What I learned as Treasurer Elect by Scott Denning

Scott Denning, Professor of Atmospheric Science, Colorado State University, March 28, 2011

I’ve been part of Foothills since 1988, but until this year I never understood the money side of the church. I want to share with you what I’ve learned about “the big picture” of church finances.

The financial operation of the church is very much like a small business, with a budget of about $700,000 per year. The budget has to be balanced. Income and expenses are both about $700k.

Of course there’s lots of detail in the full budget, but here’s the big picture: the church’s income is virtually all from our giving during the year, and the vast majority of our spending is on payroll for our handful of employees.

For accounting purposes we break down the income side into separate categories: pledge, donations, and fundraisers like the rummage sale and the auction. But really every dollar is a contribution from us even though we call them by these different names.

By far, most of our income is in the form of pledges. This is a good thing, because it’s the only part of our income that can be predicted pretty well. Other components (one-time donations, plate collections, fundraisers, etc) are a small and hard-to-predict term. The pledge is the backbone of the budget and defines everything else. We typically collect only about 95% of the money that people pledge, so that’s all we budget for.

On the spending side, the vast majority of the money goes to support our ministers and staff. Like any business, we have to cover salary and benefits like insurance and retirement. We have to commit to these in advance: we can’t just bump people’s salaries up and down from month to month or decide whether to pay insurance premiums based on our monthly income.

I’ve been really surprised at how little some of our staff get paid. The UUA provides a regional index for salary ranges for each church position, and many of our staff are well below the midpoint for our region. Some are even below the minimum!

The monthly operation of the church is challenging. Income fluctuates a lot from month to month, but we have to make payroll no matter what. This would be a lot easier if we had predictable monthly income from the pledge. Paying pledges monthly, especially through automatic deposit, would help a lot.  Instead, pledge income has a big seasonal cycle: we get a lot of pledge income in December for end-of-year tax purposes. This gives us a surplus which gets drawn down through the year, and then we’re usually really strapped in the fall.

We pay into a “reserve account” in surplus months and draw out of that in lean months. But this savings account is less than 3% of our annual budget, so it sometimes gets kind of scary. You can just imagine the stress our employees feel every October and November as they wonder whether irregular pledges and plate collections will cover payroll that month. We’d really like to pay into this account to get it up to 10% of the budget over a period of a few years, but that means either more pledges or cuts in (you guessed it) payroll.

The annual budgeting process is hard! Based on the pledge, we start preparing the budget in March, which means we have to project both income and spending 15 months out, till June of the following year. Even though we’re just a bunch of volunteers, we usually get this right to within a few percent!

So it would help a lot if we could pay 100% of the money we pledge, and if we could pay it monthly to smooth out the church’s income. It would be wonderful to build a savings account that would protect us from bumping up against a zero balance every fall.

The operation of the church is done by the ministers and a very small professional staff, plus the volunteer contributions of so many of us. As ethically responsible employers, it would be great to bring our staff up to UUA salary guidelines, but all of their payroll comes from us.

Gretchen explains that the church is like a party. There are lots of great things we get to do together here. But guess what? We’re not the guests. We’re the hosts of the party!

 

 

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