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.
Check out some of the most popular tips so far of the Church Finance 30/30 Series!
- Budgets are about freedom, not constraint
- Create a cash flow budget
- Collaboration is the glue of insightful leadership, shared-accountability, and results
- The budget is a reflection of your pastoral priorities
- Prioritize time — calculate the budget category impact percentage
