Auditor's Report

2012 AUDITOR’S REPORT 423

WEST MICHIGAN CONFERENCEOF THE UNITED METHODIST CHURCH

REPORT ON THE FINANCIAL STATEMENTS(with additional information)

YEAR ENDED DECEMBER, 2011(with comparative totals for the year ended December 31, 2010)

424 WEST MICHIGAN ANNUAL CONFERENCE 2012

ii

C O N T E N T S

Page

Independent auditors’ report .......................................................................................................... 1 - 2

Financial statements

Statements of assets, liabilities and net assets - modified cash basis ......................................... 3

Statements of support, revenue and other receipts, expenses, other disbursements and changes in net assets - modified cash basis ........................................ 4

Notes to financial statements .................................................................................................. 5 - 22

Supplementary information ............................................................................................................. 23

Combining statements of support, revenue and other receipts, expenses, other disbursements and changes in net assets - modified cash basis ................................... 24 - 25


1

INDEPENDENT AUDITORS’ REPORT

To the Council of Finance and Administration of the West Michigan Annual Conference of the United Methodist Church

We have audited the accompanying statements of assets, liabilities and net assets - modified cash basis of the Council of Finance and Administration of the West Michigan Annual Conference of the United Methodist Church as of December 31, 2011 and 2010, and the related statement of support, revenue and other receipts, expenses, other disbursements and changes in net assets - modified cash basis for the year ended December 31, 2011. These financial statements are the responsibility of the Council’s management. Our responsibility is to express an opinion on these financial statements based on our audit. The prior year summarized comparative information contained in the statements of support, revenue and other receipts, expenses, other disbursements and changes in net assets - modified cash basis has been derived from the Council’s 2010 financial statements and, in our report dated May 27, 2011, we expressed an unqualified opinion on those financial statements.

We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

As described in Note 1, the Council’s policy is to prepare its financial statements on the modified cash basis, which is a comprehensive basis of accounting other than generally accepted accounting principles.

In our opinion, the financial statements referred to above present fairly, in all material respects, the assets, liabilities and net assets - modified cash basis of the Council of Finance and Administration of the West Michigan Annual Conference of the United Methodist Church as of December 31, 2011 and 2010, and its support, revenue and other receipts, expenses, other disbursements and changes in its net assets - modified cash basis for the year ended December 31, 2011 on the basis of accounting described in Note 1.


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Our audit was conducted for the purpose of forming an opinion on the financial statements as a whole. Information on pages 24 through 25 is presented for purposes of additional analysis and is not a required part of the financial statements. Such information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the financial statements. The information has been subjected to the auditing procedures applied in the audit of the financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the financial statements or to the financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the information is fairly stated in all material respects in relation to the financial statements as a whole.

May 29, 2012


COUNCIL OF FINANCE AND ADMINISTRATION OF THE WEST MICHIGAN ANNUAL CONFERENCE OF THE UNITED METHODIST CHURCH

STATEMENTS OF ASSETS, LIABILITIES AND NET ASSETS - MODIFIED CASH BASIS

DECEMBER 31, 2011 AND 2010

See notes to financial statements. 3

2011 2010ASSETS

Cash and cash equivalents 1,251,026$ 62,040$ Investments 17,612,941 21,629,970Receipts in transit 635,840 668,534 Notes and loans receivable 420,027 414,129 Property and equipment - net 2,554,535 2,392,864

TOTAL ASSETS 22,474,369$ 25,167,537$

LIABILITIES AND NET ASSETS

LIABILITIES:Payroll withholding 71,666$ 85,596$ Assets held on behalf of others 1,047,566 997,349

Total liabilities 1,119,232 1,082,945

NET ASSETS:Unrestricted 20,231,154 22,918,603Temporarily restricted 1,113,376 1,155,382Permanently restricted 10,607 10,607

Total net assets 21,355,137 24,084,592

TOTAL LIABILITIES AND NET ASSETS 22,474,369$ 25,167,537$



STATEMENTS OF SUPPORT, REVENUE AND OTHER RECEIPTS, EXPENSES, OTHER DISBURSEMENTS AND CHANGES IN NET ASSETS - MODIFIED CASH BASIS

YEAR ENDED DECEMBER 31, 2011 (with comparative totals for the year ended December 31, 2010)

See notes to financial statements. 4

Temporarily Permanently

Unrestricted restricted restricted Total 2010

SUPPORT, REVENUE AND OTHER RECEIPTS:

Support and revenue:

Ministry shares 5,675,304$ 62,510$ -$ 5,737,814$ 5,925,124$

Special offerings 341,702 1,486,027 - 1,827,729 2,388,242

Investment income 556,686 (4,835) - 551,851 2,383,749

Camp registration and rental fees 960,900 - - 960,900 1,079,213

Other income 526,152 127,998 - 654,150 612,633

Net assets released from restrictions 1,713,706 (1,713,706) - - -

Total support and revenue 9,774,450 (42,006) - 9,732,444 12,388,961

Other receipts:

CPP holiday refunds 476,994 - - 476,994 470,672

Pension billings 2,113,505 - - 2,113,505 2,199,510

Insurance billings 4,069,311 - - 4,069,311 3,543,072

Total support, revenue and other receipts 16,434,260 (42,006) - 16,392,254 18,602,215

