Budgets at a Ministry    0010-01    ZZall

                                                             - - - Rejoice in the Lord always ... again I say Rejoice !!! - - -


                           TO: Interested Ministries                                                                                FROM: Jim Bramer, Retired CPA-Auditor 
                                                                                                                                                          FILE: 0010-01/all

                            RE: Budgets at a Christian Ministry                                                            Originated:  November 1981                                     


BUDGETS AT A CHRISTIAN MINISTRY

            I prefer to view a Christian Ministry's Budget as an expression in dollars of it's upcoming plans. Or the Ministry must plan ahead (at least annually) as unto the Lord - and convert its plans to dollars (Budget if you please) that is required to meet such plans. 
            This, of course, applies to discretionary monies and is for Internal, or daily application (not
External) GAAP   reasons as it serves "Spending Control" purposes as you monitor such Ministry monies within GPFund categories.  There is also the need to readily know the balances within the SPFunds -- since SPFund running balance information usually determines if money can be spent, etc.  
             Two Ministry Budget oddities come to mind ---- as discussed when you Click Here --- namely a Ministry frequently needs the GPFund to Budget for mandatory "Debt Retirement" and discretionary replacement of "Furniture and Equipment" --   plus some Ministries  SETASIDE  GPFund  monies and place within specified SPFunds  for applicable  reasons.   It is the overall reporting goal for the Ministry's financials to appropriately reflect, for control and monitoring purposes, monthly and year-to-date "Actual to Budget" information.  Please Click Here and Here for both information on this topic.

REASONS  FOR  A  BUDGET

    1.   CONTROL OVERSPENDING - the obvious, traditional reason.
    2.
 SIGNAL INCOME VARIANCES - identifying variances above or below projections in income provides an impetus for changes on the expense side (one is easier than the other).
    3.
   TO REDEFINE OBJECTIVES - a good budgeting process identifies objectives first and funds programs to meet those objectives.
    4
.   FUTURE PERSPECTIVE - "lifting one's head from the plow to look ahead" is essential on a periodic basis.
    5.
  BUILD PLANNING SKILLS - reducing one's projections to writing and keeping them within the hold of limited resources is a difficult, demanding task.

CONFIGURATION  OF THE BUDGET

    1.   BY NATURAL EXPENSE - (e.g. salaries, telephone, maintenance) without regard to the programs involved.
    2.
 FUNCTIONAL BUDGETING - determine each program and each supporting service and develop individual budgets for each by natural expenses.
    3.
 SPAN OF CONTROL (SOC) - each manager has a budget or group of budgets to implement without regard to the functional divisions.
    4.
  SINK OR SWIM (SOS) - each program or employee (i.e. missionary) is attached to a type of income and must live within.  Click here for info about how you can only spend what is in the "Bux Box", etc.
    5.
  COMBINATION - in practice, an organization will choose any or all of the above for various parts of its budget. However, an organization should take every effort to delineate "functions" within the entire budget since final expenses must be reported on a functional basis to be according to generally accepted accounting principles.

TECHNIQUES  OF  BUDGETING

    1.   TRADITIONAL - rehash prior budget according to inflation or fortune.
    2.
  FROM THE TOP - a board or administrator decrees who and what shall receive funding.
    3
   
FROM THE BOTTOM - requests are solicited from "grass roots" and evaluated by an administrator or committee.
    4.
  SQUEAKY WHEEL - the need with the most persuasive advocate receives funding without regard to organizational objectives.
    5
   
PERCENTAGES - percentages are computed on same predetermined basis and the total pie is sliced accordingly.
    6.
    ZERO-BASE - reducing all budgets to zero and evaluating all programs and functions, including new alternatives to determine priority and amount of funding.
    7.    Any combination of the above.
    8.    Please Go Here  for an alternative to the usual line item budget.

 PRESENTATION

    1.     INCREMENTAL - each month has a budget with the accumulation of prior and present months forming the year-to-date budget comparisons made for both current and year-to-date periods.
    2.
   ANNUAL - an annual budget is approved and year-to-date expenses are compared. "Balloon Impact" of particular budget items must be identified and explained.
    3.
   OVER EXTENDED/UNEXPENDED - a "variance from budget" column with percentages focusing attention where needed.

CAN  A  BUDGET CHANGE ?

    1.     YES. Taken to an extreme, the budget can be manipulated to the point of being meaningless, but in practice, periodic re-evaluation of the budget is both practical and valuable.
    2.
       NO  Some organizations cast in concrete an annual budget and force explanations or apologies from management when things do not match up.

WHEN  TO  BUDGET ?

    1.    As close to the year end as possible.  Ask us about 9+3 or 10+2 resources.
    2.    Absolutely before the beginning of the year.
    3.    A formal budget calendar should be implemented to force action on this important task.
    4.    Short range and long range multi-year budgeting or projecting is helpful and is essential for certain organizations and projects.

COMPUTERS  AND  THE  BUDGET

    1.    Any degree of complexity in dividing the budget, e.g. by function, SOC or SOS (see Configuration of Budget above), may mandate the use of a computerized general ledger to properly keep all of the activities separate.
    2.    When developing or purchasing a general ledger program, a budget capacity is a must, since the final reports may provide complete comparisons including variance column, ratios, increments, etc. Computers programs are ideally suited to such exhaustive "number-crunching."   Click here for some
 'Actual to Budget' samples via QBooks software.
    3.    Computerization of records should provide more frequent and timely reporting of the budget.
  Make good use of spreadsheet programs, like Excel, etc.


            See other links below for Budget info, or an alternative to the usual Budget:

                   http://www.bcidot.org/all/0011-01.html   
                   http://www.bcidot.org/all/0053-01.html
                   http://www.bcidot.org/fwi/0910-03.html
                   http://www.bcidot.org/all/0002-99.html


 The bulk of this publication originated in November 1981 and was .  UPTD: November 15, 2010

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         (1) An Onliner Document, or WRIT (Writing), may be applicable to all Ministries, or it may be designed for just groups like: Evangelical Church, School, Missionary Agency or Organization, Christian Camp / Conference, or other named group.
           (2) WRIT formats include the perspective of Jim@bcidot.org  via IOMs (Inter-Office Memos) to the Ministry Finance Team (MFTeam); THRDs, a hypothetical Online conversation with members of the MFTeam; GLEANINGS, or Scripture within context of the MFTeam; FWIW; A periodic editorial (For What it is Worth); TRUISM, or believed Ministry Finance principles; and FAQ, response to Frequently Asked Questions