smartchurch budgeting v3

CHURCH FACILITY

TABLE OF CONTENTS

INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

WHERE TO START? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .CONFIRM TOTAL HEATED AND COOLED SQUARE FOOTAGE.. . . . . . . . . .

REFER TO THE PAST – CAREFULLY.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

BIGGEST TAKEAWAYS.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

OVERSPENDING AND UNDERSPENDING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

RE-EVALUATE YOUR METHODS, PROCEDURES, AND STAFF.. . . . . . . . . .

INSOURCING VS. OUTSOURCING.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

REVIEW CONTRACTS AND SERVICE AGREEMENTS.. . . . . . . . . . . . . . . . . . . . . . . .

REVIEW SERVICE PROVIDERS' CERTIFICATE OF INSURANCE.. . . . . . .

OVERALL STAFFING NEEDS.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

WHAT CAN BE OUTSOURCED.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

CONSIDER NEW TECHNOLOGIES.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..

PRACTICAL STEPS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .COST INCREASES.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..

CANDID CONVERSATIONS.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..

MINISTRY AREA CHANGES.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..

PERSONALIZATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

SIGNIFICANT PROJECTS.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

CAPITAL RENEWAL PROJECTS.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..

KNOW YOUR DEFERRED MAINTENANCE AND PLAN ACCORDINGLY......

THAT’S A WRAP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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INTRODUCTIONWhere do you start when it comes to church facil ity budgeting? This question has

risen to the top of many inquiries we receive at Smart Church Solutions. We even

asked the Church Facil ity Management Solutions Facebook Group members which

topics members would l ike more information on. As you could guess, “budgeting”

was the top result.

More information on budgeting has been an ongoing demand. A few years back, we

heard the cry and developed The 4 Buckets of Church Facil ity Budgeting, covering

the importance of an intentional operating budget. But, we wanted to go a step

further.

Therefore, through this eBook, we wil l be providing specific steps and

you on the right path to handle budgeting initiatives moving forward.

WHERE TO START?Starting anything can be the most challenging part – we get it . Therefore, you wil l

learn two crucial starting points in the following sections to set yourself up for

success.

CONFIRM TOTAL HEATED AND COOLED SQUARE FOOTAGEOne of the first steps you need to take in gearing up for budget success is to

confirm your facil ity’s total heated and cooled square footage. The majority of the

national benchmarking and budget evaluations for facil it ies are based on your

square footage.

Without this information, you cannot determine if you’re over or under spending or

how to calculate replacement costs. The overall budget, income, and attendance

may vary from year to year. However, your facil ity size and square footage are far

less l ikely to adjust unless you have added more space or sold property. Because of

this reality, you must understand the impact of the size of your facil ity.

For example, if your church budget was $1 mill ion last year and your facil ity budget

was $200,000, that equates to 20%. However, if the church budget dropped to

2





was the top result.




further.

Therefore, through this eBook, we will be providing specific steps and


WHERE TO START?Starting anything can be the most challenging part – we get it. Therefore, you will


success.




square footage.












was the top result.




further.



WHERE TO START?Starting anything can be the most challenging part – we get it . Therefore, you will


success.




square footage.












was the top result.




further.





success.




square footage.












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square footage.












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was the top result.




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square footage.












was the top result.




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square footage.








https://www.facebook.com/groups/churchfacilitymanagement/

https://www.smartchurchsolutions.com/resources/ebook/the-four-buckets-of-church-facility-budgeting/

$900,000, and you didn’t reduce your facil ity’s square footage, then you wil l sti l l

need a minimum of $200,000 (plus inflation) to maintain the facil ity. Therefore, the

new percentage would be about 22.5%.Next, think about evaluating your uti l ity

costs. If you util ize the $/SF, you wil l need to know your square footage. You also

need to know your square footage to determine certain renewal and replacement

costs. For instance, if you determine the carpet in the children’s spaces needs to be

replaced, and the vendor tells you he can do it for $5.00/SF, you will need to know

the total square footage to determine the project’s cost.

REFER TO THE PAST – CAREFULLYLooking over last year's budget and actual spending is one of the most common

ways churches will determine the following year's budget needs. This is not a

terrible option, but it can come with some pretty significant pitfalls.