EXPENSES AND OTHER DISBURSEMENTS:

Expenses:

Salaries 2,218,624 - - 2,218,624 2,295,270

Health and life insurance 2,054,794 - - 2,054,794 2,046,910

Pension and post-employment benefit expense 220,332 - - 220,332 230,607

Other employee costs 100,275 - - 100,275 104,629

Training and continuing education 57,628 - - 57,628 52,898

Travel, meeting and moving expenses 293,045 - - 293,045 276,989

Operating and administrative expenses 1,310,116 - - 1,310,116 1,460,408

Parsonage and building expenditures 131,357 - - 131,357 135,335

World Service 928,799 - - 928,799 968,945

Programs and conference benevolence 3,112,672 - - 3,112,672 3,639,479

Depreciation and amortization 123,604 - - 123,604 110,905

Remittances to General Conference 856,666 - - 856,666 954,563

Total expenses 11,407,912 - - 11,407,912 12,276,938

Other disbursements:

Remittances to Board of Pensions 3,674,151 - - 3,674,151 751,231

Health and life insurance 4,039,646 - - 4,039,646 4,069,180

Total expenses and other disbursements 19,121,709 - - 19,121,709 17,097,349

Increase (decrease) in net assets (2,687,449) (42,006) - (2,729,455) 1,504,866

Net assets - beginning of year 22,918,603 1,155,382 10,607 24,084,592 22,579,726

Net assets - end of year 20,231,154$ 1,113,376$ 10,607$ 21,355,137$ 24,084,592$

2011



NOTES TO FINANCIAL STATEMENTS

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NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of accounting - The books and records of the Council are maintained on the modified cash basis of accounting. Under this method, income is recognized when received and expenses are recorded at the time of payment except for the recognition of certain assets and liabilities related to the timing of local church contributions at year end, reimbursement of health insurance premiums, payroll deductions, investments, property and equipment, notes and loans receivable and assets held on behalf of others in an agency capacity. Additionally, certain amounts held on the Council’s behalf at the General Board of Pensions and Health Benefits (GBOPHB) are not included in these financial statements and related cash flows attributable to local churches are reported as other receipts and disbursements. See Note 8.

Financial statement presentation - The statement of support, revenue and other receipts, expenses, other disbursements and changes in net assets - modified cash basis includes certain prior-year summarized comparative information in total but not by net asset class. Such information does not include sufficient detail to constitute a presentation in conformity with the modified cash basis of accounting. Accordingly, such information should be read in conjunction with the Council’s prior-year statement of support, revenue, and other receipts, expenses, other disbursements and changes in net assets - modified cash basis from which the summarized information was derived.

The Council is required to report information regarding its financial position and activities according to three classes of net assets: unrestricted net assets, temporarily restricted net assets, and permanently restricted net assets. Donor-restricted support is reported as an increase in temporarily or permanently restricted net assets, depending on the nature of the restriction. When a restriction expires (that is, when a stipulated time restriction ends or purpose restriction is accomplished) temporarily restricted net assets are reclassified to unrestricted net assets and reported in the statement of activities as net assets released from restrictions.

¾ Unrestricted net assets represent funds available for current operations, support for local churches, various missions, educational programs, and youth summer camps.

¾ Temporarily restricted net assets consist of contributions or earnings which have been restricted by the donor.

¾ Permanently restricted net assets are gift instruments requiring the principal be maintained intact in perpetuity and only the income be used for purposes specified by the donor.

Fund accounting - to facilitate observance of limitations and restrictions placed on the use of available resources, the accounts are maintained in accordance with the principles of fund accounting. Funds are established according to the nature and purpose of resources available to the Council. The assets, liabilities, net assets and financial activity of the Council are recorded in the following self-balancing fund groups:




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NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

¾ Connectional Ministry and Administration fund - resources available for current operations in supervision and administration of the mission and ministry of the West Michigan Annual Conference of the United Methodist Church.

¾ World Service and Conference Benevolence fund - resources available for distribution to the United Methodist denominational programs and the West Michigan Annual Conference of the United Methodist Church program agencies.

¾ Six Lanes and Advanced Specials fund - resources to allow churches direct involvement in the causes promoted by the Council agencies. Member churches select individual causes to fund from a listing prepared by the Council.

¾ Ministerial Education and Black College fund - resources available for providing financial support for the recruitment and education of ordained ministers and to provide financial support to traditionally black colleges related to the Church.

¾ Camping and Outdoor Education fund - resources available for Council retreat centers and camping programs.

¾ Pension and Health Benefits and Life Insurance fund - resources available for support, relief, assistance and pensioning of clergy, lay workers for the various units of the Council and their families.

¾ Plant fund - property and equipment owned and used directly in the operation of the Council.

¾ Loan Program fund - resources used to assist local churches and camps in financing capital expenditures.

¾ New Church Development fund - resources available for new church development.

¾ Other funds - resources for designated purposes related to other programs the Council supports.

Functional allocation of expenses - The costs of the various programs and other activities have been summarized on a functional basis in Note 10. Accordingly, certain costs have been allocated between the programs and supporting services benefited.

