Budget Percentages

Below is a recent email exchange with a friend of mine (names omitted).

Email Question:

I have a church that wants help examining their budget allocations by categories: missions, personnel, programs, etc. They want to look at similar size churches with similar size budgets. They want to know whether their allocations are in line for their type of church. Basically, they want to benchmark their distributions. They suspect that their personnel budget at 67% is high, but the church doesn't know any different. And they want to know why they do not have any money to do actual programs.

Do you have access to any sort of database like that from any of your connections?

My response:

1. No, I don’t know of any authoritative written source of ratios. Sorry.
2. My experience tells me the following makes commons sense

a.      Personnel

                                                              i.      Range of 40-60% of undesignated receipts

                                                            ii.      Ideally about 50%

                                                          iii.      This includes the ministers and administrative assistants – people key to accomplishing the goals, mission and vision of the church

b.      Facilities

                                                              i.      Range of 15-25% of undesignated receipts

                                                            ii.      Ideally about 20%

                                                          iii.      This includes facilities staff costs

                                                          iv.      The percentage will be higher if a church has debt; lower if there is no or low debt.

                                                            v.      A church should spend annually about 2% of the cost of replacing the building on maintenance. If you have a building worth $1 million, then spend about $20,000 on maintenance. The rest of the percentage will be spent on salaries, utilities, cleaning supplies, commercial property insurance, capital reserve funds, etc.

c.      Programming

                                                              i.      Range of 20-35% of undesignated receipts

                                                            ii.      Ideally about 30%

                                                          iii.      This includes education, worship, missions, funds budgeted for allocation to outside organizations (Cooperative Program/Missions), etc.

That being said, these percentages go wild in various types of churches. New, emerging, highly growing churches have very high salary percentages and loads of debt. Older, established churches have paid off their debt so their programming is high and salaries have stabilized in the 50-60% range. While there is no “one size fits all” there are well-grounded rules that will help a church stay out of fiscal trouble. Hope this helps.

Lead On!
Steve

Church Insurance

On 9/11/2001, the insurance industry took the largest hit ever - over $40 billion dollars in claims - as a result of the terrorist attacks on the twin towers, the Pentagon and the planes. The insurance industry raised their premiums in an effort to recoup their vast losses - commercial insurance prices rose a lot in 2002 and then stabilized. In an effort to help the insurance industry, Congress also permitted the industry to levy a terrorism fee on new insurance policies (this authorization for this fee expires in 2014). As a result, church's have been paying more for their commercial property insurance for ten years.

Actually, the price increases for churches are not entirely attributable to 9/11. There were two other series of incidents in the 1990s that exacerbated church insurance premium hikes. The Roman Catholic Church (and other church's, too) had a series of well publicized pedophilia scandals which then tainted all faith institutions and raised premiums. There were also a number of church vans that tipped over and killed several people. 9/11 was the third of unrelated incidents which affected church insurance.

Since 9/11/2001, every commercial property insurance has carried a terrorism clause and premium. The dollar amount isn't much and is rarely noted by the policy holder and not often mentioned by the insurance agent. This is a voluntary payment - churches can exempt themselves from paying this by simply stating they do not want this coverage. The coverage is automatic unless the church specifically states it doesn't want the coverage. Please call your insurance agent and have that coverage removed. In my opinion, churches don't need it because of the very limited coverage it offers: the terrorist attacks must be perpetrated by US citizens and acknowledged as terrorist acts by Congress are the only ones covered. Therefore, nothing on 9/11 would be covered but the Oklahoma City bombing would be covered.

In recent years I put my church's insurance contract out to bid. Here's what I learned. We paid over $42,000 for five consecutive years. In the year that the contract went to bid, the incumbent agent came back with a quote of just over $28,000 - a reduction of 35%. Two other bids came in at the same price so I knew that was a reasonable amount. In December 2010, a year after the initial bidding, I put the contract back out to bid and got back a quote of $24,500 - even more savings. We have shaved about 45% off our insurance contract.

