Church Budgeting Process

Management & Leadership in Ministry

The Church Budget A church budget is a reflection of the plans and ministries of the local church. By stating the ministries of the church and assigning dollars to the ministry areas, a church budget serves as a means to help the church achieve its goals. A good church budget: - helps the church implement & prioritize current

programs/ ministries - provides a way for church members to work together- gives guidance in distributing available funds- encourages a good accounting of funds- challenges members to provide funds to carry out

ministries of the church - authorizes church leadership to act within guidelines.

The Church Budget (cont’d)

Although the church budget functions as a guide, an authorization and a control, it is only a tool that reflects the vision and goals of the church. It should not run the church but rather be a yardstick or a measurement of the church's movement towards the vision.

Cdn. Southern Baptist web site

Four ways Church Finances are typically spent.

1) The church & ministry leaders spend money in reaction to needs & situations, as they arise.

2) Ministry leaders duplicate their spending habits from the previous year.

3) The Finance committee (or treasurer) independently exercises great power over who spends money in the church (solely determines: who, when, how much, what

for).

4) Ministry leaders annually create a ministry plan (events, programs, etc.) and a budget, based upon the values & mission of the church and then spend in accordance with the approved budget.

4 ways to determine the Church Budget 1)Line item budgeting: the Finance Committee

estimates how much money ought to be allocated to broadly defined ‘Expense Categories’ in the budget, with no input from the ministry leaders.

ie: Photocopying=$350 Outreach = $2,400Advertising = $650 Guest speakers = $890Teaching Supplies = $1,050

2) Ministry based budgeting: Each Ministry is allocated a budget … but there is no break-down, thought or direction given to determine ‘what or how’ they will spend their money.

ie: Youth ministry = $5,600/yr.Men’s ministry = $900/yr.Children’s ministry = $3,500/yr.

4 ways to determine the Church Budget3) Incremental Budgeting: Ministry leaders are given a

standardized ‘raise’ in their budget, based on last year’s expenses (i.e. All ministries get a 5% increase).

4) Mission/Ministry Prioritization Budgeting: Ministry leaders are empowered/expected to estimate & submit a request, outlining the budget they need to successfully operate their ministries for the upcoming year. This budget request is based upon the ministry leaders developing specific programs / plans/ events for their ministries, which are aligned with the overall direction/vision of the church.

The following slides outline a suggested process for preparing

a “General Operating Budget”

The 2 Big Guiding Principles

• A budget is intentionally created that enables the advancing of the church’s vision/mission AND in alignment with the core values of the church.

• A budget is created with SIGNIFICANT input from the ministry leaders who are on the front-line of actually ‘doing & leading’ the ministries.

Preparing the Church Budget1) Church Leaders annually recommend

a yearly emphasis i.e. small groups, kids, outreach, women, evangelism, teens, singles, poor, etc.

- Determined by the senior pastor in consultation with informed church leaders & the pastor’s prayer time away from the church.

- What area/ministry of the church needs to be strengthened, in order to significantly move our church ahead?

Preparing the Church Budget2) Finance committee begins to project

anticipated MONTHLY income (not just annual)

- Usually based on previous years monthly giving trends

- Anticipated ‘mood’ of church & community factors (unemployment)

- Excludes any ‘unusually’ large or small donations from the previous year

Preparing the Church Budget3) About 3 months before the end of the current

fiscal year, the Senior pastor meets with the Staff & Ministry Leaders & shares with them a motivational, high level vision casting session (a recommended ‘emphasis’ for the upcoming fiscal year) & the Finance committee distributes a ‘Budget Request Form’

(See next 2 PowerPoint slide)

# of Sundays

In addition the Finance Committee also begins to prepare a Budget Recommendation concerning Salaries AND an estimate for MONTHLY ‘income’ for the upcoming year.

Position Base Housing PensionHealth

InsuranceLife

Insurance Travel Other

Senior Pastor $35,000 $14,500 $5,800 $12,000 $3,500 $750 $1200

Youth Pastor $28,000 $12,000 $4,500 $9,000 $3,500 $650 $750

Office Sect. $22,000 0 0 $5,000 $1,200 0 0

Janitor $12,000 0 0 0 0 0 0

Book- keeper $6,000 0 0 0 0 0 0

TOTALS 103,000 26,500 10,300 26,000 8,200 1,400 1,950

Preparing the Church Budget4) Ministry Leaders work with ‘Fractal’ team of

leaders (the leadership team of their individual ministries)to prepare their ministry plan (events, programs for the upcoming year) AND a budget request consistent with the church’s high level objectives for the upcoming yr.

5) About 3 weeks later, Ministry leaders, Administrators & the office/ pastoral staff turn in the first drafts of their ‘budget requests’ to the Finance Committee. It is very helpful if each ministry leader, highlights which of their expenses are ‘negotiable’

Preparing the Church Budget6) Finance committee compiles all budget

requests (from the ministry leaders) and compares the total budget requests, against the anticipated total income.

7) If the budget requests exceed anticipated income, the Finance committee, in consultation with Ministry Leaders, remove the ‘negotiable’ budget requests & then compares the new total, against the ‘anticipated income’

Preparing the Church Budget8) Finance committee returns the ‘Budget

Request Forms’ to the Ministry Leaders, and asks all ministry leaders to make a final adjustment to their budget (i.e.: please reduce your budget request by 10%)

9) Ministry Leaders re-submit their final amended Budget Request Forms to the Finance Committee.