Cash and cash equivalents includes all highly liquid investments purchased with an original maturity of three months or less.




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NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Concluded)

Investments are recorded at fair value and consist of various debt and equity securities.

Unrealized gains and losses are recorded in the statement of support, revenue and other receipts,

expenses, other disbursements and changes in net assets. Investments in money market funds are

recorded at cost.

Receipts in transit includes contributions collected by local ministries during the years ended

December 31, 2011 and 2010, but not received by the Council until after year end.

Notes and loans receivable consists of outstanding principal for loans the Council provided to

local churches to help finance capital expenditures.

Property and equipment is capitalized at cost. Donated assets are recorded at fair value at date of

donation. Parsonages are recorded at original cost plus the cost of subsequent additions.

Depreciation is computed over the estimated useful life of assets using the straight-line method.

Additions to property and equipment over $1,000 are capitalized. Cost of maintenance and

repairs are charged to expense when incurred. The useful lives adopted for the purpose of

computing depreciation are:

Parsonages and improvements 30 to 40 years

Camp buildings and equipment 5 to 40 years

Council center furniture and equipment 5 to 7 years

Assets held on behalf of others includes cash held in an agency capacity.

Certain amounts reported as of December 31, 2010 were reclassified to conform to the 2011

presentation.

NOTE 2 - ORGANIZATION, RISKS AND UNCERTAINTIES

The Council of Finance and Administration of the West Michigan Annual Conference of the

United Methodist Church (the Council) is a Michigan Non-Profit Corporation. The purpose of the

Council is to develop and administer a comprehensive and coordinated plan of fiscal and administrative

policies, procedures, and management services for the annual conference. The member churches are

located in the western half of the Lower Peninsula of Michigan. Using ministry shares and special

offerings received from its member churches, the Council contributes to denominational ministries and

provides support for various missions, educational programs and summer youth camps. The Council is

exempt from income taxes under provisions of Section 501(c)(3) of the Internal Revenue Code. The

Council is similarly exempt from the Michigan Business Tax.




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NOTE 2 - ORGANIZATION, RISKS AND UNCERTAINTIES (Continued)

The Council is required to disclose significant concentrations of credit risk regardless of the degree of such risk. Financial instruments which potentially subject the organization to concentrations of significant credit risk consist of cash and cash equivalents, and investments. The Council places its cash with FDIC insured financial institutions and thereby limits the amount of credit exposure to any one financial institution. Credit risk with respect to investments is limited due to the wide variety of companies and industries. Although such investments and cash balances may exceed the federally insured limits at certain times during the year and at year-end they are, in the opinion of management, subject to minimal risk. The Council maintains a diversified investment portfolio which is subject to market risk.

Investments are disclosed in Notes 3 and 4 and consist largely of amounts invested in various funds by the United Methodist Foundation of Michigan (UMF) as well as the General Board of Pension and Health Benefits of the United Methodist Church (GBOPHB).

UMF Pooled Trust Fund - The Fund is available for exclusive investment by the Foundation arising from charitable contributions made through charitable remainder trusts, other charitable trusts, funds operating as charitable trusts, or gift annuity contracts. The primary investment objective of the Fund is to provide for long term capital growth. The Foundation also may consider investments in securities of other United Methodist organizations based primarily upon their religious affiliation and the desire of the Foundation to support their ministry. The Fund seeks to achieve its investment objectives by investing in a diversified portfolio of common stocks, bonds and money market instruments.

UMF Stock Fund - The Fund seeks to achieve long-term capital appreciation through investments in stocks and other securities, with primary emphasis on U.S. large capitalization companies and secondary emphasis on global and international equities and on U.S. small and middle capitalization companies. The Fund is subject to the general investment restrictions and the socially responsible investment criteria as adopted by the UMF Foundation.

UMF Bond Fund - The Fund’s primary objective is to achieve a high level of current income, with capital appreciation as a secondary objective, by investing in investment-grade debt securities. The Fund invests in U.S. Treasury and agency securities, preferred shares and other fixed income securities rated as investment grade by a Nationally Recognized Statistical Rating Organization. The Fund is subject to the general investment restrictions and the socially responsible investment criteria as adopted by the UMF Foundation.

UMF Money Market Fund - The Fund’s objective is to seek maximum current income consistent with liquidity and the maintenance of a portfolio of high quality short-term money market securities. The Fund attempts to achieve its objective by investing in a diversified portfolio of U.S. dollar denominated money market securities. These securities primarily consist of short term U.S. Government securities, U.S. Government agency securities, and securities issued by U.S. Government sponsored enterprises and U.S. Government instrumentalities, commercial paper and repurchase agreements.




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NOTE 2 - ORGANIZATION, RISKS AND UNCERTAINTIES (Concluded)

GBOPHB Short Term Investment Fund - The Fund seeks to maximize current income consistent with preservation of capital. The Fund is similar to a traditional money market fund and will hold short-term fixed income investments. However, the average maturity of the securities held in the Fund are greater than the average maturity of securities held in the typical money market fund. The performance objective of the Fund is to slightly outperform its performance benchmark, the Bank of America Merrill Lynch 3-Month Treasury Bill Index.

