Improving the financial fitness of your church Strategic Budgeting

Project Income ▫Numerical projection  Look at your track record of yearly income over the last several years. Base projection on income, not what you spent. Base projection on dollar amounts not percentages. Look for patterns of numerical increase. Note bumps from special one time large gifts, so you don’t budget off that amount. Never use percentages (percentage of what came in more this year than last) to budget with. ▫Per-capital giving  Based on avg attendance divided by total income. Amount per person. Be consistent in how you measure.

Strategic Budgeting Case Study Income Track RecordFive Year Growth Rate General Budget$124,500$124,000$132,900$131,500$132,3006% Missions$9,960$18,500$10,632$10,520$24,200143% Local Benevolence$2,490$1,860$2,658$1,973$2,6466% Special Projects$3,735$3,720$3,987$3,945$3,9696% Pass Through$1,245$1,240$1,329$1,315$1,3236% Capital Campaign$1,245$1,240$7,974$6,575$6,615431% Total Giving$143,175$150,560$159,480$155,828$171,05319% Avg. Attendance % Giving Units % Avg. Budget per GU$2,075$2,000$2,110$2,055$2,035-2% Total Avg. per GU$2,386$2,428$2,531$2,435$2,63210%

Strategic Budgeting Case Study Income Track RecordFive Year Growth Rate General Budget$124,500$124,000$132,900$131,500$132,3006% Missions$9,960$18,500$10,632$10,520$24,200143% Local Benevolence$2,490$1,860$2,658$1,973$2,6466% Special Projects$3,735$3,720$3,987$3,945$3,9696% Pass Through$1,245$1,240$1,329$1,315$1,3236% Capital Campaign$1,245$1,240$7,974$6,575$6,615431% Total Giving$143,175$150,560$159,480$155,828$171,05319% Avg. Attendance % Giving Units % Avg. Budget per GU$2,075$2,000$2,110$2,055$2,035-2% Total Avg. per GU$2,386$2,428$2,531$2,435$2,63210%

Strategic Budgeting Determine Allocations ▫Be conservative in your budgeting. Be practical. Budget according to strategic priorities, NOT according to what was spent last year, NOR by % growth from last year. ▫Ask the question: What are the two or three key strategic areas of focus for us as a church? Another way of stating that is: What are two or three things we need to do really well? ▫Allocate accordingly.

Strategic Budgeting Determine Allocations ▫The ministries don’t come to board and tell what they want to spend; the board presents the budget and tells each ministry what they have to spend for the next year. ▫The ministries simply submit a “Budget Request” proving they have vision and ministry plan to actually use that money productively. ▫Each ministry can submit a “one time” request (undesignated, special projects)

Strategic Budgeting Determine Allocations (Pie Chart approach): ▫roughly 43% to Staff, ▫15% facilities (this includes putting some aside to cover a loan for new property or building), ▫20% on denominational support/missions (until this becomes it’s own budget), ▫17% Ministries ▫5% including one time requests, and an undesignated fund for anything that comes up. Dividing this piece is difficult. ▫As increase comes (over budgeted projections) that increase is divided by percentage to different areas according to the need that year. Only budget out about 50% of that increase and reserve some for special unanticipated projects.

Adjusted Income Projection NumericalProjected Growth2009 General Budget$124,500$124,000$132,900$131,500$132,300$800$133,100 Missions$9,960$9,920$10,632$10,520$10,584$64$10,648 Local Benevolence$2,490$2,480$2,658$2,630$2,646$16$2,662 Special Projects$3,735$3,720$3,987$3,945$3,969$24$3,993 Pass Through$1,245$1,240$1,329$1,315$1,323$8$1,331 Capital Campaign$1,245$1,240$1,329$1,315$1,323$8$1,331 Total Giving$143,175$142,600$152,835$151,225$152,145$920$153,065 Attendance % Giving Units % Average Budget per GU$2,075$2,000$2,110$2,055$2,035-2% Total Avg per GU$2,386$2,300$2,426$2,363$2,341-2%

Allocating the budget

Strategic Allocation Expense Budget Core (% of GB, Missions)Budget Staff43%$61, Den Support / Missions20%$28, Facilities15%$21, Ministries17%$24, Undesignated5%$7,187.40Reserved for one time requests, new priorities Total Core100%$143, Designated(% of GB)Budget Benevolence2%$2,662 Special Projects3%$3,993Reserved for one time requests, new priorities Giving to Capital Campaign1%$1,331 Pass Through1%$1,331 Total Designated7%$9,317 Total Budget$153,065.00

Strategic Allocation What would happen if we planned on basis of a straight % of actual growth unadjusted for outliers?