With that savings I paid for a current valuation of the church's property so that we have an accurate estimate of the worth of the church's buildings and furnishings. I also got a video inventory of every room, cabinet, closet and office in the church. We made several copies of that video inventory and placed the copies with different people in their homes (away from the church), including our insurance agent. I'm in favor of inventories but not paper ones - when it says "10 chairs" there is no knowing the worth of those chairs. An image of those chairs allows for better accuracy in getting an insurance settlement.

So, please do the following

1. Call your insurance agent today and delete the terrorism coverage on your church.
2. Put your church's insurance contract out to bid as soon as possible. Get at least three quotes and chose the low bidder.
3. Get a current valuation of your church's PP&E (property, plant & equipment)
4. Make a video inventory of your tangible assets and have copies made for several people

Lead On!
Steve

9/11 - 10 Years Later is on a Sunday

This year the anniversary of 9/11/2001 is on a Sunday. Churches will be filled with people as on every Sunday and many churches will make note of the sacrifices of the people working in the Trade Center Towers, the Pentagon, and the four airplanes. Hopefully they will also recognize the first responders (fire and police personnel) who rushed into the burning buildings only to have the towers collapse and kill them. 

While it would not be appropriate to either trivialize the significance of 9/11 in American history, it is also not right to make it a jingoistic or nationalistic event. That day was one of the worst terrorist attacks but it was preceded and followed by scores of other terrorist attacks across the world (Nairobi, Madrid, London, Oklahoma City, Bali, Beslan, Mumbai, etc. to name but a few of the most infamous and deadly). The attacks are the feeble attempt by a few to disrupt lives and impose their ideology on others.

For 9/11, I’m asking our members of the church's Safety Officer Team who are active duty police officers to come in uniform (with weapons) and with a marked car. Ostensibly this is to remind people that on 9/11/2001 it was the first responders who voluntarily went into the burning towers and to their deaths. The other reason for very visible officers is to deter someone from attacking the church. Of course, our regular traffic officer will be on the street with his marked car, too. There has been much speculation that Al-Qaida or some other organization or person wanting to make a name will attempt a terrorist event on this upcoming anniversary.

Inside the church's lobby, I've suggested that we have a poster for people to sign and write notes on. Actually, we need four of them because Sunday afternoon, we can take each of these four posters to the three fire stations and one police station who take care of our church. This will be our way of thanking them for their service to us but also to say that we remember the day they lost so many of their brothers and sisters.

Let me encourage every church to have some acknowledgement on 9/11 of the first responders in their area - that is a great tribute to those who died 10 years ago. But let me also encourage you to take precautionary measures to discourage terrorists.

Lead On!
Steve

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!
Steve

The Shadow

Going to conferences is fun – you get to travel, stay in nice hotels (with comfy beds, hopefully), eat out, and meet old and new friends. I like going to conferences – I plan to continue to go to conferences. However, conferences lack something – that personal touch. 

Many times a year I’m asked, “Can you tell me in the next few minutes what a church administrator does?” I appreciate their interest so I figure that if they are really interested, they will want to learn. I make them an offer – come spend a day (in whole or part) with me: follow me around, sit in on my meetings, watch me answer email and handle personnel matters, read my financial statements, etc. In short, be my shadow and learn from the inside out what it is like to be an administrator. A few people respond positively, others say, “No thanks.” Those who shadow me leave at the end of the day with eyes wide open and a new appreciation. I’ve even had my finance committee chair shadow me – and come back for a repeat!

Church staff/leaders have a lot to offer and I wish we’d share more of this knowledge with each other. Sharing material in conferences is great but there is nothing like visiting a colleague’s church and shadowing someone for a day and seeing “what it’s really like.”

I’d like to propose that church leaders be intentional about being both a shadow and a shadow-caster:

·        Shadow-casters: these would be leaders who are willing to give a day or two a year to being shadowed. There is no agenda – they just meet the shadow at the agreed upon date and time and then let the person sit in on all that happens. If there is a confidential situation, the shadow can be excused.

·        Shadows: these are leaders, both staff and lay members, who want to shadow other church leaders. These church staff leaders may want to learn the “best practices” at another church. It could be someone interested in this field as a career opportunity and wants to learn about this career from the inside before embarking on it. It may be a lay member who wants (and needs) to learn more about what the professional minister does each day. We can all learn from each other - more than we think we can!