GBOPHB Fixed Income Fund - The Fund seeks to earn current income by investing in a broad mix of fixed-income instruments. The performance objective of the Fund is to outperform the performance benchmark (Barclays Capital U.S. Universal Index, excluding Mortgage-Backed Securities) by 0.50% (net of fees) over a market cycle (3 to 5 years). The Fund is primarily composed of a broad range of fixed-income instruments, such as U.S. Treasury and agency securities, foreign government bonds, corporate bonds, mortgage-backed securities and asset-backed securities.

GBOPHB Multiple Asset Fund - The Fund seeks to maximize long-term investment returns, including current income and capital appreciation, while reducing short-term risk by investing in a broad mix of investments. The performance objective of the Fund is to outperform the investment returns of its performance benchmark (45% Russell 3000 Index, 20% MSCI ACWI excluding USA IMI, 25% Barclays Capital U.S. Universal Index excluding Mortgage Backed Securities, and 10% Barclays Capital U.S. Government Inflation-Linked Bond Index) by 0.8% on average per year (net of fees) over an extended investment cycle (10 to 20 years).

The process of preparing financial statements requires the use of estimates and assumptions regarding certain types of assets, revenues, and expenditures. Such estimates primarily relate to unsettled transactions and events as of the date of the financial statements. Accordingly, upon settlement, actual results may differ from estimated amounts.

Tax positions are taken based on interpretation of federal, state and local income tax laws. Management periodically reviews and evaluates the status of uncertain tax positions and makes estimates of amounts, including interest and penalties, ultimately due or owed. No amounts have been identified, or recorded, as uncertain tax positions. Federal, state and local tax returns generally remain open for examination by the various taxing authorities for a period of three to four years.

The Council evaluates events and transactions that occur after year end for potential recognition or disclosure in the financial statements. As of the auditors’ opinion date, which is the date the financial statements were available to be issued, there were no subsequent events which required recognition or disclosure.




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NOTE 3 - INVESTMENTS

The Council transfers certain amounts to the United Methodist Foundation of Michigan (the

Foundation). The Foundation was formed as a nonprofit organization by member churches of the West

Michigan Annual Conference and Detroit Annual Conferences. It is governed and monitored by its own

independent commission. The Foundation’s primary purpose is to broaden the financial base of member

churches by assisting in and receiving planned and deferred gifts, assisting in the set-up and marketing of

endowment funds, and the generation of market-level returns on invested monies through the use of

investment pools.

The Council also transfers funds to the General Board of Pension and Health Benefits

(GBOPHB). The GBOPHB is a not-for-profit administrative agency of The United Methodist Church,

responsible for the general supervision and administration of investments and benefit services according

to the principles of The United Methodist Church.




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NOTE 3 - INVESTMENTS (Continued)

Investments at December 31 consist of the following.

2011 2010Direct investments:

Mutual funds:Basic materials 112,200$ 109,900$ Financials 123,790 130,985 Other 4,380 5,920

Common stocks:Basic materials 806,050 488,399 Financials 896,410 398,069 Industrial goods 396,059 309,775 Health care 1,092,562 568,720 Technology 971,969 795,553 Consumer goods 522,246 348,487 Conglomerates 16,337 67,175 Services 557,838 566,427 REITs 1,583,571 1,488,299 Utilities 635,367 351,007

Preferred stock:Financials 94,520 -

Master limited partnerships 236,690 - Money market 475,673 59,620

Pooled funds managed by the Foundation:UMF Pooled Trust Fund 761,209 823,467 UMF Stock Fund 212,247 405,079 UMF Bond Fund 193,040 238,205 UMF Money Market Fund 6,911 2,075

Pooled funds managed by the General Board of Pensionand Health Benefits (GBOPHB):

Short Term Investment Fund 455,830 1,731,091 Fixed Income Fund 1,512,084 3,318,314 Multiple Asset Fund 5,945,958 9,423,403

17,612,941$ 21,629,970$




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NOTE 3 - INVESTMENTS (Concluded)

Income from cash deposits and investments consist of the following at December 31:

2011 2010Interest and dividends 258,128$ 226,634$ Interest received from financing 13,296 9,318 Realized gain (loss) on sale of investments 181,427 28,263 Change in unrealized appreciation 99,000 2,119,534

Total - investment income 551,851$ 2,383,749$

Investment income is net of related investment expenses for the years ended December 31, 2011 and 2010.

NOTE 4 - FAIR VALUE MEASUREMENTS

Accounting standards establish a hierarchy that prioritizes the inputs to valuation techniques giving the highest priority to readily available unadjusted quoted prices in active markets for identical assets (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements) when market prices are not readily available or reliable. The three levels of the hierarchy are described below:

Level 1: Quoted prices in active markets for identical securities.

Level 2: Prices determined using other significant observable inputs. Observable inputs are inputs that other market participants may use in pricing a security. These may include quoted prices for similar securities, interest rates, prepayment speeds, credit risk and others.

Level 3: Prices determined using significant unobservable inputs. In situations where quoted prices or observable inputs are unavailable or deemed less relevant (for example, when there is little or no market activity for an investment at the end of the period), unobservable inputs may be used. Unobservable inputs reflect the Council’s own assumptions about the factors market participants would use in pricing an investment, and would be based on the best information available.




