Budgeting in Churches – A Literature Review and Research Agenda Denise Frost Phone ext 8563

Overview of the Presentation Background Professional Financial Management Forecasting Income Research Agenda

Background Church budgeting operates on the principle of stewardship. Literature on budgeting in religious organisations falls into two broad categories. In the first category, a case study approach is used to explore financial management in mainstream churches.

Background In the second category are studies that examine church budgeting in the context of an empirical case study in a religious organisation.

Professional Financial Management Generally, only larger congregations will have the financial resources to hire a full-time accountant. Smaller congregations are more likely to hire a part-time financial manager or rely on a member of the congregation to fill in.

Irvine 2005 Lay people with accounting skills performed accounting tasks. Professional accountants were consulted on a number of occasions. It is important that accounting professionals are church members and not employees, as church members are more likely to be committed to the church vision and mission.

Kluvers 2001 Most parishes employed an accountant. The accountant was required to have a relevant tertiary qualification. The accountant did not have to be a member of a professional body.

Jacobs 2005 There was no rule that a qualified accountant was required to prepare congregational accounts. Church members preferred to deal with a person with church connections even if s/he was not adequately qualified.

Training of Pastoral Staff Pastors are usually selected for their spiritual leadership. Often pastors have little training in financial matters, yet are expected to participate in making financial decisions. Often training on financial matters at seminary is minimal.

Summary of Professional Financial Management Churches often lack professional advice because of resource constraints or a resistance to ‘outsiders’.

Forecasting Income The revenue stream for a church is heavily dependent upon individual donations. Hoge, Zech, McNamara & Donahue (1999) report that in North America, individual donations make up 90% of congregational revenue. Hodgkinson (1999) found that the average North American congregation receives 81% of its income from individual donations.

Congregational Donations Around 75% of donations are given by 25% of the congregation. There are clear denominational differences in the motives underlying the reasons individuals give to a church. In American congregations, giving has been found to follow a seasonal pattern.

Attempts to Anticipate Income Patterns Pledge cards – individuals pledge to give a certain dollar figure on a regular basis (Futcher & Phillips, 1986). Pledged or planned giving is associated with higher levels of giving (Chaves, 1999).

Adoption of the Goals and Visions of the Church The degree to which the congregation adopts and supports the goals and vision of the church as their own is likely to affect the level of financial support given. Financial support is more likely to occur if members adopt and support the leadership’s goals and vision for the church.

Monitoring Income It is important to continually monitor income to ensure that income is adequate to cover budgeted expenses. One method is to make the dollar amount of the weekly offering public. Makes church members aware of the current level of giving compared with weekly budgeted expenses necessary for the church to function.

A Proposed Research Agenda Previous studies have been done on denominational, mainstream churches. No study done on an independent church with no denominational ties. There are no prior studies conducted on budgeting practices in any New Zealand church.

A Proposed Research Agenda There is no broad background knowledge about the use of budgets and the budgeting process in New Zealand churches. As an example, there is no indication of basic facts such as the percentage of New Zealand churches that use a budget.

Where to from here? Use a case study approach to study budgeting in an independent church in New Zealand. ANY QUESTIONS?