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Operations Budget Process

As discussed in a previous blog, there are a variety of types of budgets that your church may need to develop. The Operations Budget is the forecast of your day to day income and expenses for a given fiscal year. My emphasis in this blog is on the word PROCESS when preparing the Operations Budget.

PROCESS: A series of actions or steps taken in order to achieve a particular end.

Your church budget is not something to be accomplished in one financial committee meeting. It is not something that should be solely based on historical numbers. This process should involve a much deeper look at the programs currently active in your church and how they align with the God-given mission of your organization. (See my blog on Accounting vs. Accountability. ) This budget serves multiple purposes:

• As a means of accounting for the programs to which you have committed
• As a measurement tool as to the accountability function related to those programs
• As an internal control function to those spending church funds

I will attempt to create a timeline-type checklist for your church to create a meaningful and effective budget.

Three Months Prior to Fiscal Year-end,

1. Treasurer gathers current financial statements.
2. Depending on the structure of your Chart of Accounts (see my blog), your church programming may or may not be readily identifiable via your Statement of Activity (Profit/Loss). If not, you need to draft a separate document that lists all the programs your church supports. Treasurer may need to request Program/Ministry leaders assist in gathering this list.
3. Administrative Board should review each of the programs identified in #2. Analyze and ascertain that all of these programs are still relevant, effective and in-line with the church’s overall vision.
4. Assign each program/ministry leader to prepare a written explanation of the programs they are responsible for which will include:
   • Program title
   • Program description including goals, accomplishments during the current year and related costs
   • Expectations, goals, desires for the upcoming fiscal year.
   • Justification of any time or financial resources to be spent on this program.
   • In particular, the facilities committee should include detailed, documented cost estimates for any repairs or maintenance they anticipate in the next fiscal year.
5. Treasurer should begin Personnel Expense evaluation:
   • Gather comparison salary data from congregational organization, ECFA or other source.
   • Document salary packages for various staff members.
   • Gather and analyze benefit coverage costs for upcoming year. Perhaps look at alternative providers.

Two Months Prior to Fiscal Year-end

1. Schedule a Finance Committee meeting and have each program/ministry leader come to present their report as prepared in #3 above. Take into account the Administrative Boards review or programming and the efficacy of continuing given programs. This may take more than one meeting. Schedule ample time to hear ministry/program leaders out and thoughtfully discuss their programming goals as they relate to the church mission.
2. Treasurer and Bookkeeper should prepare their best forecast on expected revenue for the next fiscal year. Remember to keep in mind:
   • Current financial climate
   • Any local financial news or industry expectations
   • Church growth or decline
   • Review of past 12 months
3. Finance Committee meet again with a list of those ministry programs that they have concluded from #1 above are viable and relevant to the church’s mission. Now, keeping in mind #2, the expected revenues they have to work with, assign expected expenditures to various budget line items.
4. Present this budget to the Administrative Board/Leadership Team

One Month Prior to Fiscal Year-end

1. Administrative Board/Leadership Team meets with the Treasurer and/or Finance Committee for a review and explanation of the operating budget they have put forth.
   • What questions do they have?
   • Do you need to go back to Ministry/Program leaders?
   • Is your documentation detailed enough to justify the programming and facilities expenses?
   • What staffing changes need to be made, positions and/or salaries?
2. Finishing touches and budget approval.

Annual Budget Meeting

1. The Treasurer normally presents the budget to the congregation.
   • Consider handing out some documentation the week before for people to review.
   • Prepare your presentation and consider using charts and graphs as some people are more comfortable with visual depiction of data.
   • Be prepared with details about various programs as provided by ministry/program leaders.
2. Congregational vote

Some things to consider:

• What is the budget process at your church?
• Are you allowing enough time to prepare the church budget?
• Are you requesting input from the people responsible for the programs?
• Are you properly and prayerfully justifying the programs in your church?
• Is this a document you can live with over the next fiscal year?
• Does this budget address the goals of your ministry?

Having current and correct financial data is critical to being able to properly prepare a church budget, no matter what the size of your budget. Having no budget means no accountability. Never knowing if you are meeting your goals. Not having a plan. Not good.

If your church is not maintaining formal financial records, contact GoodBooks today. We can get you started for only $40/month.

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