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NOTE 4 - FAIR VALUE MEASUREMENTS (Continued)

The following is a market value summary by the level of the inputs used in evaluating the Council’s assets carried at value at December 31. The inputs or methodology used for valuing securities may not be an indication of the risk associated with investing in those securities.

Description Level 1: Level 2: Level 3: Total

Direct investments:Mutual funds:

Basic materials 112,200$ -$ -$ 112,200$ Financials 123,790 - - 123,790 Other 4,380 - - 4,380

Common stocks:Basic materials 806,050 - - 806,050 Financials 896,410 - - 896,410 Industrial goods 396,059 - - 396,059 Health care 1,092,562 - - 1,092,562 Technology 971,969 - - 971,969 Consumer goods 522,246 - - 522,246 Conglomerates 16,337 - - 16,337 Services 557,838 - - 557,838 REITs 1,583,571 - - 1,583,571 Utilities 635,367 - - 635,367

Preferred stock:Financials 94,520 - - 94,520 Master limited partnerships 236,690 - - 236,690

Pooled funds held:UMF Foundation - - 1,173,407 1,173,407 GBOPHB - - 7,913,872 7,913,872

Total investments 8,049,989$ -$ 9,087,279$ 17,137,268

Money market funds at cost 475,673

Total 17,612,941$

2011




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NOTE 4 - FAIR VALUE MEASUREMENTS (Continued)

Description Level 1: Level 2: Level 3: Total

Direct investments:Mutual funds:

Basic materials 109,900$ -$ -$ 109,900$ Financials 130,985 - - 130,985 Other 5,920 - - 5,920

Common stocks:Basic materials 488,399 - - 488,399 Financials 398,069 - - 398,069 Industrial goods 309,775 - - 309,775 Health care 568,720 - - 568,720 Technology 795,553 - - 795,553 Consumer goods 348,487 - - 348,487 Conglomerates 67,175 - - 67,175 Services 566,427 - - 566,427 REITs 1,488,299 - - 1,488,299 Utilities 351,007 - - 351,007

Pooled funds held:UMF Foundation - - 1,468,826 1,468,826 GBOPHB - - 14,472,808 14,472,808

Total investments 5,628,716$ -$ 15,941,634$ 21,570,350

Money market funds at cost 59,620

Total 21,629,970$

2010

Investments held at the General Board of Pension and Health Benefits as well as the Foundation include numerous securities that are combined with the investment portfolios of other church organizations. As such, they are considered Level III investments.




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NOTE 4 - FAIR VALUE MEASUREMENT (Concluded)

The following is a reconciliation of the beginning and ending balances for assets and liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3):

Funds held at the

FoundationFunds held at the GBOPHB Total

Balance January 1, 2010 1,604,769$ 12,461,989$ 14,066,758$

Total unrealized gains or lossesincluded in earnings 86,107 1,465,654 1,551,761

Purchases 159,235 1,503,392 1,662,627

Proceeds from sale (381,285) (958,227) (1,339,512)

Balance December 31, 2010 1,468,826 14,472,808 15,941,634

Total unrealized gains or lossesincluded in earnings (22,631) 127,519 104,888

Purchases 61,702 1,693,372 1,755,074

Proceeds from sale (334,490) (8,379,827) (8,714,317)

Balance December 31, 2011 1,173,407$ 7,913,872$ 9,087,279$

As of December 31, 2011:

Funds held at the

FoundationFunds held at the GBOPHB Total

The estimated amount of total gains andlosses for the year included in earningsattributable to the change in unrealized gainsor losses relating to assets still held at yearend. (22,631)$ 127,519$ 104,888$




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NOTE 5 - PROPERTY AND EQUIPMENT

Property and equipment consist of the following at December 31.

2011 2010

Parsonages:

District 1,041,123$ 777,582$

Area 218,595 211,546

Camps:

Land 198,000 198,000

Buildings 2,997,449 2,846,084

Vehicles 149,975 149,975

Equipment 175,255 164,572

Conference center furniture and equipment 564,798 537,157

District offices furniture and equipment 114,609 111,601

Area office furniture and equipment 32,912 32,912

Work in process - 178,012

5,492,716 5,207,441

Less accumulated depreciation 2,938,181 2,814,577

Net property and equipment 2,554,535$ 2,392,864$

Depreciation and amortization expense 123,604$ 110,905$

2011 2010

District parsonages:

Lansing District Superintendent 80,438$ 80,438$

Grand Rapids District Superintendent 238,953 237,000

Grand Traverse Superintendent 255,660 -

Heartland District Superintendent 291,072 284,644

Kalamazoo District Superintendent 175,000 175,500

Total district parsonages 1,041,123$ 777,582$

Area parsonages:

15160 Duxbury Lane, DeWitt Township 186,926$ 179,877$

Okemos office building 31,669 31,669

Total area parsonages 218,595$ 211,546$




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NOTE 5 - PROPERTY AND EQUIPMENT (Concluded)

The DeWitt Township parsonage and the Okemos office building are owned jointly with the Detroit Annual Conference. The above amount represents the Council of Finance and Administration of the West Michigan Annual Conference’s share, which approximates forty-two percent of the original cost basis of the property.

