Tuesday, August 9, 2011

Capital Budgeting

The List
Every church needs more money for it's capital projects. Oh, I presume that you have a list of capital needs which means you've already done a study of them. If not, here's what you need to do:
  • Itemize
    • Make a list of every thing you need to do in the next ten years. 10? Yes, because I guarantee you do not have the money do it all this year so you need to have a plan of what you're going to do over the next decade. Equipment will break down and need to be replaced. Keeping a list of your HVAC (heating, venting, and air conditioning) equipment and what needs to be replaced in the next few years will help you set money aside for those needs.
    • Also, there are things that you don't see now that you will need in the future. In 1990, no one had any idea of the power of the internet - now it is an indispensable part of every office. Who knows what the next 10 years will bring - be prepared to control the future rather than having the future take control of you.
    • The list needs to items that you know about but also what others see. No one person knows all in a church, consult with others (both staff and lay members) about what should be on the capital needs list.
    • Most capital needs lists are physical plant items: air conditioning units, roofs, paint, furniture, buildings, etc. There is nothing keeping a church from establishing a capital needs list with items related to non-physical needs - items that will help others outside the four walls of the church and/or will enable members to go farther and do more. I wish more capital needs lists had other items such as
      • Endowment or foundation funds: this would be a pool of funds to meet present and future needs of the church whether it is a physical plant need or a ministry need.
      • Mission fund for a specific trip coming up or to take care of a ministry need somewhere else. 
  • Prioritize
    • After you've got a list, put them in some type of order. The best order is one which indicates their priority for being accomplished - the priority of need. This order is very fluid - some things will drop in priority while others will rise according to the needs of the church at any given time. For instance, new interior signage may drop in priority when people realize that the condition of the children's furniture warrants more attention and funding.
    • This does not mean that you'll do the items on the list in that order. Several things may interrupt such as
      • A donor sees something on the list that tickles his or her fancy and the donor decides to take care of that item(s). There are donors like this in every church - let members know about the list and you may be surprised by how many items are "just taken care of."
      • Some items are so big that you can't do them in one year; instead, items are taken care of in phases over several years. I'm doing that right now with several items: installing electric shades in the dining room and gym; replacing all copper gutters and downspouts with aluminum ones with gutter guards (so I never have to pay for the gutters to be cleaned again); putting in new windows throughout the church; etc.
  • Monetize
    • Put a dollar figure beside each one. The dollar figure is very much a guess, but an educated one.  Do not spend the time now to get quotes for every item, just take a stab at how much each item will cost (aim a little high, too!). That way, when people see the list, they'll understand the scope of the needs. Also, if someone wants to "own" one of the items, they'll know how much to give to the church to cover that specific item.
  • Date-ize
    • Establish goals as to when items will be done.  These dates can be fluid, of course. But if you don't put some type of date/goal, then it may never get done. Put it on the list with a desired "due by" time frame even it is done piece-meal over several years.
  • Publicize
    • Tell people what the list contains, why items are on the list, ask them for additional items for the capital needs list, be willing to alter the list as needed, and continue to tell people about the list. The more publicity you can create, the better. You're not "poor-mouthing" the church, just making people aware of items that they may not know about or may have over-looked. Help people be aware of the needs - then they'll support you in your efforts to meet these capital needs.
    • One of the ways that I make my list available is to put it in a rack just outside my office door. I totally believe in transparency so I make all financial info available to anyone who comes to my office (and a limited amount online at the church's website). That rack contains four items:
      • The latest audit by the independent audit firm
      • The most recent monthly financial statement
      • The current capital needs list
      • Give away books on stewardship and generosity (The Treasure Principle by Randy Alcorn and Fields of Gold by Andy Stanley)
    • When a project is underway, let people know what is being done and why it is being done. AND, thank them for their financial gifts which made that work possible. Acknowledge their generosity every way you can whether it is in print or from the platform.
  • Review-ize
    • Every few months (definitely once a year), go over the list. Move things around in priority, re-value items as you have new info about their cost, change the "due by" dates as needed, move items to the bottom "already done" category, etc. The capital needs list is organic - don't let it be static.
The Money
I tell my vendors that while I cannot afford a new piece of equipment this year, I can pay for it in five years by setting money aside. Where does this money come from? Lots of sources - and that is key: tap various areas of the church's finances in order to pay for the various projects. Finding different pools of money to do things will let you do more. Here are some examples:

  • Use the church's reserve funds for things that are needed. That's what the reserve funds are there for. Don't deplete the reserve funds, but also don't let those funds just sit there when they can be used for immediate and/or pressing needs. If necessary for a big project, tap the entire reserve fund with the understanding that the money will be put back if the church ends the fiscal year in the black.
  • If the church ends the fiscal year in the black AND it has fully funded the reserve accounts it needs, then use the excess to pay for capital needs. Make sure that the governing body of the church authorizes this expenditure and as often as possible, let the congregants know about this project and how it was paid for out of their generous gifts to the budget.  
  • The church's foundation was asked for money for the renovation (complete gutting) of the oldest bathrooms in the church. The foundation was informed that the total need is $100,000 and they would be approached five years in a row for $20,000 each year to do this work. The foundation agreed to fund this. 
  • The gym needed new equipment. The need was made known to parents during Upward Basketball games and over the course of about 9 months, over $12,000 was received for this need. This money came from people outside the church so these gifts didn't affect the church's budget receipts - this was "gravy money" which we would not have received otherwise. 
  • Talk about specific needs with various members of the church who you know have the gift of generosity. Twenty years ago a family donated funds to enhance a room in memory of a loved one. The room is increasingly out of date and needs some re-touching. I approached the family and they are more than willing to underwrite the cost of renovations to this room. In fact, I gave the family a ballpark of how much this would cost and they said that money is not a hinderance. They are a wonderful family and example of generosity.
In summary, keep a list (with lots of input), check it twice and thrice, find the money from lots of different pockets, spend the money while you tell people what you're doing and why, and say "thank you" lots of different ways.

Lead On!

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