Church Budget

Sincere Gratitude for a Generous Church

It's been a little over two months since I launched Brokepastor.com. In some ways, it's gone exactly as I expected, and in other ways, it's not gone anything like what I expected.

One of the unexpected aspects of this endeavor has been the number of pastors I've heard from who, without complaining, have shared with me how their respective churches either can not, do not, or will not meet their financial needs. Please note the three categories I just gave.

I've heard from some pastors who shepherd churches that can not support them financially. Many of these churches are very small, and the pastors who serve them are often bi-vocational. I'm sure that, in many of these cases, the churches are doing all they can, and I have nothing but respect for both the pastors and the churches that fall into this category.

Unfortunately, I've heard from other pastors who shepherd churches that do not support them financially. The issue isn't, necessarily, the church's ability to financially support their pastor; it's often simply that no one is thinking about it. It's as if the pastor's financial needs have been forgotten by the church, and there are many pastors out there who feel uncared for by their church in this area.

Worst of all, I've heard from pastors who shepherd churches that will not support them financially. In at least one case, this has been a "power play" by certain leaders within the church (likely) to get the pastor to resign. In other cases, this is the reflection of an ungodly attitude that seems to believe that pastors should be poorly paid in order to keep them humble and faithful to God.

While I have many thoughts on each of these categories that I will probably share in future posts, talking to all of these various pastors has made me even more grateful for the church I pastor. Just last night, our church members voted on next year's operating budget. Included in that budget were very generous raises for myself and our other full-time pastor.

Don't get me wrong. It's not the money that I'm thankful for. It's the heart of our people who always seem to ask, "How much can we do for our pastors?". The kind people of our church are models of how a church should seek to treat it's pastoral staff, and I am sincerely grateful to God for them and for their obvious and practical love for me and my family.


Why every pastor should receive disability insurance from their church

While fairly standard in the secular workplace, disability insurance coverage does not seem to be as common amongst pastors and churches. Yet, the possibility of a pastor becoming disabled is no less than any other worker in any other profession, and churches should be ready to care for any pastor who becomes disabled - either directly or through the purchase of disability coverage.

Notice the two options I just gave for caring for a disabled pastor (I’m assuming that a church not providing care for a disabled pastor isn’t one of their options. How unloving, uncaring, and un-Christlike would that be?).

One option is for the church to care for a disabled pastor directly – meaning, the church is willing and able to keep that pastor on its payroll (at some level or another) indefinitely, regardless of work performed or services rendered. While this may save the church money on annual premium payments now, it places all of the long-term risk on the church – a commitment that may or may not be feasible in the present or future.

The second option - and the one I would highly recommend - for caring for a disabled pastor is through the purchase of disability insurance coverage. Yes, the church will incur an expense related to the annual premiums, but this is generally minimal – especially when you compare it to the idea of keeping a pastor on your payroll indefinitely should they become disabled. This way, the church transfers the long-term risk to the insurance provider, and everyone can have peace-of-mind knowing that the pastor will be cared for should the unthinkable happen.

Does your church offer disability insurance coverage to your pastor?


A Guiding Philosophy for Compensating Church Employees

I have a philosophy that guides my thinking in relation to church employee compensation and benefits. Before I share it, notice that I included all church employees, not just pastors. This applies to any and every employee a church may hire. Here is my guiding philosophy for church employees:

The church of Jesus Christ should attempt to treat its employees as well as, if not better than, the best secular employers of our day.

I can hear the cynic respond, “Of course you’d say that! You’ve got a dog in the fight.” Well, you are correct. I do have a dog in the fight, but this philosophy is not driven by my own current employment status, but rather by my belief that the church is to be a city on a hill - a light in a very dark world - in every single aspect of its life and dealings before this broken world. And this can be nowhere more vividly and practically displayed than in the realm of employee care.

I grew up in circles where pastors and Christian workers of all types were viewed as having, effectively, taken a vow of poverty as a condition of their employment. I can think of dozens of faithful, Christian school teachers, for example, who were paid poverty-level wages (or likely below) in exchange for their service.

Even for pastors, too many churches act as if it is okay to give little, if any, thought to truly being a blessing to those whose responsibility it is to shepherd their souls.

This just should not be!

While my philosophy may be an ideal that few, if any, churches or ministries ever fully attain, it should at least be the guiding force behind every decision that is made.


How Our Church Saved Over $100,000 in Healthcare Costs

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It's true. As of the end of this year, our church will have saved more than $100,000 (over a three year period) in healthcare costs associated with providing medical insurance for our pastoral employees.

We did it by using the provisions of the Affordable Care Act (a.k.a Obamacare) to our advantage. Not only did it save our church a TON of money, but it provided amazing health insurance for our pastoral staff. To learn how, buy Benefitting from Obamacare today!

How to Determine Projected Giving for Next Year's Budget?