Land included in the parsonages listed above amounted to approximately $195,000 and $155,000 at December 31, 2011 and 2010, respectively.

Work in process at December 31, 2010 primarily consists of costs accumulated for improvements to the Albright and Lakeview camps. These improvements were placed into service during 2011.




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NOTE 6 - NOTES AND LOANS RECEIVABLE

Notes and loans receivable consist of the following, as of December 31.

2011 2010Note receivable from the FSU Wesley Foundation, with monthlypayments of $414, including interest of 6% maturing May 2015. 3,864$ 13,329$

Note receivable from the Belding UMC, with monthly payments of$111, including interest of 6% repaid in 2011. - 954 Note receivable from the Washington Heights UMC, with monthlypayments of $178, including interest of 7.5% maturing December2012. 871 2,217 Note receivable from the Millville UMC, with monthly payments of$2,153, including interest of 3% maturing December 2020. 200,967 223,000 Note receivable from the Portage Chapel Hill UMC, with monthlypayments of $615, including interest of 4.25% maturing December2018. 44,131 49,506 Note receivable from the Bellevue UMC, with monthly payments of$689, including interest of 5% repaid in 2011. - 20,099 Note receivable from the Climax/Scotts UMC, with monthlypayments of $845, including interest of 3% maturing June 2019. 67,449 75,839 Note receivable from the Church of All Nations, with monthlypayments of $636, including interest of 5% maturing April 2015. 23,891 29,185 Note receivable from the Reading UMC, with monthly payments of$382, including interest of 2.75% maturing December 2021. 39,710 -

Note receivable from the Scotts UMC, with monthly payments of$137, including interest of 3% maturing March 2021. 13,485 - Note receivable from the Quincy UMC, with monthly payments of$241, including interest of 3% maturing November 2018. 25,659 -

420,027$ 414,129$

NOTE 7 - LEASES

The Michigan Area Headquarters (the Headquarters), supported jointly by the Council of Finance and Administration of the West Michigan Annual Conference and the Detroit Annual Conference, leased office space in 2000. The Headquarters pays rent expense from its budget, but the Council of Finance and Administration of the West Michigan Annual Conference, Detroit Annual Conference and the Headquarters are jointly responsible for the lease. The lease expires in July 2014. The base monthly lease rate is $6,500 with annual escalation for cost of living.




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NOTE 8 - PENSION AND OTHER POST-EMPLOYMENT BENEFITS

The Council participates in a multi-employer defined contribution pension plan that covers substantially all Council lay and clergy employees. The Council contributes between 9 and 12 percent of each participant’s annual wages. Contributions made by the Council approximated $86,000 and $81,000 for the years ended December 31, 2011 and 2010, respectively.

Additionally, the Council participates in a defined benefit pension plan that is frozen (Pre-1982 Plan). The Plan is administered by the GBOPHB. The Council’s plan assets exceeded the estimated actuarial plan liability based on the most recent actuarial calculation as of January 1, 2011 by $5,438,943 or 113% in 2013.

Effective January 1, 2007, the General Conference adopted the Clergy Retirement Security Program (CRSP-DB). This program is an amendment and restatement of the previous clergy pension program. Contributions made by the Council approximated $485,000 and $445,000 for the years ended December 31, 2011 and 2010, respectively. The Council’s expected contribution based on the most recent actuarial calculation as of January 1, 2011 was projected to be $1,909,500 for 2012 and was not available for 2013.

From 1982 through 2006, the Council contributed to the Ministerial Pension Plan (MPP Annuities) that was administered by the GBOPHB to fund clergy retirement benefits. The GBOPHB has taken the position that the Council is responsible for funding any shortfall in benefits. The Council’s portion of the total estimated actuarial liability based on the most recent actuarial calculation as of January 1, 2011 was projected to be approximately $31,623,317 in 2013. Total plan assets were approximately 112% of the estimated plan funding liability. The Council’s expected contribution for 2012 was $0 and was not available for 2013.

The Council’s policy is to fund the majority of costs of qualified retirees’ (clergy and lay employees) health care coverage. Such costs are expensed when paid and amounted to approximately $1,156,000 and $1,202,000 for the years ended December 31, 2011 and 2010, respectively. The projected unfunded post-employment medical benefits liability, based on the most recent actuarial calculation dated December 31, 2011, was approximately $16,242,000.

NOTE 9 - RELATED PARTY TRANSACTIONS

The Council conducts essentially all transactions, other than purchases of goods and services and sales of certain property, with affiliated congregations. Certain administrative expenses are reimbursed by related organizations. The Council also processes payroll transactions for affiliated organizations at no charge. The value of these services has not been determined but is not considered significant to the financial statements.




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NOTE 10 - FUNCTIONAL ALLOCATION OF EXPENSES

The functional allocation of the Council’s expenses as they relate to programs and management and general are listed below.

2011 2010Programs:

Connectional Ministry and Administration 2,231,856$ 2,206,972$World Service and Conference Benevolence 2,334,932 2,347,172Six Lanes and Advanced Specials 1,553,438 2,008,704Ministerial Education and Black College fund 407,908 457,660 Camping and Outdoor Education 790,786 911,427 Pension and Health Benefits and Life Insurance fund 1,642,049 1,682,585New Church Development 495,319 570,783 Other funds 35,874 55,100

Total programs 9,492,162 10,240,403

Management and general 1,915,750 2,036,535

11,407,912$ 12,276,938$

Fundraising has not been segregated on the basis of immateriality.

