fund. Some mission areas may have a chit from the diocese to say that they have past surplus which they can spend in the future, but the mere existence of these chits don’t generate anything bank-like. Perhaps it is expected that some mission areas which had deficits in the transitional period will begin to generate surpluses to ‘pay off’ their ‘debts’ from the transitional period, but this is a very uncertain source of income for the bank-like fund.

There is in fact a pressing danger that two sorts of mission area will each now quickly begin to spend their way through diocesan capital assets, which is where the mechanism may unravel.

The first will be the mission areas which showed surpluses in the transitional period. Some of these may want to use this money to fund initiatives or simply to cover any deficit in their budgets for a given year. They will perceive themselves to be spending money which they have deposited in a bank-like fund. But, if other mission areas are not generating surpluses to ‘pay off debt’ from the transitional period, then the money will simply be coming out of diocesan capital assets.

The second will be mission areas which showed deficits in the transitional period. Some of these will still be generating similar deficits in the early years of the new funding arrangements. They will be perceived to be borrowing from the bank-like fund. But, while some of this dipping into diocesan capital assets may well be balanced by repayments in future years to top them up again, much of this borrowing will be ‘sub-prime’ and these portions of diocesan capital assets will eventually have to be written off as well.

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