This year I’m taking some conference time and shadowing some counterparts in different cities. As long as I’ve been doing this, I know that I can learn from others especially if I am sitting as close to their shoes as possible. I'm looking forward to being a shadow; I've been a shadow-caster almost a dozen times so it's time for me to be a shadow. 

Lead On!
Steve

Training and Conferences

Training is underrated in most church office venues. I think that most churches don't want to spend the money on doing the training when it is incredibly beneficial. Every year I attend a national conference of my peers and I learn so much at each one even though I've been doing this work for over 15 years. Sometimes what I learn re-enforces what I already know, but that is a good feeling, too.

Ministers and other management staff need to go to at least one training conference a year. If for nothing else, it is good for their morale to get out of the office and to hang around peers. Usually money is budgeted for these positions so the people can go if they'll only make it a priority. It is up to the supervisor to make the subordinate attend a conference - too many say they can't fit it into their schedule. Everyone has excuses, just find the time to go!

Administrative Assistants (Admins) are on the low end of the totem pole and rarely are they included in a training budget. That is wrong. I work with about a dozen ladies - all of whom are very committed to their work and to the church. They are consummate professionals - very skilled at what they do and anxious to do it right, the first time.

When I came to my current church, I was told that the church database was insufficient for the church's needs and that one of my priorities was to get new software. I had used that software for over 10 years so I knew what it could and couldn't do. What I soon learned is that the Admins were not knowledgeable about the software. I began to remedy that immediately.

First, I brought in an expert to lead all-day classes for the ladies. We set aside time and they brought in questions. It cost me about $1,000 for the consultant and for the lunches. I probably recouped that money within three months - what the Admins learned they implemented immediately and they became more productive and efficient.

The second year, I brought in the same consultant for a half-day training session. After lunch, the consultant spent about 30 minutes in the cubicle of each person addressing her needs and concerns. The third year, I brought the consultant again. By now the ladies were pretty knowledgeable about the software and the complaints from the ministers and managers had diminished but I knew the ladies wanted to know more. This time, the consultant spent 45-60 minutes with each person - there weren't classes for everyone, just individual sessions. After the consultant left, I met with the Admins and they drafted a series of documents to help new Admins and as "cheat-sheets" for the current Admins.

Finally, for the past several years I've sent at least two Admins to a national conference. These two get to spend a week out of the office in a nice hotel with company-paid meals and travel (that is a huge morale booster for them). They hang around other Admins for the week and get to know the software developers and technicians - now when the Admins call for help, they can put a face with the name. It does cost about $3,000 to do this each year but that money is recouped within six months in efficiency, effectiveness, shared knowledge with the other Admins, and morale.

A side benefit to all this is that the turnover of the Admins has been pretty low (less than the ministerial staff turnover). Every year they talk about who is going and they pretty much self-select - I don't have to make the choices. They are a wonderful group of Admins who can now do just about anything on the software - there are no complaints about what the software can or cannot do. The Admins know it all!


Lead On!
Steve

Telling Stories

Here are two secrets - people that give money to churches and other non-profit organizations really, really want to know what their money was used for. AND, if you tell them and it is a compelling and life-changing story, they'll give you more money.

Most churches do a poor job of telling stories to their constituents. Churches just presume that people will continue to give "because that's what the Bible teaches." Sorry, that doesn't cut it any more. Our society has trained people, especially the under-40 crowd, to ask questions about "what happened to my money." They want to know - they expect and demand to know. There are two consequences:

• Tell people where their money went
• Once people see the good things that happened as a result of their money, they will tell others about it and, very often, give you more money. Telling stories is a game-changer: people will step up to the plate like they've not done before and they'll tell others the stories they are hearing. Telling stories is huge!
• Don't tell people where their money went
• If you do not prioritize telling people about how their money was used and you just presume that money will continue to come in, then you continue to operate as you are now. You may not see a decline in giving but you will probably not have an increase either.

How do you tell people? That's easy. Every way you possibly can.  Use every medium possible from print to social media to illustrations in sermons to my favorite, completely altering the offering time.

