Budgeting in Churches – A Literature Review and Research Agenda Denise Frost

1. Budgeting in Churches – A Literature Review and Research AgendaDenise Frost Denise.Frost@wintec.ac.nz Phone 834 8800 ext 8563

2. Overview of the Presentation • Background • Professional Financial Management • Forecasting Income • Research Agenda

3. Background • Church budgeting operates on the principle of stewardship. • Literature on budgeting in religious organisations falls into two broad categories. • In the first category, a case study approach is used to explore financial management in mainstream churches.

4. Background • In the second category are studies that examine church budgeting in the context of an empirical case study in a religious organisation.

5. Professional Financial Management • Generally, only larger congregations will have the financial resources to hire a full-time accountant. • Smaller congregations are more likely to hire a part-time financial manager or rely on a member of the congregation to fill in.

6. Irvine 2005 • Lay people with accounting skills performed accounting tasks. • Professional accountants were consulted on a number of occasions. • It is important that accounting professionals are church members and not employees, as church members are more likely to be committed to the church vision and mission.

7. Kluvers 2001 • Most parishes employed an accountant. • The accountant was required to have a relevant tertiary qualification. • The accountant did not have to be a member of a professional body.

8. Jacobs 2005 • There was no rule that a qualified accountant was required to prepare congregational accounts. • Church members preferred to deal with a person with church connections even if s/he was not adequately qualified.

9. Training of Pastoral Staff • Pastors are usually selected for their spiritual leadership. • Often pastors have little training in financial matters, yet are expected to participate in making financial decisions. • Often training on financial matters at seminary is minimal.

10. Summary of Professional Financial Management • Churches often lack professional advice because of resource constraints or a resistance to ‘outsiders’.

11. Forecasting Income • The revenue stream for a church is heavily dependent upon individual donations. • Hoge, Zech, McNamara & Donahue (1999) report that in North America, individual donations make up 90% of congregational revenue. • Hodgkinson (1999) found that the average North American congregation receives 81% of its income from individual donations.

12. Congregational Donations • Around 75% of donations are given by 25% of the congregation. • There are clear denominational differences in the motives underlying the reasons individuals give to a church. • In American congregations, giving has been found to follow a seasonal pattern.

13. Attempts to Anticipate Income Patterns • Pledge cards – individuals pledge to give a certain dollar figure on a regular basis (Futcher & Phillips, 1986). • Pledged or planned giving is associated with higher levels of giving (Chaves, 1999).

14. Adoption of the Goals and Visions of the Church • The degree to which the congregation adopts and supports the goals and vision of the church as their own is likely to affect the level of financial support given. • Financial support is more likely to occur if members adopt and support the leadership’s goals and vision for the church.

15. Monitoring Income • It is important to continually monitor income to ensure that income is adequate to cover budgeted expenses. • One method is to make the dollar amount of the weekly offering public. • Makes church members aware of the current level of giving compared with weekly budgeted expenses necessary for the church to function.

16. A Proposed Research Agenda • Previous studies have been done on denominational, mainstream churches. • No study done on an independent church with no denominational ties. • There are no prior studies conducted on budgeting practices in any New Zealand church.

17. A Proposed Research Agenda • There is no broad background knowledge about the use of budgets and the budgeting process in New Zealand churches. • As an example, there is no indication of basic facts such as the percentage of New Zealand churches that use a budget.

18. Where to from here? • Use a case study approach to study budgeting in an independent church in New Zealand. ANY QUESTIONS?