If we l ived in a perfect world where all inflationary factors were equal and facil ity

deterioration was at the same rate every year, this could work. But we don’t. We

have seen firsthand examples from churches on how referring to past dollars spent

only was the wrong approach.

We had a church spending over $2.00/SF for uti l it ies for a 200,000-square-foot

campus. They did not know that they should only be spending $1.25-$1.50/SF.

Therefore, they were spending about $100,000 more than the top of the normal

range. Their budgeting plan was to just add 3-5% to what they had been paying –

big mistake. They were already spending 25-37% more than they should have been

and were just going to add more to that? In this instance, solely relying on

“historical” data was the wrong approach, and it would have been a waste of

ministry dollars.

The cause of the overage in spending on util it ies was a matter of bad behavior. The

but instead of learning how to use it , they just let the system run. This is poor

behavior, which is the leading factor to most overspending (and underspending).

Another reason why you should not use past data to set future expenses is that it

assumes your facil ity is being util ized exactly as it was in previous years, and the

cost to maintain the facil ity is the same. Therefore, uti l ization and maintenance

costs should be addressed.

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$900,000, and you didn’t reduce your facil ity’s square footage, then you will sti l l


new percentage would be about 22.5%. Next, think about evaluating your uti l ity

costs. If you uti l ize the $/SF, you will need to know your square footage. You also






ways churches wil l determine the following year's budget needs. This is not a













ministry dollars.





assumes your facil ity is being uti l ized exactly as it was in previous years, and the





new percentage would be about 22.5%.Next, think about evaluating your util ity

costs. If you util ize the $/SF, you wil l need to know your square footage. You also



















ministry dollars.











costs. If you uti l ize the $/SF, you wil l need to know your square footage. You also



















ministry dollars.











costs. If you uti l ize the $/SF, you wil l need to know your square footage. You also



















ministry dollars.











costs. If you util ize the $/SF, you will need to know your square footage. You also



















ministry dollars.






























ministry dollars.






























ministry dollars.






























ministry dollars.








BIGGEST TAKEAWAYSLike we said above, starting is hard. So, here are a few challenges we have for you,

using the information presented above:

• Determine your heated and cooled square footage if you don’t know it already. If

you do know, take some time to verify the data. Remember, facil ity square footage

is calculated from the outside face of the structure and not the interior dimensions.

If you use interior dimensions, you wil l not have an accurate measurement.

• Go back through last year's expenses for util it ies, janitorial , and general

maintenance and plug the costs (and your square footage from above) and compare

them to the recommended best practices we have found based on our national

benchmarking projects. The best practice annual cost ranges are as follows:

• Uti l it ies: $1.25 - 1 .50/SF

• Janitorial : $1.50-2.50/SF

• General Maintenance: $2.25 - 3.50/SF

OVERSPENDING ANDUNDERSPENDINGYou now know your square footage and historical data, so what’s next? Data for

data's sake is actually pretty worthless; it should be the catalyst for intentional

action. So, let ’s take action. In the following sections, we will review the next steps.

RE-EVALUATE YOUR METHODS, PROCEDURES, AND STAFFDon’t breeze past this one. It is far too easy for all of us to use the seven words of

a dying organization: “We have always done it that way.” Don’t get lulled into

complacency just because you have done things a certain way in the past. Or that

your mentor did it a certain way. Or – worst of all – it is the easier way. Let’s look at

a few areas you may want to re-evaluate:

INSOURCING VS. OUTSOURCINGThis is a constant area of consideration for every facil ity steward. Do you insource

or rely on volunteers. Or, do you outsource tasks to outside labor, contractors, and

other third parties?

The good news: there is no right or wrong answer. When we consult with churches,

we see a near 50/50 split between insourcing and outsourcing. There are pros and







• Go back through last year's expenses for uti l it ies, janitorial , and general




• Uti l it ies: $1.25 - 1 .50/SF





action. So, let’s take action. In the following sections, we will review the next steps.





















• Util it ies: $1.25 - 1 .50/SF

• Janitorial: $1.50-2.50/SF















4











• Uti l it ies: $1.25 - 1 .50/SF


























• Uti l it ies: $1.25 - 1 .50/SF


























• Uti l it ies: $1.25 - 1 .50/SF





















If you use interior dimensions, you will not have an accurate measurement.





