Transcript Effective Budget Procedures for Churches

Regional Thrive Tours
2012-2013
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The church budget is a “ministry action plan”
or a “M.A.P.” that shows the way the church
will make its journey this year to fulfill what
God has called it to do.
It is often expressed in the form of a line item
budget and/or a narrative budget.
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A line item budget objectively serves as a
guideline to compare income to
expenditures and to pace yourself through
the fiscal or financial year.
2013
Annual
Budget
Monthly
Budget
Revenue (Income)
Tithes, HPL1/L2, TC,
HLD, Heritage
$111,962
$9,330
$12,000
$1,000
Fundraiser(s)
$6,000
$500
Other
$3,600
$300
$133,562
$11,130
People (Payroll)
Pastor @ limit
$56,442
$4,704
Property (Operations)
$37,452
$3,120
Programs (Ministries)
$39,668
$3,306
Total Expenses
$133,562
$11,130
Net (Gain/Loss)
$0.00
$0.00
Expense Offerings
Total Revenue
Expenses
Monthly YTD
Actual
Budget
YTD
Actual
YTD
Variance
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A narrative budget subjectively declares,
“This is who we are as the people of God and
this is what we do with the resources with
which He has blessed us.”
Total Budget $133,562
Developing Leaders,
$10,552.00 , 8%
Harvest, $15,214.00 ,
11%
Prayer, $5,090.00 , 4%
Pastoral Care,
$56,442.00 , 42%
Love,
$8,812.00 ,
Pastoral Care
Ministries Support
Love
7%
Prayer
Ministries Support,
$37,452.00 , 28%
Harvest
Developing Leaders
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Enables responsible stewardship of resources.
Creates openness to a growing vision.
Allows for responsive funding of ministries.
Defines priorities in planning ministry needs.
Communicates the need for financial support
to the congregation.
Increases confidence and trust in church
leaders.
Provides an effective tool for stewardship
education.
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Eight Steps to creating an effective budget:
1. Form the Budget Development Committee
(BDC) from the Finance Committee (FC).
2. Ministries review previous year and preview
next year via Budget Request Forms.
3. BDC evaluates Budget Request Forms.
4. BDC prepares line item budget.
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Eight Steps to creating an effective budget:
5. BDC presents proposed line item budget to
Finance Committee (FC).
6. FC prepares narrative budget from line item
budget.
7. Present both line item and narrative budgets
to church conference for approval or
amending.
8. Communicate narrative budget to local church
via stewardship campaign.
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Form the Budget Development Committee
(BDC) from the Finance Committee (FC)
◦ The pastor appoints three or four persons to the
BDC from the FC.
◦ At a minimum, these should include the pastor, the
finance chair, and the treasurer.
◦ The BDC schedules meetings and a timeline for the
budget process (usually 3 months before budget to
be presented to conference).
◦ CALENDAR YEAR | FISCAL YEAR | REPORTING YEAR
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Ministry Directors meet with their ministry
teams and review previous year and preview
next year (using the Budget Request Form)
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What are the primary needs of our congregation
that are met thru our ministry?
What did we do effectively?
How can we improve our ministry?
Do we need to phase out anything?
What new endeavors need funding?
What is the amount of funding needed to
realistically operate our ministry next year?
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BDC evaluates Budget Request Forms
submitted by ministry directors.
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Review funding requests from each ministry.
Do these requests contribute to the fulfillment of
the church mission and vision?
Do these requests support our four core values?
Interview Ministry Director(s) as needed for
clarification.
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BDC prepares line item budget.
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Consider church’s vision, mission, and values.
The treasurer should prepare two Income &
Expense Reports: one should categorize the
previous year, subdivided by months; the other
should report the annual Income & Expense
totals for the last five years.
Note any trends, new vision, or developments
over the last few years that may impact your
budget (i.e., depressed local economy; loss of
members; increased expenses; expected major
repairs; hiring a youth pastor; etc.).
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BDC prepares line item budget.
o
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Identify and list all revenue streams by
category (i.e., tithes, offerings, fundraisers,
church business income, other).
Adjust as needed for observed trends or
developments.
Total all reliable revenue over past year and
divide by 12 = average projected monthly
operating income available to be budgeted.
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BDC prepares line item budget.
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Identify all of the expenditures (by category)
for the past year. Usually, there are three
major categories: people (payroll), property
(operating expenses), and programs
(ministries).
Adjust as needed for observed trends, new
vision, or developments.
Total all disbursements for past year and
divide by 12 = average projected monthly
expenses.
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BDC prepares line item budget:
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People (Payroll) deals with pay packages (i.e.,
salary and benefits) for staff: lead pastor,
youth pastor, custodian, secretary, etc. Most
churches use 40%-50% of their budget here.
“People” are our chief resource!