Telling stories during offering time
The offering time has changed in the past couple of decades. It used to be a time for special music to show off some piece the choir or a soloist worked on and wanted to fit in the worship service. Not any more. Offerings need to be interactive and here's how.

• Every Sunday of the year, have a story about how the offerings have been used. You'll need to coordinate the stories - don't just insert stories - make them relevant to the message and/or to something going on in the life of the church at that time.
• If you don't have 52 stories, you've got serious problems and they're not financial - your church is dying because you're not aware of how at least 52 lives have been affected by your church.
• Take 3 or 4 minutes each week during the offering to tell a story in different formats
• Use videos of different things, slide shows, live interviews on stage, narratives, songs by children, conversion and baptism stories, etc. 
• Alter the format each week to keep the story-telling time fresh and interesting
• Give each ministry of the church (missions, education, worship, fellowship, care, and administration) two or three times during the year for them to tell an interesting story about their ministry and how people's contributions made all the difference.
• If you're doing a live interview, rehearse with the people you're interviewing so that you'll know their story and can help them get over their nerves about standing in front of "the whole church."
• When planning a story, think about the end first. What do you want people in the pew to hear and take home? Then backtrack till you come to an appropriate place to start the story. But always, always think about the end of the story first and then decide how to start the story.
• Tell stories about 
• The youth mission trip that you're raising money for, that is going out next week, and that just came back. That's three times to tell the same story with different angles each time.
• The Vacation Bible School that is coming next week and that happened last week. Two times for stories.
• People!!! Every story is about people - every story must be centered around a person or group of people. Stories should have names (first name is enough) of lives that have been changed because of what people gave. I can't emphasize this enough - even if the story is about how members gave money for a building, then talk about who will use that building and why!

Critical Elements
There are two things that need to be in every story-telling time. These two things need to be used every week and they need to be said in different ways so that these words are honest and genuine, not a refrain that everyone tunes out.  Here they are:

• Thank you
• Say thank you every time you can. People like to be thanked, even if they only gave a couple of bucks. If people are shown appreciation and not taken for granted, they're more like to give next time. Say thank you as often as you can and be innovative in the ways that you use those words.
• Generosity
• Use the words generous and/or generosity as often as possible. Generosity has replaced "stewardship." There are no negative connotations to generosity while stewardship can have some minor misunderstandings. Use these words - generous is a more accurate depiction of what God has done for each of us in opening his hand to share with us his wealth of love and in spreading his arms out to die for us and in holding us close to him in times of our distress.

We need to encourage our constituents to be generous, like God, and thank them for their generosity. Tell them stories about how generous God has been with us and how their own generosity has changed the lives of so many people.  So please, TELL STORIES!!


Lead On!
Steve

Financial Statements - Balance Sheet

This is a pure accounting post - fair warning.

The balance sheet is a snapshot of your organization's financial status at one specific moment in time, usually the end of the month for public purposes but it can be produced for any date of the month or year. The balance sheet is divided into three main sections: assets, liabilities, and equity. For non-profits, I have specific guidelines for each of these three areas; these guidelines differ from what you may see in other balance sheets but it has passed muster on decades of audits and reviews by Big Four audit firm audit partners.

Assets

• Assets should only be cash assets. Cash assets means "money in the bank" - what you can actually spent as of the Balance Sheet date. My balance sheet has three lines for assets:
• Checking account - I have one and only checking account. It is easier to reconcile and saves lots of time of transferring between banks. Having more money in one bank gives me more clout with that one bank - clout is good!
• Endowment Fund or Foundation - this is a one-line summary of the endowment funds. The line item detail of the various sub-accounts is spelled out in the liabilities section of the balance sheet.
• Petty Cash - if you have a petty cash bag somewhere in the church, that amount needs to show up in the assets. It's not going to be much, between $50 and $250, but for good accounting records, you need to show that money.
• What is not in the assets category? 
• Property, plant & equipment or PP&E (sometimes known as furnishings, fixtures and equipment) is one of the biggies not in there. Why? Because my experience is that someone will see that you have several million dollars of PP&E and say that the church already has millions of dollars in the bank. Trying to explain to Mr. or Mrs. Smith that PP&E is bricks and mortar and not dollars in a bank can be difficult. I just avoid the conversation altogether by omitting PP&E. I don't ignore PP&E - one of the notes of the audited financial statements shows the insured value of the church's PP&E. That should be based off of a valuation done within the past five years but it can be taken from the commercial property insurance contract for the church.
• Depreciation is the other thing that is not in the assets. Depreciation is done purely for tax purposes. Since a non-profit does not file income taxes and thus does not take a deduction for depreciation, there is no need to record all the inventory and track all their depreciation. FYI, I track inventory differently - every few years I get a video inventory of the entire church, inside and out, so that if there is a disaster, the insurance company can value things from a picture and not from a written document. I make several copies of the video inventory and these copies are placed in several locations, onsite and offsite including with the insurance agent.
• Accounts Receivable - I use the cash basis of accounting which means that I only record cash when it is received and when it is spent. Thus, I do not record receivables such as member pledges. People may pledge to give your non-profit some money, but there is no legal binding to require them to give you the money, only their conscience. Because I do not know if I will get their pledge or not, I do not record money until I receive it in the office. It keeps things neat and clean.