• Uti l it ies: $1.25 - 1 .50/SF


























• Uti l it ies: $1.25 - 1 .50/SF


























• Uti l it ies: $1.25 - 1 .50/SF
















cons with each approach based on your organization's culture, sense of “control”

(which may be an i l lusion), and facil ity budget.

REVIEW CONTRACTS AND SERVICE AGREEMENTSIn many cases, service providers work on an annual contract basis. Your job is to

review the current contracts and make sure the language sti l l meets your needs on

an ongoing basis. In addition, you may want to open the service category up for

alternate pricing from others. I am not suggesting making a change, but at least

determine if you are sti l l paying market rates for the level of service you deem

appropriate for the following year.

REVIEW SERVICE PROVIDERS' CERTIFICATE OF INSURANCEBelow are a few questions you should ask yourself. Understanding the answer to

these questions is more important than most people realize until an incident occurs

and you are on the short end of the coverage. Be proactive rather than reactive.

• Are all of your vendor ’s COI's current?

• Do they all have the required coverage?

• Is your organization listed as “Additional Insured?”

• Has your primary insurance carrier reviewed these docs?

• Have you shopped your general and property insurance recently?

OVERALL STAFFING NEEDS

•churches need one full-time equivalent maintenance (not cleaning) person for every

35,000 square feet of the facil ity.

• Do you have the RIGHT people in the RIGHT seats? This can be a little more

challenging to vet, but don’t be afraid to rock the boat a little for the benefit of

your organization. If someone is not suitable for the position, then you are doing

yourself, your organization, and them a disservice.

•you have established? Remember, you have established a culture, whether you are

intentional about it or not.

•

because you will pay for it multiple times over.














• Is your organization l isted as “Additional Insured?”






• Do you have the RIGHT people in the RIGHT seats? This can be a l ittle more

challenging to vet, but don’t be afraid to rock the boat a l ittle for the benefit of





•



(which may be an il lusion), and facil ity budget.
























•

because you wil l pay for it multiple times over.


















•churches need one full-time equivalent maintenance (not cleaning) person

for every 35,000 square feet of the facil ity.







•


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•


WHAT CAN BE OUTSOURCEDWe have found that when a church outsources much of its maintenance, the FTE

the outsourcing, so this is not a magic bullet. Also, the solution of “we wil l just get

CONSIDER NEW TECHNOLOGIESTo my “mature” facil ity stewardship friends, considering new technology may sound

scary or intimidating. It does not need to be. Technology advancements are moving

at an incredible rate. Remember, the iPhone is only 13 years old. Can you imagine

not having a smartphone? In the world of facil ity management and stewardship, the

pain of lacking the personnel to get things done. Let me reiterate we are not trying

removing tasks from their plate so they can focus on tasks only a human can

perform.

The following are some of the most straightforward options that provide the

greatest return on investment:

• HVAC Automation: Don’t let this freak you out. Automation is not rocket science.

It merely allows a machine (computer, software, phones, tablets, etc.) to perform

tasks that have previously been the role of a human. In today’s world of wireless

controls, it is easier than ever to compile a connected HVAC system to the cloud. In

communicate directly with your organization's event scheduling software, l ike

eSPACE.

• Door Access Control: We have found that more and more churches are uti l izing

digital door access controls. Why not automate these commands to lock and unlock

unlock doors.

• Digital Signage: I hate to sound like a broken record, but the principle above also









perform.








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unlock doors.










perform.








eSPACE.



unlock doors.

• Digital Signage: I hate to sound l ike a broken record, but the principle above also









perform.








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unlock doors.



the outsourcing, so this is not a magic bullet. Also, the solution of “we will just get







perform.






controls, it is easier than ever to compile a connected HVAC system to the cloud.

In


eSPACE.

• Door Access Control: We have found that more and more churches are util izing


unlock doors.


6

applies to your interior digital signage and room signs. There is no reason not

to automate them with the integration with your event scheduling software.









perform.








eSPACE.



unlock doors.










perform.








eSPACE.



unlock doors.










perform.








eSPACE.



unlock doors.










perform.








eSPACE.



unlock doors.


https://www.smartchurchsolutions.com/software/

applies to your interior digital signage and room signs. There is no reason not to

automate them with the integration with your event scheduling software.

• Extras: There are other things to consider when automating, such as lighting,

early detection sensors, water detection sensors, predictive maintenance sensors,

the l ist goes on.