Property (Operations) deals with administrative
costs: mortgage, rent, insurance, utilities,
maintenance, repairs, etc. Most churches use
25%-30% of their budget here.
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BDC prepares line item budget:
o
Programs (Ministries): 10% to IO, 2% to state
Youth Group, Children’s Church, Specialized
Ministries, VBS, Choir, Missions/Harvest
Partners, Local Outreach, Worship Team,
Seminars (i.e., SOPAS), Sunday School, Youth
Camp tuitions, etc. Most churches use 25%30% of their budget here.
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BDC presents proposed line item budget to FC:
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FC considers BDC’s proposal.
Notes any trends, concerns, new vision, or
developments over last few years.
Confirms the minimum average amount received
and disbursed on a monthly basis and verifies
projections from this data.
Makes changes or adjustments in all categories, as
necessary.
Staff and/or Ministry Directors contacted for
additional clarification, as needed.
Finalizes line item budget to present to conference.
2013
Annual
Budget
Monthly
Budget
Revenue (Income)
Tithes, HPL1/L2, TC,
HLD, Heritage
$111,962
$9,330
$12,000
$1,000
Fundraiser(s)
$6,000
$500
Other
$3,600
$300
$133,562
$11,130
People (Payroll)
Pastor @ limit
$56,442
$4,704
Property (Operations)
$37,452
$3,120
Programs (Ministries)
$39,668
$3,306
Total Expenses
$133,562
$11,130
Net (Gain/Loss)
$0.00
$0.00
Expense Offerings
Total Revenue
Expenses
Monthly YTD
Actual
Budget
YTD
Actual
YTD
Variance
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FC prepares narrative budget from line item
budget:
o
o
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Decide on four to six broad ministry areas for
your narrative budget. You could use the core
values and add two more.
Write one or two descriptive paragraphs for
each ministry area. Tell how they are impacting
the community, changing peoples’ lives,
affecting the missions abroad, etc. Use pictures
if possible.
Use a pie chart and percentages to visualize
how the budget is disbursed.
Total Budget $133,562
Developing Leaders,
$10,552.00 , 8%
Harvest, $15,214.00 ,
11%
Prayer, $5,090.00 , 4%
Pastoral Care,
$56,442.00 , 42%
Love,
$8,812.00 ,
Pastoral Care
Ministries Support
Love
7%
Prayer
Ministries Support,
$37,452.00 , 28%
Harvest
Developing Leaders
NO MISCELLANEOUS CATEGORY
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Love: $10,762
The Greatest Commandments are to love God
whole heartedly and to love one another as we
love ourselves. We love God through worship
Him together as we are led by our Praise Team
and Choir who learn and then teach us new
songs regularly and who are assisted by our
state of the art A/V system. Too, we love one
another by supporting and participating in the
community food pantry, clothing closet, soup
kitchen and benevolence center to assist
families in need. Too, our…
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FC presents both line item and narrative
budgets to church conference for approval or
amending. Though different in appearance and
function, these should complement each other.
o The line item budget’s focus is an objective,
o
neutral, and coldly sterile representation of the
figures with an emphasis on numerical accuracy. It
is often difficult to comprehend.
In contrast, the narrative budget’s focus is a
subjective, biased, and warmly passionate
information of the ministry areas of the church with
an emphasis on how the financial support will be
directed to make these ministries work. It is quickly
and easily understood.
LEGAL IMPLICATIONS OF AN APPROVED BUDGET
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FC communicates narrative budget to
local church via stewardship campaign
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Develop a communication channel (i.e., power point
presentation, dvd, webinar, brochure, handout, etc.)
and inform the church of the “M.A.P.” or “ministry
action plan” for the coming financial year.
Consider an annual Appreciation Banquet where you
express your gratitude to everyone who gave and
inspire others to come on board. Be inclusive; not
exclusive.
Use this banquet to launch your financial
stewardship campaign for the new year (i.e., show
dvd, provide brochures, feature the six main areas
of ministry, etc.).
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FC communicates narrative budget to
local church via stewardship campaign
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Schedule messages over the next four to six
Sundays on stewardship and focus on one area of
ministry each week (include bulletin inserts, use dvd
presentations, use testimonials, etc.).
Every two to three months (i.e., at quarterly
conference), give new emphasis to these areas.
Provide updates on how the positive results of these
areas. Inform congregation of challenges being
faced, etc.
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Additional resources (info & examples):
◦ See Building a Narrative Budget at
http://www.centerforfaithandgiving.org/Resources/
AdministrativeResources/BuildingaNarrativeBudget/
tabid/950/Default.aspx
◦ http://cornerstonefund.org/learn/church-finance
◦ See Treasurer’s Guide, then Budget Procedures,
http://cogop.org/ministries/stewardship/freeresou
rces.html