Greetings once again from the Treasurer's Office.
A glance at the August income and expense report shows that our monthly daily average mail income fell substantially below our budgeted yearly daily average to $112,079.
We find this income dip to be disappointing if not downright discouraging, especially since we expected a substantial rise from July, and it did not materialize.
Even so, the yearly daily income average stayed slightly above our budgeted amount of $122,000. So, if the anticipated year-end rise in income materializes, we will still receive income within projections.
I stress, of course, that this will be true if and only if income starts to climb again as it often does toward year's end.
While the current slump can be more or less managed if projections hold, our real challenge will be with the 1998 budget. Even though four months remain until the new calendar and fiscal year, we are already projecting income and planning expenses. I will share more information about the budgeting process with you between now and year's end.
In September your pastor received the pledge cards for next year. We ask you to give careful attention to your giving plans for next year, and, as always, we are grateful for your prayers and continuing financial support.
Income and Expenses
Mail income in Aug. $2,353,659
Daily Average: $112,079
Holy Day Offerings processed in Aug. $2,600
Other income in Aug. 751,204
Total income in Aug. 3,107,463
Totals for the year to date:
Mail income, Jan-Aug $20,783,734
Daily Average: $126,730
H.D. Offerings 3,319,512
Other income, Jan-Aug 4,012,466
Total, January-Aug. 28,115,712
Down from 1996: 16.4 percent
Expenses, Jan-Aug. 27,782,141
Down from 1996: 25.7 percent
Average daily mail income, month by month
Jan. 1997 124,385
Feb. 1997 144,367
Mar. 1997 132,217
Apr. 1997 138,931
May 1997 124,340
June 1997 121,411
July 1997 118,947
Aug. 1997 112,079
I understand from our pastor that you are in the process of making next year's budget for the church. I want to be able to pray about the process, and it would help me to know more about it. How exactly do you go about deciding on the budget?
Projecting next year's budget is a two-step process. First, we make an estimation of how much income we project the church will receive, and then, second, we set expenses to fall within the projected amount.
Although in its simplest terms our budgeting process is just this straightforward, in actual practice each step is a bit more complex than it sounds. Let me explain each step in more detail.
In order to project income, we begin by examining the income trends over the last few years. By looking at recent past income, we try to gain a perspective of how the income might be expected to climb or fall, if the prevailing trend in place were to continue at its current rate of acceleration or deceleration for the next year.
Of course, since in recent years our income has been trending downward, although at a decreasing rate of decline, we would be ignoring the obvious if we were to conclude that the trend will for certain instantly reverse in December and begin up in January 1998.
Of course, we hope the trend will reverse and climb, and, if it were to do so, we could easily accommodate such an upward reversal since it is always easier to increase spending rather than decrease.
However, prudent planning requires us to carefully plot the past and infer from the past what is likely to happen in the future, and then plan conservatively for it.
Based upon the technique I just described, we will plan for a decrease in income once again next year, although we hope it will be a fairly moderate decrease when compared to the last three years or so.
Once we have projected income, we then plan expenses to approximately fall within income unless something unusual were to happen. (We must maintain a certain amount of money in reserves to plan for the unlikely but possible event of a surprise drop).
If income were climbing, we would of course plan to save some money by adding to reserves. In our current financial climate, however, we essentially plan for about a break-even budget and plan to add to reserves, if at all, through the sale of various properties the church owns that are up for sale or even in escrow (as is the case with a few, peripheral buildings).
We of course hope and pray our major facilities here and in Texas will sell next year, but we cannot plan our cash flow based on a coming and hoped-for sale that we are optimistic will occur sometime fairly soon, but which we cannot pinpoint precisely.
A key part of planning expenses is setting priorities. As our income has dropped, we have made a determined effort to always keep the church functions, such as the local congregations and field ministry, as the highest priority, and cut as much as possible from other functions first.
This is in fact why recent years have seen the discontinuance of Ambassador Foundation, the closure of Ambassador University and the layoff of more than 700 full-time headquarters employees.
Although even the strictly church functions have been impacted by expense cuts as our yearly income fell from $170 million a year in 1989 and 1990 to about $40 million this year, such cuts in church expenses have been the last and least to be trimmed.
Whatever our income picture holds for next year, we nonetheless try as much as possible to always make the church functions the highest priority each year.
Beginning last year we have had the added advantage of figuring in the effect of the nonbinding pledges our members have made. Every year from here on out the total of the members' pledges will be figured into the income projection process.
I cannot overstate how helpful the pledge system has been in helping stabilize our income, and how we hope to be able to more and more rely upon the pledged amounts to help us more accurately project the next year's contributions.
I should add that the process of projecting income, setting priorities and planning expenses is not something done unilaterally by me, the church's treasurer.
To the contrary, the various managers here are conferred with at various junctures throughout the process. Then, when it looks like I am able to make up a proposed budget that takes into consideration a multitude of input from various staff members and managers, I present the budget with options, if any, to the board of directors for discussion.
It is the board and not any one person who finally approves the budget and also approves subsequent adjustments up or down as income fluctuates within the year.
In summary, the budget is set by a collaborative process involving numerous staff personnel and managers in conjunction with the board of directors.
We try to realistically project the future income and expenses against the backdrop of a priority hierarchy in which the church functions are weighted as heavily as budget realities permit.
You as members contribute directly to the process by your giving patterns in the previous year and your pledges for the coming year.
Please ask God that we show wisdom and good stewardship over the finances for the coming year. Thank you, and God bless you for your prayers and financial support.
Sept. 16, 1997, WN, page 15
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