Strategic Budgeting Case Study – Projection based on % growth, unadjusted for outliers Income Track RecordAvg AnnualProjected Growth RateBudget General Budget$124,500$124,000$132,900$131,500$132, % $ 133,958 Missions$9,960$18,500$10,632$10,520$24, % $ 31,120 Local Benevolence$2,490$1,860$2,658$1,973$2, % $ 2,679 Special Projects$3,735$3,720$3,987$3,945$3, % $ 4,019 Pass Through$1,245$1,240$1,329$1,315$1, % $ 1,340 Capital Campaign$1,245$1,240$7,974$6,575$6, % $ 12,321 Total Giving$143,175$150,560$159,480$155,828$171,0534% $ 185,436 Avg. Attendance % Giving Units % Avg. Budget per GU$2,075$2,000$2,110$2,055$2,035-2% Total Avg. per GU$2,386$2,428$2,531$2,435$2,63210%

Impact of “straight line” budget Expense BudgetUnadjustedAdjustedPotential Core (% of GB, Missions)Budget Shortfall Staff45%$74,284.91$64,686.60($9,598.31) Missions10%$16,507.76$14,374.80($2,132.96) Facilities20%$33,015.51$28,749.60($4,265.91) Ministries20%$33,015.51$28,749.60($4,265.91) Undesignated5%$8,253.88$7,187.40($1,066.48) Total Core100%$165,077.57$143,748.00($21,329.57) UnadjustedAdjustedPotential Designated(% of GB)Budget Shortfall Benevolence2%$2,679$2,662($17) Special Projects3%$4,019$3,993($26) Giving to Capital Campaign1%$1,340$1,331($9) Pass Through9% $ 12,321$1,331($10,990) Total Designated15%$20,359$9,317($11,042) Total Budget$185,436$153,065.00($32,371.47)

What to do with greater growth? ▫“Ministry Expansion” Request (this can be funded by surplus from previous year or out of ½ of the increase) ▫½ reserved for future projects / additional opportunities ▫Ask: What is going to make disciples? What is going to reach people for Christ? ▫E.g. – investments in assimilation, outreach and stewardship systems yield significant increase in giving units and per capita giving

Impact Income Adjusted "Impact" Income ProjectionNumericalProjected Growth2009Impact 2009 General Budget$124,500$124,000$132,900$131,500$132,300$800$133,100$151,396 Missions$9,960$9,920$10,632$10,520$10,584$64$10,648$12,112 Local Benevolence$2,490$2,480$2,658$2,630$2,646$16$2,662$3,028 Special Projects$3,735$3,720$3,987$3,945$3,969$24$3,993$4,542 Pass Through$1,245$1,240$1,329$1,315$1,323$8$1,331$1,514 Capital Campaign$1,245$1,240$1,329$1,315$1,323$8$1,331$1,514 Total Giving$143,175$142,600$152,835$151,225$152,145$920$153,065$174,105 Attendance %145 Giving Units %70 Average Budget per GU$2,075$2,000$2,110$2,055$2,035-2%$2,150 Total Avg per GU$2,386$2,300$2,426$2,363$2,341-2%

Revised Strategic Allocation

Expense Budget - Impact Expense Budget - Impact Investments Core (% of GB, Missions) Core Budget Impact Budget One Time Allocation Staff43%$61,812 38% Den Support / Missions20%$28,750 18% Facilities15%$21,562 13% Ministries17%$24,437$34,31721% 1/2 of impact income goes to "ministry expansion" projects Undesignated5%$7,187$17,06710% 1/2 of impact income goes to reserves, future projects Total Core100%$143,748$163,508100% Impact Designated(% of GB)Budget Benevolence2%$2,662$3,028 Special Projects3%$3,993$4,542 Giving to Capital Campaign1%$1,331$1,514 Pass Through1%$1,331$1,514 Total Designated7%$9,317$10,598 Total Budget$153,065$174,105

Strategic Budgeting Principles Numerical Growth Per capita giving Be conservative Strategic Allocation Impact Projection ½ of increase is allocated ½ of increase is invested in future reserves, projects Ask: What is going to make disciples? What is going to reach people for Christ?