Improving the financial fitness of your churchStrategic Budgeting

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 Record Five Year

2004 2005 2006 2007 2008 Growth Rate

General Budget $124,500 $124,000 $132,900 $131,500 $132,300 6%

Missions $9,960 $18,500 $10,632 $10,520 $24,200 143%

Local Benevolence $2,490 $1,860 $2,658 $1,973 $2,646 6%

Special Projects $3,735 $3,720 $3,987 $3,945 $3,969 6%

Pass Through $1,245 $1,240 $1,329 $1,315 $1,323 6%

Capital Campaign $1,245 $1,240 $7,974 $6,575 $6,615 431%

Total Giving $143,175 $150,560 $159,480 $155,828 $171,053 19%

Avg. Attendance 120 124 126 128 132 10%

Giving Units 60 62 63 64 65 8%

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 $2,632 10%

Strategic Budgeting•Case Study

Income Track Record Five Year

2004 2005 2006 2007 2008 Growth Rate

General Budget $124,500 $124,000 $132,900 $131,500 $132,300 6%

Missions $9,960 $18,500 $10,632 $10,520 $24,200 143%

Local Benevolence $2,490 $1,860 $2,658 $1,973 $2,646 6%

Special Projects $3,735 $3,720 $3,987 $3,945 $3,969 6%

Pass Through $1,245 $1,240 $1,329 $1,315 $1,323 6%

Capital Campaign $1,245 $1,240 $7,974 $6,575 $6,615 431%

Total Giving $143,175 $150,560 $159,480 $155,828 $171,053 19%

Avg. Attendance 120 124 126 128 132 10%

Giving Units 60 62 63 64 65 8%

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 $2,632 10%

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 Adjusted Income Projection Numerical Projected

2004 2005 2006 2007 2008Growth 2009General 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 120 124 126 128 132 10%Giving Units 60 62 63 64 65 8%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

Staff; 43%

Den Support / Missions; 20%

Facilities; 15%

Ministries; 17%

Undesignated; 5%

Core Budget (% of GB, Missions)

StaffDen Support / MissionsFacilitiesMinistriesUndesignated

Strategic AllocationExpense Budget

Core (% of GB, Missions) BudgetStaff 43% $61,811.64 Den Support / Missions 20% $28,749.60 Facilities 15% $21,562.20 Ministries 17% $24,437.16 Undesignated 5% $7,187.40 Reserved for one time requests, new prioritiesTotal Core 100% $143,748.00

Designated (% of GB) BudgetBenevolence 2% $2,662 Special Projects 3% $3,993 Reserved for one time requests, new prioritiesGiving to Capital Campaign 1% $1,331 Pass Through 1% $1,331 Total Designated 7% $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 Record Avg Annual Projected 2004 2005 2006 2007 2008 Growth Rate Budget

General Budget $124,500 $124,000 $132,900 $131,500 $132,300 1.25% $ 133,958

Missions $9,960 $18,500 $10,632 $10,520 $24,200 28.59% $ 31,120

Local Benevolence $2,490 $1,860 $2,658 $1,973 $2,646 1.25% $ 2,679

Special Projects $3,735 $3,720 $3,987 $3,945 $3,969 1.25% $ 4,019

Pass Through $1,245 $1,240 $1,329 $1,315 $1,323 1.25% $ 1,340

Capital Campaign $1,245 $1,240 $7,974 $6,575 $6,615 86.27% $ 12,321

Total Giving $143,175 $150,560 $159,480 $155,828 $171,053 4% $ 185,436

Avg. Attendance 120 124 126 128 132 10%Giving Units 60 62 63 64 65 8%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 $2,632 10%

Impact of “straight line” budget

Expense Budget Unadjusted Adjusted PotentialCore (% of GB, Missions) Budget Budget ShortfallStaff 45% $74,284.91 $64,686.60 ($9,598.31)Missions 10% $16,507.76 $14,374.80 ($2,132.96)Facilities 20% $33,015.51 $28,749.60 ($4,265.91)Ministries 20% $33,015.51 $28,749.60 ($4,265.91)Undesignated 5% $8,253.88 $7,187.40 ($1,066.48)Total Core 100% $165,077.57 $143,748.00 ($21,329.57)

Unadjusted Adjusted PotentialDesignated (% of GB) Budget Budget ShortfallBenevolence 2% $2,679 $2,662 ($17)Special Projects 3% $4,019 $3,993 ($26)Giving to Capital Campaign 1% $1,340 $1,331 ($9)Pass Through 9% $ 12,321 $1,331 ($10,990)Total Designated 15% $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 IncomeAdjusted "Impact" Income Projection Numerical Projected Projected

2004 2005 2006 2007 2008Growth 2009 Impact 2009General 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 120 124 126 128 132 10% 145Giving Units 60 62 63 64 65 8% 70Average 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

Staff39%

Den Support / Missions

18%

Facili-ties13%

Ministries21%

Undesignated10%

Impact Budget / One Time Allo-cation

StaffDen Support / MissionsFacilitiesMinistriesUndesignated

Expense Budget - ImpactExpense Budget - Impact Investments

Core (% of GB, Missions)

Core Budget

ImpactBudget

One Time Allocation

Staff 43% $61,812 $61,812 38%Den Support / Missions 20% $28,750 $28,750 18%Facilities 15% $21,562 $21,562 13%

Ministries 17% $24,437 $34,317 21% 1/2 of impact income goes to "ministry expansion" projects

Undesignated 5% $7,187 $17,067 10% 1/2 of impact income goes to reserves, future projects

Total Core 100% $143,748 $163,508 100%Impact

Designated (% of GB) Budget BudgetBenevolence 2% $2,662 $3,028 Special Projects 3% $3,993 $4,542 Giving to Capital Campaign 1% $1,331 $1,514 Pass Through 1% $1,331 $1,514 Total Designated 7% $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?