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Uncovering The Unasked Questions in Church Capital Budgets

For growing houses of worship a capital budget is a necessity, and forecasting expenditures is a matter of asking the right questions.

Planning for the future is an important part of a growing church.  And a capital budget is a useful tool for determining the resources necessary to help church facilities keep pace with that growth.

Simply put, capital budgeting is a way that churches can plan for the things needed to grow their ministry beyond normal day-to-day operations, according to Mike Boblit, vice president of ministry relationship banking at Evangelical Christian Credit Union (ECCU).

"We all want to appear smart, and we don't want to ask a dumb question," Boyce said, "but in cases like this, the dumb question is the question that you didn't ask."

"Capital budgeting is generally described as budgeting funds that are set aside for property improvements, upgrades and maintenance," says Boblit.  Known in some churches as "the building fund," these funds generally support major, big-ticket items such as parking lot repaving, new roofs, new HVAC systems, and other major expenditures related to the church physical plant.

A capital budget for major facility-related expenses is a necessity for a growing church and one that is often overlooked, notes Deborah Ike, president and founder of Velocity Ministry Management, a company dedicated to vision implementation for church leaders.

"When you’re experiencing growth as a church, it’s an exciting and busy time," says Ike, "and with all that’s going on, it can be easy to overlook the behind-the-scenes aspects of supporting that growth into the future."

"However, in order to sustain and continue that growth, you need to consider its impact on your church facilities and equipment," Ike explains.

For example, more automobile traffic generated by a growing congregation means that you might need to repave the parking lot or repaint the lines sooner rather than later, according to Ike.  Meanwhile, increasing numbers of people using a church facility leads to greater wear and tear and eventually replacement or repair of carpeting, pews, chairs, bathrooms, and other items.  And ultimately, you may need to add on to your building or construct a brand-new one in order to accommodate growth.

A capital budget helps churches deal with these and similar situations.

"It’s important to look ahead and plan for at least 12-24 months, and budget for the expenses required to maintain, and possibly expand, your facility," says Ike.  Not doing so, she notes, can result in a run-down physical plant that might cause first-time guests to hesitate in making this their church home." 

And at the same time, "Not budgeting for and performing proactive maintenance also can cost you more in the long run, when you find yourself having to make emergency repairs." 

Through a capital budget, a church can plan for the financial needs of property upkeep and improvements.  This is done by budgeting for these items in the list of planned expenses for a given year—-even if the church is not going to spend on the planned improvement or upkeep during that year, tells Boblit.

"If the money is budgeted and the church funds the budget, then cash will grow until the time comes to make the expenditure, allowing a church to plan for the necessary large ticket items needed to keep a facility in good shape," he says.

How To Develop A Capital Budget For Church

The capital budgeting process starts by building a list of items needed to keep your property in order, along with projecting the likely time frames in which expenditures may be need to take place.

"Estimate the cost and timing of the projected needs over the coming years, and then include a portion of the costs in your annual budgeting process," Boblit says.

Examples of these items, according to Boblit, include parking lot slurry or repaving, which is often done every five to seven years; roof maintenance, which can be an annual expense, based upon your location; audio and visual equipment and carpeting, all of which typically have a five to seven-year lifespan; and HVAC system maintenance (annually) and replacement (every 10 to 15 years).

If you're like most people, chances are good that you don't know all there is to know about the items included in a capital budget, particularly their costs.  That's when it's a good time to reach out to others for help.

"First, have your accountant provide you with reports on what you’ve spent on capital items over the last few years," says Ike. 

Gather estimates on capital items to get an idea of what each may cost, she notes.  You'll definitely want to meet with your facilities manager to discuss the costs he/she projects for upcoming building maintenance expenses, such as replacing the church’s roof, repaving the parking lot, replacing HVAC units, and other items, she notes; and at the same time, "Discuss whether there might be a need to add onto or remodel the church facility, and what that may entail."

Especially for non-construction-related capital budget items, such as those involving maintenance, gathering information from vendors can be a productive means by which to get solid information about costs, according to Kari Boyce, senior business development specialist at Thrivent Financial.

"If it is not something as straightforward as a construction project, you can talk to the people that you would potentially hire in order to get cost estimates," Boyce says.

Major construction projects are one type of capital expense item that can require some extra research, as well as expanding the circle of those you consult with, in order to get good estimates of costs, timing and challenges.

Talk with a lender that is comfortable with church budgeting and finance in general is a good place to start, notes Boyce.  And it also pays to consult with someone that's done this before.

"Talk with another church in the community that has done a similar project," Boyce says.  And importantly, "Ask them if there is anything they wish they had known before they started the project and what they would do differently if they had the opportunity to start again."

Whether you are talking to lenders, vendors, churches, or anyone else to nail down costs for items in your capital budget, the important thing to remember is to not be shy about asking every question that comes to your mind.

"We all want to appear smart, and we don't want to ask a dumb question," Boyce said, "but in cases like this, the dumb question is the question that you didn't ask."

For additional information:

-Lewis Center for Church Leadership, Wesley Theological Seminary - "Does your church need a capital budget?" (https://www.churchleadership.com/leading-ideas/church-need-capital-budget/ ).

- Financial Leadership for Churches and Non-profits LLC "Capital Budgeting" (http://www.financeforchurches.org/capital-budgeting/).

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