NOTE 11 - RESTRICTED NET ASSETS

Temporarily restricted net assets are available for the following purposes.

2011 2010

New Church Investment fund - restricted for development of new churches 1,904$ 1,929$

Camp endowment - restricted for the upkeep and running of camps 750,788 812,285

Special Offerings - contributions designated by local churches 195,131 206,918Ministerial training - designated for the training of clergy 165,553 134,250

1,113,376$ 1,155,382$

Net assets amounting to $1,713,706 and $2,183,161 were released from restrictions during the years ended December 31, 2011 and 2010, respectively, by incurring expenses satisfying their restricted purposes.




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NOTE 11 - RESTRICTED NET ASSETS (Concluded)

Permanently restricted net assets are available for the following purposes.

2011 2010

Permanent endowment - restricted 10,607$ 10,607$

NOTE 12 - ENDOWMENTS

Endowments consist of funds established for a variety of purposes and may include both donor-restricted funds and funds internally designated to function as endowments. Restrictions are both permanent and temporary and assets associated with endowment funds are classified and reported based on the existence or absence of these restrictions.

The Council has interpreted the Uniform Prudent Management of Institutional Funds Act (UPMIFA) as permitting the preservation of the historical value of the original gift of the donor-restricted endowment funds absent explicit donor stipulations to the contrary. As a result, when directed by the gift instrument, the Council classifies as permanently restricted net assets (a) the original value of gifts donated to the permanent endowment, (b) the original value of subsequent gifts to the permanent endowment, and (c) accumulations to the permanent endowment made in accordance with the direction of the applicable donor gift instrument. The remaining portion of the donor-restricted endowment fund that is not classified in permanently restricted net assets is classified as temporarily restricted net assets until the restricted purpose has been accomplished. The Council considers the following factors in making a determination to appropriate or accumulate donor-restricted endowment funds.

1. The duration and preservation of the fund. 2. The purposes of the organization and the donor-restricted endowment fund. 3. General economic conditions. 4. The possible effect of inflation and deflation. 5. The expected total return from income and the appreciation of investments. 6. Other resources of the organization 7. The investment policies of the Council.

The Council’s investment and spending practices for endowment assets attempt to provide a predictable stream of funding to programs supported while seeking to maintain the purchasing power of the endowment assets.

Investment earnings from donor-restricted endowment funds are classified as unrestricted income absent explicit donor stipulations to the contrary. In the event that the fair value of donor-restricted endowment funds falls below the level required to be maintained in perpetuity, the resulting deficiency is recorded as a reduction of unrestricted net assets.




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NOTE 12 – ENDOWMENTS (Concluded)

Changes in endowment net assets are as follows.

Temporarily restricted

Permanently restricted Total

Endowment net assets January 1, 2010 779,928$ 10,607$ 790,535$

Investment return:Investment income 22,337 - 22,337Net appreciation (realized and unrealized) 53,416 - 53,416

Total investment return 75,753 - 75,753

Contributions 3,400 - 3,400 Approved for expenditure (46,796) - (46,796)

Endowment net assets December 31, 2010 812,285 10,607 822,892

Investment return:Investment income 21,635 - 21,635Net appreciation (realized and unrealized) (34,395) - (34,395)

Total investment return (12,760) - (12,760)

Approved for expenditure (48,737) - (48,737)

Endowment net assets December 31, 2011 750,788$ 10,607$ 761,395$

NOTE 13 - CONTINGENCIES

From time to time the Council is involved in various legal proceedings that have arisen in the ordinary course of business. Management does not believe that the outcome of these proceedings, either individually or in the aggregate, will have a material adverse effect on the Council’s financial position or future results of operations.

Effective September 1, 2009 the Council became primarily self-insured, up to certain limits, for health claims through Professional Benefits Services. The plan includes all participating Council employees as well as affiliated congregation clergy. The Council has purchased stop-loss insurance, which will reimburse the Council for individual policies that exceed $75,000 annually. Claims are expensed as paid. The total claims expense under the program was approximately $4,200,000 and $4,202,000 for Council employees for the years ended December 31, 2011 and 2010, respectively. The Council is reimbursed for stop loss premiums and claims paid for affiliates covered under the Plan. The total amount of claims incurred but not reported attributable to the Council has not been determined, however, claims incurred in December estimated in the amount of $214,438 were paid in 2012.