Liabilities

• Liabilities are monies that are due to other organizations or are designated for a specific cause. I divide the liabilities section of a church's balance sheet into several sections.
• Payables are monies that are due to others. Typically the payables I have are for taxes, retirement, and other payroll withholding items.These are monies that were withheld from paychecks and the organization is holding them only until it is time to file with the proper authorities.
• Donor Restricted Ministry Funds are funds that were given by people for a specific purpose such as the benevolent fund, the youth mission trip, a building campaign, etc. Legally, the non-profit can only spend the money on the cause to which the donor gave the money. If you spend the money on anything else without the permission of the donor, you're in legal hot water (close to the boiling point!). I have this category because all of the funds in the donor restriction ministry fund section will be spent by church members or committees of the church. Members of the church will determine where and how the money will be spent.
• Donor Restricted Missions Funds are funds that were given by people for a specific organization that is not located at the church. These funds will not be spent by church members or committees. Instead the monies are forwarded on several times a year to the appropriate organization who in turn will spend the money on their mission. Examples of these funds are national or international mission offerings and organizations with whom the church has an affinity but does not exercise control such as Habitat or a campground.
• Church Designated Funds are funds the church set aside out of its budget and/or out of any funds leftover at the end of each budget year. Forward-thinking churches will establish reserve funds for major building maintenance items (think A/C units costing $30,000 each), office equipment (new computers), etc. The church is in complete control of these funds and can change when and how it spends these monies because these monies came from undesignated gifts.
• A special mention to one fund. I am a strong proponent of establishing the "Unspent Ministry Fund" which is the church's rainy day fund or emergency fund equivalent to 30, 60 or 90 days worth of revenues (whatever the church's finance committee establishes). The source of these funds is the money that is "left over" at the end of each budget year. Instead of leaving it in the equity section of the church balance sheet, I clear out that figure to Unspent Ministry Funds. This helps in a several ways:
• I can look at the equity line and see immediately how well (or not) the church is doing this year and
• It clears out all profits and losses from prior years into this one fund
• Endowment Fund or Foundation is the detail for all the various sub-accounts of the endowment fund or foundation. 
• My first presumption is that your church has a foundation - that will be a subject for a future post. If you don't have a foundation or endowment fund, you need to get one this year - do not wait!!
• Secondly, these sub-accounts show what the church and its members value by establishing a separate fund for a specific cause. These are the only permanently restricted accounts (for purposes of FASB 116 and 117). I work with donors to establish funds and then spend money from the fund according to their wishes. The church has ultimate control over these funds but they should spend them according to the donor's desires. If you do that, you'll get more money, guaranteed!

