Annual Budget - Sacred? 0910-03 ZZfwi

                         TO:   Mostly Interested Church Onliners                                                                 FROM: Jim Bramer. Retired CPA-Auditor
                                                                                                                                                                     FILE:  0910-03/fwi

                          RE:  Budget - Annual/12 Months - Sacred?                                                           Originated in April 2001

       Not only do I have an "Ax to Grind"  today, but I have a  "Bee in my vocational Bonnet."  

       When I got out of the Army in 1956, our family moved to Spokane, Washington where I pursued my education and CPA training.  We were a part of a Baptist Church and it was not long before I become the Church Treasurer.  Of course, one of the primary aspects of this responsibility had to do with the General Operating Fund Annual Budget.
       Back then ( as the grandkids would say --- a looooooong  time ago), and even today, we had to deal with the "Sacredness" of the General Operating Fund  Annual Budget.  By "Sacredness",  I mean such things as:

  •     Remember we are a congregation driven Church and it has to make all of the money decisions.

  •     My goodness.... in no way could it be changed --- it is set in concrete, unless we call a congregational meeting we can not authorize that needed $500 item.  

  •     An immediate wonderful opportunity for Church Ministry came our way but no way could we make Annual Budget adjustments. 

  •     We really should make some Church Personnel changes that is not possible because the Annual Budget can not be changed.

  •  One of you Onliners recently shared a quote from one of their finance officials:  "It's easier to get forgiveness, than it is to get Annual Budget change approval"there seems to be grain of truth in this quote.

  •     Even when our General Fund  income was not enough we still had to comply with our Annual Budget .... even if we had to borrow internally from other Church Funds - or even from external sources.

  •     Oh my goodness ..... looks like we have money in the General Fund  and I have not spent last year's budget. I must think of some way to spend it.

  •     A recognized emergency has come up that needs action right now. But no way can we do it because it first needs congregational approval, etc.

       Obviously, I am doing some exaggerating above,  but I trust you get my point. We need to get away from much of the above archaic "mind set" as we righteously handle such matters. What about the believed  Budget Truisms  below .....

B U D G E T     T R U I S M S

  1.     Yes..... we need authorized spending controls, or a Budget. But we also must be a Ministry that can rightfully respond to needs --- especially if we have available resources.  

  2.     Remember, the budget is supposed to be a "personification of the known Ministry's plans as converted to dollars." Plans do not remain the same for an entire 12 months, or during an Annual Budget  time. 

  3.     The Ministry must have the necessary accounting system, and structure, in order to timely provide information to decision-makers as they live within advance dollar authorizations, yea Budgets.

  4.      In a Church situation, most congregations are the final spending authority, but there must be some righteous ways to meet needs between necessary congregational meetings.

  5.      A Church's by-laws could provide the Board of Leadership  with authority to make as much as 5% of Annual Budget changes without having to go to the congregation. If the congregational approved  Annual Budget is $500,000, then, provided the General Fund  has the resources, $25,000 is available to the  Board  to meet new operating ministry needs.

  6.      In a Church setting -- there may be merit in using a TriAngular approach; (1) Salaries and Benefits of the present staff remain in place for the entire fiscal year; (2) authorize Operational Costs and SetASides for the first six months and (3) then such non payroll costs again for the last six months.

  7.      Other alternatives to a strict Annual Budget  include the following approaches:  " Four by Three" Plan or Budget for 4 months forward only at a time; Or you take the 4 months to date spending (or 8 months) and plan/budget forward from there. Another is a "Six + Three + Three" Plan or you plan/budget for the 1st six months; and quarterly thereafter.  

  8.      All operating costs flow via this updated General Fund  Annual Budget when the income permits. Do NOT look to Board discretionary funds for such purposes.  Draw on  Reserves or SetASides resources only for  'out of the ordinary'  needs.

  9.      Approved Budget items expire at the end of each fiscal year and any unused portions are NOT carried over to next year.  Ministry department managers often ask toward the end of the year if there is unspent money left in their Annual Budget.  Or they have the mind-set/philosophy of: "I better spend any unused portion since it is approved - even though it is not that badly needed";  or " Whewwww, I don't want to lose it so I better find some way to spend it". Incurring unnecessary expenses are  NOT good resource stewardship. 

  10.      Ministry department managers sometimes "pad" their Annual Budget and get approval for more than they really need. They should be asked the question: "Did you pad the budget for things you really do not need?"  Again, the best approach is to carefully plan what you want to accomplish during that period, and then convert your plans to dollars.

  11.      But the decision makers should always be taking a fresh look at the Ministry so when, or if, plans change ( requiring either less money or more money) then the Ministry should be able to timely change the Annual Budget, etc. 

  12.      The Ministry must have a strategic plan if the General Fund  is not getting enough money to pay for the authorized Annual Budget Click here for more details about our Fund Accounting Method Three whereby money is assigned to Spending Priority Groups when it comes in. If a Spending Priority Group  has money,  then expenses are authorized and paid therefrom.

  13.       In a Church setting, it is important for the Leadership to keep the congregation regularly informed of the General Fund  status - preferably via the weekly Church Bulletin.    


At Churches
       Process                                      5013-02
       Reporting via Big Pix              5012-02
       General                                       5009-02
       Comments                                 5008-77
Exchequer Group                           0909-03  
Fund Accounting - Not Fun         0041-01
Fund Accounting Via QB             0601-01
Glossary                                           0010-01
Goals                                                 0011-01
Ministry Budgeting                        0010-01
Onliner thoughts                            6403-15
PlanJecting                                     0053-01
Samples                                           0799-07
SetASide Accounting                   0088-01
Truisms                                            0069-01

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UPTD: June 08, 2012