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SUPPLEMENTARY INFORMATION



COMBINING STATEMENT OF SUPPORT, REVENUE AND OTHER RECEIPTS, EXPENSES, OTHER DISBURSEMENTS AND CHANGES IN NET ASSETS - MODIFIED CASH BASIS

YEARS ENDED DECEMBER 31, 2011 (with comparative totals for the year ended December 31, 2010)

24

Connectional

Ministry and

Administration

fund

World Service

and Conference

Benevolence

fund

Six Lanes and

Advance

Specials fund

Ministerial

Education

and Black

College fund

Camping and

Outdoor

Education

fund

Pension and

Health Benefits

and Life

Insurance fund

SUPPORT, REVENUE AND OTHER RECEIPTS:

Support and revenue:

Ministry shares 2,500,882$ 2,393,546$ -$ 407,908$ -$ 46,122$

Special offerings - - - - -

Investment income 26,569 14,037 - - 1,421 501,369

Camp registration and rental fees 166,056 32,958 - - 761,145 -

Other income 147,892 8,506 - - 230,309 32,434

Net assets released from restrictions - 51,737 1,553,438 - 60,096 -

Total support and revenue 2,841,399 2,500,784 1,553,438 407,908 1,052,971 579,925

Other receipts:

CPP holiday refunds - - - - - 476,994

Pension billings - - - - - 2,113,505

Insurance billings - - - - - 4,069,311

Total support, revenue and

other receipts 2,841,399 2,500,784 1,553,438 407,908 1,052,971 7,239,735

EXPENSES AND OTHER DISBURSEMENTS:

Expenses:

Salaries 1,003,041 492,108 - - 358,410 -

Health and life insurance 230,020 85,824 - - 28,608 1,635,246

Pension and post-employment benefit expense 127,720 34,408 - - 10,481 -

Other employee costs 31,112 19,230 - - 38,665 6,285

Training and continuing education 6,247 5,737 - - 488 -

Travel, meeting and moving expenses 242,110 39,670 - - 599 2,439

Operating and administrative expenses 593,629 49,760 - - 356,879 136,352

Parsonage and building expenditures 36,204 - - - 95,153 -

World Service - 928,799 - - - -

Programs and conference benevolence 480,538 748,513 1,417,499 72,656 354,622 518

Depreciation and amortization - - - - - -

Remittances to General Conference 359,425 26,050 135,939 335,252 - -

Total expenses 3,110,046 2,430,099 1,553,438 407,908 1,243,905 1,780,840

Other disbursements:

Remittances to Board of Pensions - - - - - 3,674,151

Health and life insurance - - - - - 4,039,646

Total expenses and

other disbursements 3,110,046 2,430,099 1,553,438 407,908 1,243,905 9,494,637

Increase (decrease) in net assets before transfers (268,647) 70,685 - - (190,934) (2,254,902)

Transfers (189,320) (83,697) - - 291,183 (96,168)

Increase (decrease) in net assets (457,967) (13,012) - - 100,249 (2,351,070)

Net assets - beginning of year 1,014,808 85,031 - - (508,731) 18,350,586

Net assets - end of year 556,841$ 72,019$ -$ -$ (408,482)$ 15,999,516$

2011


25

Plant fundLoan Program

fund

New Church Development

fund Other FundsTotal

unrestrictedTemporarily

restrictedPermanently

restricted Totals 2010

-$ -$ 326,846$ -$ 5,675,304$ 62,510$ -$ 5,737,814$ 5,925,124$- - 341,702 - 341,702 1,486,027 - 1,827,729 2,388,242- 13,296 (6) - 556,686 (4,835) - 551,851 2,383,749- - - 741 960,900 - - 960,900 1,079,213- - 81,596 25,415 526,152 127,998 - 654,150 612,633- - 4,840 43,595 1,713,706 (1,713,706) - - - - 13,296 754,978 69,751 9,774,450 (42,006) - 9,732,444 12,388,961

- - - - 476,994 - - 476,994 470,672- - - - 2,113,505 - - 2,113,505 2,199,510- - - - 4,069,311 - - 4,069,311 3,543,072

- 13,296 754,978 69,751 16,434,260 (42,006) - 16,392,254 18,602,215

- - 346,368 18,697 2,218,624 - - 2,218,624 2,295,270- - 60,792 14,304 2,054,794 - - 2,054,794 2,046,910- - 47,110 613 220,332 - - 220,332 230,607- - 3,618 1,365 100,275 - - 100,275 104,629- - 14,761 30,395 57,628 - - 57,628 52,898 - - 7,476 751 293,045 - - 293,045 276,989- - 157,162 16,334 1,310,116 - - 1,310,116 1,460,408- - - - 131,357 - - 131,357 135,335- - - - 928,799 - - 928,799 968,945- - 37,431 895 3,112,672 - - 3,112,672 3,639,479

123,604 - - - 123,604 - - 123,604 110,905- - - - 856,666 - - 856,666 954,563

123,604 - 674,718 83,354 11,407,912 - - 11,407,912 12,276,938

- - - - 3,674,151 - - 3,674,151 751,231- - - - 4,039,646 - - 4,039,646 4,069,180

123,604 - 674,718 83,354 19,121,709 - - 19,121,709 17,097,349(123,604) 13,296 80,260 (13,603) (2,687,449) (42,006) - (2,729,455) 1,504,866285,275 (250,000) 22,223 20,504 - - - - - 161,671 (236,704) 102,483 6,901 (2,687,449) (42,006) - (2,729,455) 1,504,866

2,392,864 1,572,333 (19,928) 31,640 22,918,603 1,155,382 10,607 24,084,592 22,579,7262,554,535$ 1,335,629$ 82,555$ 38,541$ 20,231,154$ 1,113,376$ 10,607$ 21,355,137$ 24,084,592$

2011


Documents

Auditor's Report