The FD Interview Part 2: Ian Theodoreson, CFO, Church of England

On the report published by audit firm Mazars on the Church of England's dioscesan financial arrangements, which led to accusations it was sitting on a huge cash pile instead of paying down its pension liabilities

That report came out without anyone even knowing they were doing it and I wish they had spoken to us. In fact we have spoken to them now and said: “the next time you do this, can we do it together?” I am very pleased someone did it – you know, that is the stuff we need, that comparative data – but it does need mediating, in some of their interpretations for example. There is no standard presentation of diocesan accounting, for instance, so some of the anomalies they were identifying really needed unpicking and explaining. It was slightly crude.

I think they made too many assumptions about what certain things meant. It would have had immense value if they could have spent a bit of time unpacking that with us and saying to us, "this one looks a bit strange, what’s happening here?" We might have been able to say to them, “you are right, that one is strange” or “well, that’s because of so and so”. I applaud the intent, the application of it was just a little bit screwy. The size of reserves of individual churches: don’t forget these are all individual economic units, legal bodies, there is no single Church of England plc entity. Every church needs to think about its own particular circumstances: looking after a Grade 1 Listed building, say – there probably aren’t enough reserves in the whole of England to cover that kind of risk and liability. What they were concluding from that was sort of random.

There are some churches that are really in desperate states, there are others that are quite well resourced. Yes, some dioceses have quite a lot of reserves, but a lot of their so-called wealth is tied up in buildings, which you can’t just go off and sell when things are a bit tight, so it’s a slightly artificial wealth in some regards.

We are a bit like the landed gentry: big on property and low on income, low on cash. Mazars is looking here at the size of diocesan boards of finance and Synods, but again, you have an ancient government structure here with levels of representation that have been built up over centuries. The truth is that if you were designing from scratch, you wouldn’t do it like that: you probably wouldn’t make the Church of England like this if you had a clean sheet of paper. You’d look for something rather more streamlined.

In an organisation such as ours with a low centre of gravity, how do you get the voice and representation from people right down on the ground? It is a bit of a headache. Synod is a headache – it has a great strength and it’s a great dragon at the same time. I think the important thing is you don’t diminish the qualities of the process just because you are frustrated with some of the slow decision-making process.

On whether Mazars' report was wrong-headed

It’s not wrong-headed at all; there was some real merit in it. The trouble is people reacted slightly negatively to it because they got it wrong; the danger is you then don’t pay any regard to the lessons that are in it. I would certainly, if we could streamline what we do, make the diocesan organisation more streamlined like local authorities, which some dioceses are taking active steps towards. The trick for us is how to get sufficient representation of all the different types of views, because what you don’t want is to have two or three people driving through a particular way of thinking. The dioceses are varied and within that churches are varied. If you have a diocese that covers a large rural patch, another with an urban conurbation and another with a suburban-type church, they are facing three completely different sets of challenges. We need to make sure that as a diocese you are trying to carry all those interests. The thing the Church stands for is having a presence in every community: that’s a heck of a challenge.

On accusations that the Church is sitting on a huge cash pile

I don’t think churches are sitting on large reserves because you are talking about 14,000 to 15,000 different organisations that Mazars added and aggregated together, each of which has its own particular financial challenges. A lot of those reserves are encompassing property which is not easily converted to spending money, so it’s a slightly artificial implication. I think we can do better with the reserves, though. Very large amounts of money are just sitting on cash deposits when quite frankly, one thing we are encouraging churches to do is to think about having a reserve strategy: what do you need your reserves for? When do you need them? If you are building up a fund to pay for the five-yearly repairs assessment which all churches have to go through, don’t leave that cash earning diddly-squat in the bank – think about putting it in some form of market-based but conservative investment. At least you will get some capital growth and be able to plan what you need for your day-to-day living, what you need to be building up for these big projects.

Some churches are quite sophisticated in what they do but for a lot of them, the fact is that the person who is managing the money has probably been dumped with it, and it isn't their bag because they have a day job. So finance tries to provide some guidance and challenge: we can’t tell them what to do.