One of the hardest aspects of creating an operating budget for the upcoming fiscal year is determining how much giving the church should project/expect next year. I know that, in our case, this is something we wrestle with each and every year.

Over time, we have developed five questions to help us make this crucial determination:

  1. What is the total YTD actual giving for the current fiscal year?
  2. Based on current average weekly giving, what is the projected annual giving for the current fiscal year?
  3. How does the projected annual giving for the current fiscal year match up to the prior year's projection?
  4. Does recent giving (rolling 3 month and 6 month totals) appear to be trending up, down, or steady?
  5. How does YTD actual giving for the current fiscal year compare to the same time period in the prior fiscal year?

What is the total YTD actual giving for the current fiscal year? This allows us to see where we're at today.

Based on current average weekly giving, what is the projected annual giving for the current fiscal year? This is where we take whatever we've received YTD and divide it by the current number of weeks in the fiscal year. For example, if we have received $200,000 YTD and there have been 40 weeks of giving, then our average weekly giving is $5,000. With 12 remaining weeks of giving left in the year, our projected annual giving for the current fiscal year would be $260,000 ($200,000 actual + $5,000 times 12 weeks = $260,000).

How does the projected annual giving for the current fiscal year match up to the prior year's projection? If, last year, we projected that we would receive $250,000 in giving this year, and our projection for EOY is $260,000, then we are on track. If, however, we projected $300,000, then where did our projection go wrong? What happened? This step acts as a quality control feature in our overall thinking and planning.

Does recent giving (rolling 3 month and 6 month totals) appear to be trending up, down, or steady? So, at this point, we compare three numbers. First, we determine our YTD average weekly giving. Second, we take the the last 26 weeks of giving and determine the average weekly giving from that time period. Finally, we take the last 13 weeks of giving and determine the average weekly giving from that time period. After comparing those three numbers, do we find an increase in giving, a decrease in giving, or no change in giving? This gives us an idea of what to expect going forward.

How does YTD actual giving for the current fiscal year compare to the same time period in the prior fiscal year? Are we seeing more or less giving than we were 12 months ago at this same time? Again, this gives us a sense on what to expect going forward.

If, after reviewing these factors, the projected giving for the upcoming fiscal year is less than the current year’s projections, then we have to adjust our budget accordingly.

On the other hand, If, after reviewing these factors, the projected giving for the upcoming fiscal year is greater than the current year’s projections . . . then we have to determine how much extra to project. This is the particularly tricky part.

In general, we have tried to tie increases in projected giving to any actual increases in annual giving over the previous 5 year period.

For example, If the projected giving for the current year is $260,000, AND if, after reviewing the factors listed above, we believe that the projected giving for the upcoming fiscal year should be greater than the current year’s projections, AND if the average year-over-year increase in actual giving for the past five years equals 3%, THEN the projection for the upcoming year’s giving should equal 103% of the current year’s projections, i.e. $267,800. 

As you can see, this is about 50% art and 50% science. It's our attempt to be both conservative and factual in making this very important projection.

How does your church make this projection? Leave a comment below, or follow me on Facebook and leave a comment there.


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BENEFITTING FROM OBAMACARE

Over the past three years, our church has saved over $100,000 in health insurance premiums by using the provisions of the Affordable Care Act (a.k.a Obamacare) to our advantage - $100,000 that we have used to hire additional staff, send one of our members into foreign missions, and pay down our church's mortgage!

Written for both pastors and church decision makers, Benefitting from Obamacare is the story of how we did that, the challenges we faced, the things we had to consider, and what we have experienced since.

What is the Best Way to Report Reimbursable Expenses?

If your church has an accountable reimbursement plan - and I sure hope it does - then your employees need a way to report their reimbursable expenses. There are two basic methods.

First, you can always have them turn in their physical receipts. This is the most common and low-tech option available to you. Normally, you would have a form of some sort that they would complete and attach the receipt to in order to be reimbursed.

However, and I have no business relationship with this company, a far more efficient way to do it would be to use a service like Expensify. This is what our church uses, and we LOVE it. The service comes with an app that you can download onto your phone that allows you to take pictures of your receipts for instant submittal. It even reads the receipt for you and fills out much of the information automatically. 

On the back end, you can customize the service to fit your church's specific budgetary categories, and can set rules in place to determine when an expense needs to be reviewed by an administrator and when it doesn't (e.g. expenses under $25 don't need to be reviewed, but anything more than that does).

One way or the other, you need to provide a way for employees to submit receipts for reimbursable expenses. Leave a comment below to share how your church does this, or follow me on Facebook and leave a comment there.


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The Accountable Expense Reimbursement Plan for Employees policy template is designed to provide churches, ministries, or other religious entities with a ready-to-customize policy to help them address the necessary components of administering an accountable reimbursement plan.

How much cash should a church keep in reserve?

When it comes to personal finances, most experts agree that every person/family should have somewhere between 3 and 6 months worth of living expenses in an emergency fund. But what about a church?