Equity

• Church's don't have equity, right? Actually, they do. All the cash and all the bricks and mortar belong to the church members. If the church were to close its doors, they would have to figure out what to do with all the money and mortar. Before you think you can cash in on this, IRS regulations regarding 51(c)(3)s stipulate that the bylaws of the organization must name a successor non-profit to receive all the equity of a church should it fold.
• The way that I use the equity section is not unique, just different. I don't have any PP&E (see assets for that discussion) so several million dollars is missing from the equity. Instead, I have one line which shows the net surplus or deficit for the year. That one figure shows me at a glance how well or poorly we're doing for this fiscal year - I don't need to dig any further. The bottom line is truly the bottom line!
• At the end of the year, I use the equity to fund several things if there is a surplus. Use the leftovers to pay for long-term things that you would otherwise not be able to afford. As I tell people, I can't find $100,000 this year but I can find it in the next five years. Plan for the future by taking a little money each year so that at the end of several years you've got what you need.
• The first thing I do is to ensure that the Unspent Ministry Fund is fully funded to the level stipulated by the finance committee.
• The next this is to fund any reserve accounts or upcoming projects that need funding. Sometimes there are projects that need some extra money that wasn't in the budget. Some times you need to set aside extra money for computers or a mission trip in a few years. Take a little each year and after three or four years, you'll have the money for new children's furniture or a youth trip to Scotland.
• The last thing is to use the leftovers to pay for capital improvement projects in the following fiscal year. Every organization needs to spend money on its facilities but often the problem is they don't know where to get the money. The annual "leftovers" is a great place to get them. Use that money, given by members for their church, to improve the church facilities. That will help you from needing a capital campaign to fix up the church buildings and you can tell members regularly during the year how you are spending their money to fix up their building.

Lead On!
Steve

Thermo-Wars

I maintain my HVAC (heating, venting, and air conditioning) equipment in as good an operating condition as I possibly can, but that doesn't stop thermo-wars: people sitting next to each other where one is wrapped in a sweater and the other person is fanning himself because of the heat. I use a laser thermometer in these thermo-wars. Actually, my main weapon is education and the laser thermometer is a tool in the education process.

The laser thermometer looks like a small gun that shoots a laser beam. Within a few seconds after pulling the trigger,  the device displays the temperature of what the beam. The closer the laser thermometer is to the target, the more accurate the reading because longer "throws" allow for more dispersal of the feedback to the sensor. I use this device in several ways:

• When staff or members tell me something is wrong, I get a laser thermometer reading and show it to the person. 
• If the temp is off, I thank the person and begin working on the problem. That lets the person know I'm not ignoring them. That makes for good public relations with parishioners.
• If the temp is fine, I show the screen to the person. Sometimes people trust technology more than other people and the laser thermometer can help convince them that the temperature is "normal."
• I've also bought several laser thermometers for various staff persons. This empowers them to check the temp themselves. Then they can decide whether or not to call me. Giving laser thermometers to others has cut down on the number of "false alarm" calls to me.
• When I do call my HVAC company to report a problem, I can tell them what the real temp is rather than give a vague response about what the temp is. It helps me to have better communications with the HVAC technician and so my relationship with him is improved.

As I said, it is a neat "toy" but it really does help members see what the real temp is and helps me respond to the members and to the HVAC company. The laser thermometer helps members know the real temp; but the real savings is in controlling the temperature in the building.

Lead On!
Steve

HVAC

Heating and air conditioning are HUGE consumers of a church's budget - somewhere in the 5% to 10% range depending on the energy efficiencies of the buildings. There are direct costs to buy and install the equipment, to pay the electric and gas bills, and to pay for ongoing maintenance of the equipment itself including regular PM (preventive maintenance). There are also indirect costs of taking staff time to oversee this equipment and to handle the distraction of members who become obsessed with the temperature.

To save money in this area you need to know and control several things:

• What the temperature is when it comes into the room
• How long the conditioned air is on
• Where conditioned air leaves the room

