Church Management Academy Blog - Knowledge, Tips and Tools

By Michael Castrilli

The Budget is Not an Excuse

“Sorry, it’s not in the budget.” This is not a terrible response in and of itself, the problem is when the budget is used often as a penalty stick or prison.

To some people, the budget is used as a weapon of passive aggressive destruction.

“Well, the church budget committee doesn’t meet until 2023. Sorry, you are out of luck.”

As we have discussed, budgets are not created for constraint, but to offer freedom. A budget is a management tool that allows you the freedom to connect resources to mission priorities.

The budget is also not to be used as a weapon — it is a plan that offers leaders and organizations the insights they need to make informed financial decisions. Yes, the budget offers parameters on how much you expect to receive and to spend. But, the budget is also a GPS to help direct you to your destination. However, as we all know, directions are only as good as the person driving. The driver must be able to adjust for conditions on the ground – weather, road closures, accidents. The budget can offer this flexibility.

In fact, the budget empowers effective decision-making by providing directions for saying “yes” or “no” as circumstances arise. But, the budget should never be used as a simple way to say “no” because someone has not taken the time to establish priorities and create a resource plan that is collaborative, transparent, and reflects the needs of the organization.

When the budget is used as an excuse, leaders risk losing the trust, credibility, and morale of those they lead.

Developed and executed well, the budget is never a negative excuse — it’s a positive reality.

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Read Parish Finance: Best Practices in Church Management

By Michael Castrilli

Checks and Balances for Church

In some churches, one person counts the Sunday collection.

The same person deposits the collection funds with the bank and is then responsible for issuing all of the church’s checks.

And the same person is then responsible for reconciling the checkbook.

There are no checks and balances when one person performs all of these tasks. This system places too much temptation in their hands.

Segment Church Finance Duties

At every church, there needs to be segmentation of duties. That is, no one person should perform two consecutive functions in the financial chain of events.

Where possible, it is even preferable to have a separate person perform each of these tasks. Naturally, in a church with a small staff, that might not be possible. At a minimum, there should be rotating collection counting teams staffed by church volunteers and more than one person should be involved in depositing the collection. A different person should be charged with reconciling the checking account.

It is not just in the handling of collection funds where the segmentation of duties is important. In fact, it might be even more important, and the temptation to steal even greater, in the case of other church revenues such as church fundraisers, which are heavily cash-based.

Creating safeguards and internal controls for church finances is not about trust – it is about protection and accountability.

When you get pushback from those who may feel as if you are taking away some of their responsibilities, you can respond by saying, “This is not about trust, this is for your PROTECTION.”

Think about it this way – without strong internal controls, if the money goes missing, how are people protected? If there is no process, there is also no protection.

*Portions of this text come from Parish Finance: Best Practices in Church Management (New York: Paulist Press, 2016), Chapter 8.

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Limit Church Bank Accounts

It’s not unusual in a typical church for each ministry or organization to want control of their finances. Each will insist they need their own checking account. They don’t.

If a church has too many checking accounts it makes it difficult, if not impossible, for the church’s leadership to maintain control of finances. This will impact, not only the ability of the parish to provide accurate financial information but will greatly increase the opportunity and the temptation for embezzlement.

As my co-author Dr. Chuck Zech notes in our Parish Finance book,

In a classic case, when the Diocese of San Diego declared bankruptcy in 2007 in conjunction with the clergy sexual abuse scandal, it was discovered that the average church had eight checking accounts. The presiding judge wondered aloud how any parish could effectively control its finances with that many individual checking accounts. The authors have tales of parishes with more than 50 checking accounts, each controlled by a separate parish organization. This is clearly untenable

In reality, some church organizations do need their own checking account. A parochial school, for example, needs its own account. A national fraternal organization, like the Knights of Columbus, could justify having its own checking account. But the choir, adult education committee, youth group, etc. will also argue that they need their own separate checking account.

Limit Church Bank Accounts – One Checking Account Can Work!

The vast majority of church organizations could easily get by simply having individual line items in the parish’s statement of accounts, one for revenue and one for expenses. That would allow the parish to control the organization’s finances while still providing the opportunity to monitor its budget. By creating a budget that is built by program area, there is no need for separate accounts because managers can easily access reporting information.

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Picture of the front and steps of Saint Martin of Tours Chapel, St. Charles Seminary, Philadelphia, PA — Saint Martin of Tours Chapel, St. Charles Seminary, Philadelphia

By Michael Castrilli

It’s All About The Flow

It is important to design your budget recognizing the fact that some revenues and expenses fluctuate throughout the year. Most churches develop a twelve-month budget but differ on how the budget is displayed and managed.

To have the most realistic and manageable view of the budget, create a Church Cash Flow Budget. Unlike the creation of a budget that evenly divides income and expense categories by the number of months in the budget period (linear), a Church Cash Flow Budget provides realistic month-to-month projections of anticipated receipts and expenditures. The advantages to creating this type of budget are numerous, including:

Gaining visibility into actual revenues and disbursements of cash
Understanding how seasonality may affect revenues or expenses
Managing cash flow for months with higher expenses or lower income.
Mitigating the risk of not having enough cash on hand to pay bills.

St. John Lateran in Rome, Italy — St. John Lateran, Rome Italy

Tip 3 is brought to you by the Church Finance 30/30 Series

By Michael Castrilli

Church Capital Assets Planning

Yesterday, I discussed the importance of creating a church capital assets budget! As a refresher, capital assets are simply those items that the church owns that have value extending beyond one year. Can you think of some examples?

Yes, I am sure you guessed – the church building, the rectory, or other assets like major equipment – for example, a boiler, the church organ, or computers and technology.

Interestingly, even though these assets are critical to accomplishing the mission of the parish, many parishes do not have a capital budget. This may be due to a number of factors, but the process of creating a capital budget does not have to be overly difficult.

If a church building is unusable due to maintenance, issues or the high cost operate the facility, how does the parish accomplish the critical mission? Capital budgets can be helpful in this regard.

Today, let’s walk through the various categories and questions that can help you put this budget together.

Capital improvements – Do you have any significant projects planned for new buildings, additions, major refurbishes or upgrades?

Asset purchases – Do you anticipate any purchases of new equipment like computers, software (e.g. financial management system) or other assets that will be available beyond one year?

Equipment repair – Do you have equipment that might require repair in the upcoming years? Is money available for unexpected equipment breakdowns?

Facility upgrades – Are there any updates planned or necessary? Examples might include painting, carpeting, or retrofitting classrooms for new LCD screens.

Deferred maintenance – Have resource been allocated for the replacement of assets before they fail? This category also includes scheduled or routine maintenance (e.g. the annual boiler inspection) to ensure that assets last for their expected useful life.

Don’t forget to consider any new planned investments on the horizon and ensure that you build into the budget the expected useful life of the assets. As you consider the categories above, create a three to five year (or more) budget. Remember, it does not have to be perfect! By undertaking this review and understanding your critical infrastructure needs, you may be surprised by the insights you gain.

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