PRACTICAL STEPSNow that you are busy compiling, evaluating, and digesting ideas and numbers, let ’s

talk about practicality. In the sections below, we will provide some concepts and

steps to take that are very practical but often overlooked. I want to thank Patrick

Hart, Executive Director of NACFM, for his input and inspiration on the items below:

COST INCREASESCost increases are inevitable, so we must plan accordingly. Are you paying the same

for electricity, gas, or water as you did last year? How about five years ago? The

reality is this: prices increase. We need to determine, or at the very least, make an

educated projection as to what these cost increases wil l be to budget properly. For

instance, some areas to consider are the following:

• Uti l ity costs, including potential demand rate increases and tax rates (Note: If you

are in Canada, you need to plan for the increased Carbon Tax increases)

• Vendor costs, including general hourly fees and PM contract increases

• Consumable material costs

• Insurance costs

• Vehicle fuel

• Infrastructure costs, such as telephone, cell phone, internet, etc.

CANDID CONVERSATIONSYou need to have a very candid discussion and review with your team about the

mindset of stewardship.

As facil ity stewards, we must always be mindful of two concepts:

(1) These are God’s Facilities: We Have Been Entrusted to Steward Them





the l ist goes on.














• Insurance costs

• Vehicle fuel










the l ist goes on.














• Insurance costs

• Vehicle fuel








• Extras: There are other things to consider when automating, such as l ighting,


the l ist goes on.

PRACTICAL STEPSNow that you are busy compiling, evaluating, and digesting ideas and numbers, let’s

talk about practicality. In the sections below, we wil l provide some concepts and












• Insurance costs

• Vehicle fuel





(1) These are God’s Facil ities: We Have Been Entrusted to Steward Them





the l ist goes on.








educated projection as to what these cost increases will be to budget properly. For






• Insurance costs

• Vehicle fuel







early detection sensors, water detection sensors, predictive maintenance

sensors, the l ist goes on.










• Util ity costs, including potential demand rate increases and tax rates (Note: If you




• Insurance costs

• Vehicle fuel






That means we are not entitled to them. We cannot go about haphazardly in our

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the l ist goes on.














• Insurance costs

• Vehicle fuel










the l ist goes on.














• Insurance costs

• Vehicle fuel










the l ist goes on.


talk about practicality. In the sections below, we wil l provide some concepts and












• Insurance costs

• Vehicle fuel






https://www.smartchurchsolutions.com/software/

https://nacfm.com/default.aspx


(2) Nearly Every Dollar Your Facility Team Spends Comes From the

Pockets of Your People.

From the successful businessman to the widow on a fixed income, this concept has

always helped keep my perspectives in l ine. When we grasp that the money we

spend on the uti l ity bil l is being paid for by the generosity of people who give

sacrificially, it changes our mindset. It makes us evaluate the stewardship aspects.

Good stewardship does not always mean sticking with cheap or cutting corners or

reducing budgets. Being a good steward may actually mean being proactive and

spending the right amount of money to care for and maintain our facil it ies to

continue our ministry.

MINISTRY AREA CHANGESThe reality here is the facil ity team rarely “uses” the facil ity. In most cases, the

facil ity team is maintaining and managing the facil ity for others to use. This means

we must understand how it wil l be used in the coming years.

Are there new programs planned? Will we have VBS this year, and for how many

kids? Does the pastor plan to hold a conference at the church? Will we be adding

an additional service on the weekend? Is there a plan to add (or close down) a

school or daycare? As facil ity stewards, it is our responsibil ity to understand the

ministry initiatives of the church.

Then we must determine how that impacts our budgets. Increased programs may

soap, sanitizer), and increased uti l ity costs and cleaning cycles.

PERSONALIZATIONThe following section will focus on three interconnected components often

neglected in the facil ity budgeting process. A couple of deferred maintenance and

life cycle items are often overlooked entirely during forecasting. Can you guess

where I am heading?

Significant Projects

























where I am heading?


























where I am heading?






always helped keep my perspectives in line. When we grasp that the money we




















where I am heading?