1. To control the temperature for the air coming into a room, I set all the thermostats at
1. Occupied Heat (people using the room during heating season), 68 Fahrenheit
2. Unoccupied Heat (the room not used during the heating season), 60
3. Occupied Air Conditioning, 74
4. Unoccupied Air Conditioning, 80
5. You don't want to set the unoccupied temperature too high or low - that will cause the unit to have to work extra hard to get to the occupied temperature when it is called for. The occupied temps are just inside the "uncomfortable" zone - the temps are still comfortable but because they are at the limit, they save large amounts of money than if they were right in the middle of the comfort zone. Frankly, there is no comfort zone that meets everyone's needs - I hit the edges of the range and then rely on people to dress accordingly, but they still complain. Keeping your building temps within these ranges will save your budget thousands of dollars - I highly encourage you to do this.
2. To control how long the conditioned air comes into the room, there are several cool pieces of technology
1. Programable thermostats 
1. These are great because they can turn a unit on and off when the room is being used according to the program that is keyed into it. This ensures that the units are running only when someone has told the unit to run. Most programmable units have some sort of temporary override button or control. The override is to ensure that when there is an unscheduled meeting, the unit can be turned on in order to get the room to the occupied temp (whether heat or A/C).
2. The bad news about programmable thermostats is that they rely on humans. Humans have a tendency to want to mess around with thermostats. I've found thermostats with the date and time changed (which plays havoc with the schedule that was originally programmed). I've also seen thermostats with the programmed temp and run times completely changed. And it doesn't matter if the thermostat is behind a locked casing or a locked screen, that is just a challenge to some people to figure out how. The human factor is pretty frustrating.
2. The latest piece of technology which I plan to try in a few places pretty soon is a thermostat with a motion sensor. The idea is that when the motion sensor comes on due to movement, it turns on the thermostat which in turn may (or may not) call for the unit to bring the room to an occupied temp.
1. There are several good things about this: 
1. You only need to program the thermostat (these motion sensor stats are also programmable) for the times of the week when people will definitely be in the room. The rest of the week the unit will turn itself on when it senses motion in the room.
2. The thermostat will keep the unit on so long as movement is sensed and when it comes on, it will stay on for 15-20 minutes (whatever is programmed when it is setup). 
3. This device completely eliminates the human error element and that is a huge relief. 
4. You will see immediate savings because the unit is running only when it needs to run - not when the room is empty (even though a meeting was scheduled).
2. There are several bad things (or perhaps I should say, "unknown things"): 
1. The unit will turn on whenever a custodian comes into the room to get one chair or when kids are playing "hide and seek" in the room. 
2. If the unit turns on and off several times a day, it can shorten the life of the unit by several months or even years. That can be mitigated by lengthening the "on" time for the unit to 20-30 minutes but that will also decrease the savings.
3. These thermostats are not cheap. And, if the thermostat controls temps in several rooms, you'll need to install a sensor in each major room controlled by the stat so that if someone enters a room, that sensor will "see" the person and turn on the unit (even though the actual motion sensor thermostat is a couple of rooms away). Installing the extra sensors is not cheap either.
3. There are only just so many places conditioned air can leave a room
1. Ceiling - most commercial buildings have drop ceilings for the convenience of accessing equipment and running wires without destroying a hard ceiling. However, some amount of conditioned air is lost above the drop ceiling. The good news is that it is not that much and it is usually is a layer of hot air (because hot air rises) 
2. Doors - every time a door is opened, air rushes out (or in). If the room's thermostat is in occupied mode, then it is a great idea to keep doors closed. Hallways may or may not have conditioned air but hallways, by definition, lead to doors that go to the outside.
3. Walls - yes, walls leak air. If you can, insulate them in order to keep conditioned air inside the room. Insulating a wall after it is built is not cheap and it is very messy. But it can lead to energy savings.
4. Windows - this is probably the place in a room where conditioned air is lost the fastest. Windows leak like a sieve. I highly encourage you to get double-paned, energy efficient windows in all your openings. 
1. That is a huge expense to most churches - let me suggest that you begin phasing in the windows over a 5 or 10 year time period. Divide the church up into 5 or 10 sections and begin replacing windows one section at at time. Doing it in phases will not consume your maintenance budget in one year but spread the cost over several years. 
2. The best time to do all energy efficiencies, is at the beginning of your budget year. If you don't have a capital budget (and most churches don't), then spend the money in the first month of your fiscal year. Charge some of the expense to your maintenance budget and the other part to your utility budget (because your utility budget will decrease that year due to energy savings).
3. One way to fund capital needs, is to take any "leftover" budget money at the end of the fiscal year and put that money into a fund to pay for capital items. I'll explain this concept in another post - it's one of my favorite ways to get things paid for without hurting the budget.

There are significant and real savings is in controlling the temperature in the building.

Lead On!
Steve