1. Budgetary Control at the Local Church

2. Budgetary Control. The working policies of the Seventh-day Adventist church request that all institutions and organizations adopt the principle of making annual budgets and the submission of proper financial reports to the boards or committees in a timely manner.

3. A budget is the expression of plans in formal financial terms
A budget is the expression of plans in formal financial terms. They may be considered as “guides to future action.” Put differently, it is an “estimate of financial activity covering a definite future period of time.”

4. There are many types of budgets that are used by business organizations but in the Seventh-day Adventist local church, only two kinds are of interest to us. The first is the operating budget—a projection of the financial needs of the local church which relates to normal operating activities that begin and end within a financial year.

5. The second is the capital budget—a projection or estimate of developmental activities which generally extend over a longer period of time. At the local church level, both budgets are generally prepared annually.

6. It is important to note that a budget should reflect the plans and projections of the church. It is the fault of many congregations not to plan but to simply present figures on paper.

7. How to prepare a budget Select a budget committee
Have departmental leaders submit departmental estimates based on the strategic plan objectives for their respective departments.

8. The finance or budget committee must consider the actual income and expense for the last fiscal year along with the revised estimates for the current year.

9. Revised
Actual
Estimate
2002
2003
INCOME:
Combined Budget
120,000.00
140,000.00
Interest on Accounts
1,500.00
1,800.00
Ingathering Returns
8,000.00
10,000.00
129,500.00
151,800.00

10. The committee will then make projections of the income for the following year.
The committee must next make the necessary allocations as prescribed by policy. These would include mission offerings and conference/mission development.

11. The committee will then examine departmental estimates, overhead projections and other required allocations in light of the available net income after appropriations to the conference/mission.

12. It is important to ensure that expenses do not exceed income.

13. The budget is to function as an instrument of financial control
The budget is to function as an instrument of financial control. Administrators are to ensure that the spending is guided by the fiscal boundaries that are prescribed by the budget.
Financial reports are to be presented at the monthly board meetings.

14. Kindly give attention to the various divisions and sub-divisions such as Income and Expenditure and departmental expenses, allocations and grants, overheads etc.

15. In the example above, there are three columns
In the example above, there are three columns. The first (2004) represents the actual figures for that year. The second, (2005) is the year in which the budget is being prepared (most likely around November or December) for the up-coming year.

16. It contains figures that are revised estimates as the year is not yet done. These are projections based on the current trend. The final column is the proposed budget for the up-coming year, in this case 2006.

17. The Capital Budget
The capital budget is used to provide financial estimates for the acquisition of assets that will generally extend their use into the future. Examples would include the purchasing of a bus, an organ or the seats.

18. As these are not normal, regular activities of the church they may be called “extraordinary” purchases or expenditures. It is a good practice to budget for the regular activities of the church (the operating budget) before commitment is made for such expenditures.

19. An example of a capital budget is given on pages 4 & 5 of your hand-out.
In this example, the congregation is planning for two capital projects: seating for the children’s division and a digital projector. Note the following:

20. The projected operating gain of $3,100
The projected operating gain of $3, from the operating budget above is added to the estimate of cash available at the end of This figure would be derived from the treasurer’s books and the projected income and expense for the rest of the current year— This gives us the total cash estimate available for 2006.

21. The Reserve funds for 2005 are then removed from this amount so that the congregation does not spend reserved funds that are allocated for specific projects such as building, Pathfinders etc. This gives a clear picture of what is available for use on the proposed capital projects.