Acctg and Church Budgets 5009-02 ZZchu

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                           TO:  Interested Churches                                                                                          FROM: Jim Bramer, Retired CPA-Auditor
                                                                                                                                                                     FILE: 5009-02/Chu

                           RE:  Church Budgets and Accounting                                                                    Originated August 1998                          


        Below is a hypothetical Online Email (EML) thread between any one of the following MFTeam members: PAT (Ministry Chief Executive), LEE: (Ministry Volunteer Treasurer), or FRAN: (Ministry Computer Bookkeeper) and  Jim@bcidot.org    


FR: PAT

            To remind you, Jim, we have an OPERATIONS set of books that segments our Church finances between one "General Purpose Fund- GPFund" and then into all of the various "Special Purpose Funds - SPFunds." Money flowing to the GPFund is spent for the general Church Ministry (including Missions), while Designated and/or SetASide monies flow through these SPFunds.

            Jim, our MFTeam needs whatever you can share with us on the general topic of "Budgets" within this context.

FR:   Jim@bcidot.org

        Thank you, PAT. It pleases me that your records and fiscal administration recognizes the fundamental uniqueness of Church Finances ..... namely the need to appropriately handle such things as the SPFunds and the GPFund. Please include next in this THRD a sample of your fiscal statements that come from of your OPERATIONS set of Books.

FR: PAT

OK.... Please see below:

            PHOTO STATEMENT as of October 31/xxxx

Cash and/or Bank Deposits

$ 35,000

Amounts Due Us

$ 15,000

Total

$ 50,000

Liabilities

    

  Due to Vendors

$ 500

  Trust Funds

$ 500

$ 1,000

SPFund Balances

  Total of Donor Preferences

$ 1,500

  Total of Virtual Self

     Funding Church Programs

$ 500

$ 2,000

Total of Board SetASides

$ 2,000

Total of Board Discretionary Funds

$ 40,000

GPFund Since Jul 1, thru Oct 31, XXXX

$ 5,000

Total

$ 50,000

- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

Church Wide VIDEO Actual to Budget Report

                     July 1, xxxx through October 31, xxxx

Budget

Annual

Actual

To Date

Variance

Budget

Donations Income

$105,000

Expenditures

  Sal/Benefits

xx,xxx

xx,xxx

x,xxx

xx,xxx

  Operate Supp/Expenses

xx,xxx

xx,xxx

x,xxx

xx,xxx

  Mission

xx,xxx

xx,xxx

x,xxx

xx,xxx

  Debt Service

xx,xxx

xx,xxx

x,xxx

xx,xxx

  SetASide

xx,xxx

xx,xxx

x,xxx

xx,xxx

  Capital Purchases

xx,xxx

xx,xxx

x,xxx

xx,xxx

    Total

$100,000

$98,000

$2,000

$ 300,000

Actual Gain (Loss)

$ 5,000

- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

FR: JIM

        Great, PAT, that the foregoing reports show how the MFTeam has seen fit to structure your fiscal matters along the lines that we have discussed down through the years. Someone reading this THRD may need explanation of some of your terminology and format. Please access our  Sitemap  for more resources.

        Let me share the following "CHURCH BUDGET TRUISMS"

        A> Church spending controls are essential.
     
  B> Whenever a Church authorizes a SPFund , it concurrently authorizes the expenditure of that SPFund balance for that specified purpose; therefore a fiscal year budget for each SPFund is not needed.  Contact me at  Jim@bcidot.org   about the need to budget for expenditure transactions that flow via a self funding SPFund operations at the church.
        
C> The Annual GPFund Budget is the needed authorized expenditures for that year. Such expenditures are generally divided up by GPFund spending groups (I like to reference them as D)ollar A)ccountability G)roups - DAGs.) Then there are various expenditure categories within each group; e.g.: Salaries/Benefits, Operating types of Supplies and/or Expenses, Missions, Debt servicing, SetASides (Transfers to a SPFund) and Equipment, etc. procurements.  Do your best to assign the annual expense to the applicable seasonal month of the fiscal year -- do NOT divide the annual budget by 12 and insert same for each month.
      
  D> The income flowing to a Church GPFund is very seasonal and/or volatile; a steady known stream is the exception rather than the rule.
        
E> Therefore, a Church rightfully can spend only what comes into the GPFund, regardless of the Annual Budget authorization.  Please take special note of the "you can only spend what is in the Box - if the Box is empty, no can spend"  system as outlined when you click here.
       