Based on what I've heard and observed (both directly and by talking to CPAs who work with churches), I don't believe that too many churches follow that same advice when it comes to their own cash reserves. In fact, my non-verifiable opinion, based solely on what I have seen and heard, is that many churches operate on less than one month's worth of average giving.

In other words, let's say that Grace Church has an annual budget of $240,000. Assuming that they did not budget above what they believed they would actually receive in the course of the year, that means that they expect to average $20,000/month in giving. If they are like many of the churches I have seen and heard about, this means that they would have less than $20,000 in the bank at any given moment.

You know what that is, right? That's the church equivalent of living "paycheck to paycheck."

May I humbly suggest that this is not a wise approach when it comes to managing a church's finances? Just like an individual or family should have 3-6 months worth of living expenses in an emergency fund (separated from their normal checking account, by the way), so a church should have 3-6 months worth of average giving in an emergency fund - separate from their normal operating funds.

At our church, we have a number of different cash accounts. The two largest are our operating fund and our contingency fund. Our operating fund is our normal, monthly checking account. This is where weekly giving goes in, and this is where all bills are paid from. Separate from that, we have a contingency fund (which is what we call our emergency fund). In this fund, we keep three full months of average giving as nothing more than a cash reserve. This is here to protect us from any number of things (e.g. major, unforeseen expense; extended downturns in giving; loosing 2-3 weeks of giving due to a hurricane; etc.).

Why did we pick three months instead of six, you ask? Well, to me, it all comes down to size. We began maintaining a three month contingency fund back when our annual budget was around $120,000. Today, our current annual budget is approaching $400,000. Personally, I think we have about another $100,000 of budget growth before we would need to consider increasing our contingency fund to 4 months. It seems to me that, the larger a church is, the more it should consider adding to its cash reserves. For us, this is the schedule I would follow:

  • $0-$499,000 - 3 months
  • $500,000-$999,999 - 4 months
  • $1,000,000-$1,999,999 - 5 months
  • $2,000,000 and up - 6 months

Obviously, your specific circumstances might dictate a different schedule, but at least this will get you thinking. The reality is that the vast majority of churches will fall within that first tier, and will likely never have more than 3 months' worth of average giving in reserve . . . and that is okay.

Regardless, if your church does not have a sufficiently funded cash reserve, let me challenge you to talk with the leaders of your church about this need and to begin working towards that as soon as possible.

What do you think? Leave a comment below to share how your church handles this. Or, follow me on Facebook and leave a comment there.


COMING SOON!

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STRUCTURING PASTORAL COMPENSATION

Is your church structuring its pastoral compensation package in a way that truly blesses your pastor? Is your church doing all it can and should to financially provide for the pastors who keep watch over your souls?

The fact of the matter is that most churches have never given any thought to what a pastoral compensation package should look like, and much less to how they should structure it so that their pastor receives the maximum benefit.

Structuring Pastoral Compensation is written for church decision makers (Elders, Deacons, Trustees, Committee Members, etc.) to help them understand what should be included in their pastor's compensation and how to best implement the various pieces so that their pastor will be truly blessed.

Church Budgets: When to Begin Preparing

It's September. Do you know what that means? It means that I'm on the verge of beginning another loosing season of Fantasy Football.

But apart from that, it also means that our church's annual budget season is upon us. At our church, our fiscal year matches the calendar year . . . which means that we are only four months away from needing to have a new, approved annual budget. In order to have our budget ready to go on January 1, we begin the process on September 1.

Now, we didn't pick that date arbitrarily. We arrived at it by "reverse engineering" our budget process. Let me explain.

Since we know we need to have an approved budget ready to go on January 1, and since our annual church budget must be approved by our members, we know that we have to have them vote on it during our Q4 Members' Meeting - normally held on either the first or second Sunday of December (depending on how the calendar looks in a given year).

In order to have them vote on it at that meeting, we must make it publicly available for review at least two weeks prior. This means that we normally have to have it completely finished and ready to go by mid-November.

Since our Elder board has to approve it before it is made public to our members, the Elder board wants to have a month to review, discuss, and tweak it . . . which means they need to have the first draft from our finance committee by mid-October.

In order for our finance committee to have it's recommended draft budget to the Elder board by mid-October, they need two things. First, they need to receive YTD budget reports along with a few specific, year-end financial projections from our financial secretary and Executive Pastor by the last week of September. Second, they need next-year's budget requests from all of the various ministry leaders within our church by the last week of September as well.

And, over time, we've learned that both of those things take a few weeks to get. So, to make sure everything works as it is supposed to, we begin preparing our new budget on September 1.

Obviously, that process is specific to our church and our setup, but regardless of how your church operates, I think there's wisdom in "reverse engineering" your budget process so that you can begin in a timely manner and complete your budget without too much stress.

Leave a comment below to share how your church handles this. Or, follow me on Facebook and leave a comment there.