PERSONALIZATIONThe following section wil l focus on three interconnected components often



where I am heading?






always helped keep my perspectives in line. When we grasp that the money we




















where I am heading?
























l ife cycle items are often overlooked entirely during forecasting. Can you guess

where I am heading? As we look at future facil ity budgets, we must identify

any significant projects on the horizon. These could include the following:

8


(2) Nearly Every Dollar Your Facil ity Team Spends Comes From the




spend on the util ity bil l is being paid for by the generosity of people who give



















where I am heading?


























where I am heading?


As we look at future facil ity budgets, we must identify any significant projects on

the horizon. These could include the following:

SIGNIFICANT PROJECTSAs we look at future facil ity budgets, we must identify any significant projects on


• Additions: Increase the existing footprint

• Renovations: Changes to existing spaces

• New Construction: Adding new facil it ies to the existing campus or other locations

• Significant upgrades: These are often combined with capital renewal projects. In

this case, these projects could include the following:

• Adding handicap-accessible elements

• Install ing a fire alarm system or fire sprinklers in a building without one

• Upgrading to LED lighting

• Adding alternative fuel sources




CAPITAL RENEWAL PROJECTS

of reaching the end of l ife for a piece of equipment or facil ity system. If you util ize

a tool, such as our free Life Cycle Calculator, you could review this before setting

your facil ity budget to plan accordingly.

We often see churches have not adequately planned for inevitable capital renewals

and do not have adequate funds in a capital reserve account — ouch.

An evaluation of any item in the Life Cycle Calculator that may be set for

replacement in the next 1-5 years should also be identified. While noting the items

needing attention soon is critical, you should also determine if items with

end-of-l ife terms erode your operational budget. For example, let's say you have an

HVAC unit that needs to be replaced in two years. However, you're experiencing an

excessive amount of service calls for that specific unit. Now, you may need to

accelerate the replacement. By doing so, you wil l save on operational budget costs.





























accelerate the replacement. By doing so, you wil l save on operational budget costs.





























accelerate the replacement. By doing so, you will save on operational budget costs.





















































































































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of reaching the end of l ife for a piece of equipment or facil ity system. If you uti l ize









































KNOW YOUR DEFERRED MAINTENANCE AND PLAN ACCORDINGLYDeferred maintenance is the facil ity kil ler. In many cases, it is the “silent” kil ler. In

others, it is as blatant as the noses on our faces. Smart Church Solutions has

https://www.smartchurchsolutions.com/software/life-cycle-calculator/



performed Facil ity Condition Assessments for over 5 mill ion square feet of ministry

facil it ies. There is not a single church that did not have a significant l ist of deferred

maintenance items.

As a reminder, deferred maintenance is the practice of postponing maintenance

activities such as repairs on both real property and personal property to save costs,

meet budget funding levels, or realign available budget monies. The failure to

perform needed repairs could lead to asset deterioration and, ultimately, asset

impairment.

Generally, a policy of continued deferred maintenance may result in increased

costs, asset failure, and even health and safety implications. Planning and

preventive maintenance, along with adequately funding your annual maintenance

accounts, is much cheaper in comparison to deferred maintenance.

THAT’S A WRAPThat is a wrap for facil ity budgeting. But we don’t want to leave you empty-handed.

For any questions or concerns you may have regarding budgeting, reach out to Lee

Cool at [email protected] to see how Smart Church Solutions can help.

Onward, and happy budgeting!





maintenance items.





impairment.













maintenance items.





impairment.













maintenance items.





impairment.













maintenance items.





impairment.













maintenance items.





impairment.













maintenance items.





impairment.













maintenance items.





impairment.









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maintenance items.





impairment.








We also want to offer several additional resources as you begin your budgeting process:

• Our Life Cycle Calculator can help set you on the right path to being the best steward of the facil it ies entrusted to you.

• The Four Buckets of Church Facil ity Budgeting is a guide to help you determine what your budgets should be and the various buckets monies should be allocated.

• The 2020 Church Facil ity Operations Benchmarking Report shows how churches of comparable size and operational tempos performed last year.


https://www.smartchurchsolutions.com/cool-solutions-consulting/facility-condition-assessment/

https://www.smartchurchsolutions.com/resources/ebook/the-four-buckets-of-church-facility-budgeting/

https://www.smartchurchsolutions.com/software/life-cycle-calculator/

https://www.smartchurchsolutions.com/resources/additional-resource/2020-church-facility-operations-benchmarking-report/

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