Preparing the Church Budget10)Finance Committee forwards a

recommended budget (Income & Expenses) to the Church Board (elders) and the Senior Pastor’s recommendation for a ‘ministry emphasis’ for the upcoming year. The Church Board reviews and ultimately forwards a Budget recommendation to the congregation for congregational approval (Annual Business meeting).

11) Church family votes: For OR Against; OR modifies the 2 recommends:

- ministry emphasis for upcoming year - budgeted income/expenses.

Budget Approval Processa) Make sure the annual Business Meeting is duly

called & adequately announced /promoted.b) Ensure that the Church Board has a specific

budget number & a ministry emphasis to recommend to the church family.i.e. The church board recommends that:

- 2013 Church strongly emphasize children’s outreach ministries this yr.

- 2013 Operating Budget be: $144,300.

c) 3 weeks in advance of the church’s annual business meeting, hand-out to the church family a ‘high level’ over view of the budget (not line-by-line) and a statement about ministry emphasis for the upcoming year.

One of the keys to helping the Budget approval process move along smoothly and quickly, is to

provide the church family with ‘high level’ budget numbers, not line-by-

line expense items.

2013 General Operating Budget Recommendation

2013 Budget 2012 Actual 2011 Actual

Income $145,500 *$141,347 $138,203

Expenses $144,300 $141,057 $138,309

Difference: +1,200 +290 -106

Expenses 2013 Anticipated 2012 Actual

Church Ministries (children, men, youth, women) = $22,20020,124

Outreach = $7,500 6,600

Missions Support = $10,000 9,000

Salaries = $65,000 61,750

Office Admin = $ 5,800 7,126

Facilities (Mortgage, Utilities, maintenance) = $33,800 36,457

TOTAL $144,300 $141,057

(See Special Notes on next slide)

2013 General Operating Budget Recommendation

Special Notes:

The proposed 2013 Budget anticipates a 3% increase in giving.

Salaries have increased by 5%, due to adding our new youth pastor, plus salary increases.

Missions contributions are increased by $1,000 over last year.

Congregational approval of the budget includes granting permission for the church board to spend up to 10% more than the budget, before needing congregational permission.

2013 Emphasis on ‘Children’s outreach ministries’.

*Income excludes any income for one time, special projects

Budget Approval Process

d) Include a written statement to the congregation: “A detailed break down of the budget is available from the treasurer. Contact: Fred Smith at 555-5436”

e) 1 wk. before Business meeting, hold an information mtg. to allow anyone an opportunity to ask detailed financial questions to the chairperson of the finance committee and the senior pastor.

f) At annual business mtg. present the overall budget numbers (income & expenses) for congregational approval. Don’t ask for line- by- line approval.

Budget Insights:1) As a rule of thumb: Income is

approx. $1000 / person connected with the church. Thus: a church constituency of 125 = $125,000 /yr.

Income with av. attendance of 100 = $165,000 *

2) Zero based budgeting is considered a normal procedure. All ministries start with needing to justify all their expenses for the upcoming year. Start with $ 0.00 budget and work up … rather than each ministry getting an ‘increase’ over last year.

* Barna.org ‘Report examines the state of Mainline Protestant churches’ Dec. 7, 2009

Budget Insights:3) As a Rule of Thumb: 15 to 20% of budget = Underwrite

ministries & Missions expenses

40 to 60% of budget = Salaries 20 to 45% of budget = General

Admin. & Building management

Year Church Ministries Salaries Gen. Admin. Budget Constituency

2006 KWC = 14.4% + 48% + 37.6% = $1.1 m 13002007 FWC = 14.7% + 42% + 43.3% = $665,000 600

Budget Insights:3) As a Rule of Thumb:

15 to 20% of budget = Underwrite ministries & Missions expenses

40 to 60% of budget = Salaries 20 to 45% of budget = General Admin. &

Building management

Year Church Ministries SalariesGen

Admin Budget Constituency

2006 KWC = 14.4% + 48% + 37.6% = $1,100,000 1300

2007 FWC = 14.7% + 42% + 43.3% = $665,000 600

An Important Clarification

It is not uncommon for the average person in the congregation to ‘raise their eyebrows’ when they first hear that typically only 15-20% of their donations are used to underwrite the ministries of the church … however, don’t forget that the salaries portion of the budget (40-60%) is also a component of ‘church ministries’. One of the ministries of the church, are the services the pastoral staff provide to the congregation and the community. (i.e. counselling, preaching, visitation, coaching, teaching, practical help to people, leadership, planning, etc.)

Mainline Churches’Pastoral Salaries

George Barna indicates pastoral salaries typically comprise 33% of the annual budget for most mainline churches (vs. 40-60% for evangelicals).

This is probably due to the fact that mainline churches typically have older buildings, thus requiring a greater percent of the income to be devoted to renovation, repair, utilities, etc. not because evangelical pastors are paid better.

Barna.org ‘Report examines the state of Mainline Protestant churches’ Dec. 7, 2009

Class ExerciseChurch size: 180 peopleChurch Budget: $180,000/ yr. 18% available for ministries: $32,400

19 Ministries:Children Support Group Social Comm.Teen Ushers/Greeters BenevolentMen’s ALPHA/Evangelism Sports MinistryWomen’s Interior/exterior Decorating Young AdultSingle ParentCommunity Outreach Nursery & VBSAudio/Visual Pre-school ministry Seniors

Emphasis this year: offer more practical help to the hurting

How would you divide the $32,400 between 19 ministries???