  F> Therefore, the Annual Budget is  NOT SET IN CONCRETE; it should be either prudently increased or decreased.
     
   G> The MFTeam and the Church staff MUST regularly make wise decisions from such fiscal information as: 1> Weekly amount of GPFund Income; 2> Amounts of GPFund Income as assigned for Ministry absolutes; 3> GPFund Income residuals for authorized non-absolutes; and 4> SPFund Balances.
      
  H> It is appropriate for the MFTeam/Staff to temporarily do inter-fund borrowing since some spending groups need their funds unevenly throughout the year.
         I> Annual budget authorizations expire at the end of each fiscal year; unused authorizations DO NOT automatically carry forward to the next year. If it does not happen within this year's ministry/plans, then include it as a part of the new year's plans converted to dollars, yea the budget, etc.
        
J> The Church should have  Finance Policies  in place that authorizes the Leadership Board to make approved changes to the congregational annual budget --- some policies allow an increase of some 10% of the congregational approved annual budget - if annual budget is $500,000 then the Board can change up to $50,000, etc.  We join a Church administration in hoping that it is NOT necessary to run a mid-year revised Annual Budget back to the congregation;  it is NOT wise for the congregation to micro-manage.

FR: PAT

        The above TRUISM list, or guides/principles, should help us as we work through the best way to effectively utilize BUDGETS at our Church. Thank you, Jim. Anything else on this topic?

                        FR: JIM

        Yes, remember, BUDGETS are a tool in order for you as a MFTeam to live within your means. You might find info about the 'sacred-ness of the annual budget'  of interest when you  click here.

        1> Within the Church's fiscal facts and culture, operative verbs are: 'Communicate,'   'Educate' and 'Take appropriate action.'
        2> Calendarize Budget activity to insure that 'all the bases are touched'.
        3> The Leadership Board might consider a Mid-Year Congregational Budget session when present Annual budget changes are as much as 20%.
        4> Ask us for Samples of other Weekly reports that assist the Church to prudently assign its GPFund income and live within the actual GPFund Income.
        5> Ask for Sample reports where financial status is regularly projected for some 90 days forward; especially near the fiscal year end  (The  "Ten plus Two"  reports, etc.).
        6> Ask for some information on an alternative "Purchase Order" method.
        7> A  "Fiscal Operating Manual"  needs to thoroughly cover this "Budget" topic.
        8> Ask for a  "Glossary of Church Budget Terms."
        9> Hopefully, the following  "Inter-Office Memo"  content will be of assistance to you.

 = = = = = = = = = = = = = = = = = = = = = = = =  = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = =  = = = = = = = = = = = = =

TO: Church Purchasing Agents                                                                                                                              FROM: MFTeam

RE: Buying Interrogation Flow Chart                                                                                                                   DATE: xx/xx/xxxx

= = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = =

Question: Is the requested purchase a part of the annual budget??

         If the answer is YES - - -

          Then does your latest "A)ctual to B)udget DAG" (A to B) report show unspent Budgeted money?

*****************************

         Watch for seasonal aspects ... or expenditures that don't flow evenly during the year.
         The Annual Budget process should anticipate, when possible, the actual monthly needs and NOT simply divide up the annual authorization amount by 12 and allocate such an amount for each month. See Inter-fund borrowing statement below.

****************************

     If the answer is NO - - -

        You can not exceed authorized annual Budget amount; it is very unlikely that you can do any buying.

     If the answer is YES - - -

        The Church Staff members then consults a  "Weekly Assignment"  report to see if any money remains after weekly SetASides for the following future purposes:

            1> For next Payroll
            2> For other known obligations
            3> For next Missions obligation

Question: Is money available after these SetASides?

          If the answer is YES - - - -

                             OK to make purchase in the normal manner.

          If the answer is NO - - -

    Since these purchase resources are not available,  then follow the MFTeam mandated policy (such as; this person makes decisions up the $1,000, and the MFTeam thereafter) as to the possibility of temporarily borrowing from other Church Funds. It is probable that the expenditure can NOT be made at this time.

FR: PAT

            Thank you again, Jim, for these resources on this most important topic.


  Please Click here for list of Church resources here on www.bcidot.org. This publication originated in August 1998.   Click here and go to List of threads (THRDs) at www.bcidot.org  and was  UPTD: April 24, 2010  

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