256. Case Study #17: Faith, Dollars, Budgets and Risk Leadership

[Although the story in this case study may seem to resemble a real situation, the names, places and actual circumstances do not describe any actual church, church board, pastor or chairperson.]

At the annual general meeting of Faith church the board had recommended a challenging budget for the next fiscal year. The congregation had been growing and for the past four fiscal years the average annual growth in the budget was in the range of ten percent. Concurrently the attendance during that time had increased eight per cent annually on average. However, given the size of the current congregation and the anticipated ministry needs and opportunities, the board perceived that in the coming fiscal year the increase needed to be in the range of twelve percent. They cast the challenge to the congregation in the form of a faith journey. God had supplied their needs in the past and they believed He would do so again. The congregation accepted their lead and voted for approval, even though some voices suggested a more cautious approach might be warranted.

About six months into the new fiscal year the board discerned through administration’s reports that the gap between anticipated income and expenses was widening. A deficit at fiscal year end was becoming a definite possibility. The board had already approved the use of contingency funds to bridge this gap two months ago. They still had a line of credit with the bank, but were reluctant to use debt financing as a way to sustain the budget.

Over the Advent season the board had sponsored a special offering to support the budget as well as a particular community project. The people’s giving was more than generous. These funds restored the financial equilibrium and brought things to a balance, but there were still six months of the fiscal year to go. Despite God’s provision through the special offering, concern within the board was growing that this level of giving would not be sustained during final part of the fiscal year and a significant deficit would occur.

Part of the board’s angst arose because the congregation had approved the hiring of a new associate pastor and part of the salary and expenses associated with this hire were built into this new budget. If the funds did not materialize, some board members were uncertain whether they should proceed with the hire. Or should they postpone this hire for 12 months and see whether giving caught up with the budget expenses.

Some board members urged sticking with the course and exercising faith that God would provide. They offered no specific plan to deal with a possible deficit other than relying upon the line of credit to sustain operations and the belief that God would meet the need. Others were of the view that God had provided them with information that they should act upon. Not to manage this risk of deficit by reducing expenses was presumptuous. They did not want to “test God.” Prudence dictated that expenses be reduced now so that any deficit at fiscal year end would be manageable.

So at their next meeting the board had to decide whether to go forward with the budget as approved, with the risk of substantial deficit, or to defer or cut some projected expenses in order to avoid a substantial deficit at year end. No board member wanted to curtail ministry or reduce staff at this point, but each felt the weight of the responsibility to manage this risk well. The health of the congregation was in the balance and the board’s credibility as the primary ministry leadership team for the congregation was on the line.

This kind of discussion and decision faces each church board at some point and perhaps is a regular, annual occurrence in your context. How do you balance the apparently competing claims of bold faith and prudent leadership?  What kind of policy might assist a board to manage such matters and decisions well? When is external counsel helpful? What role does a board chair play in such board discussions? Should a lead pastor participate in this discussion or is it a conflict of interest? What information does this board need to make a wise, spiritually-informed decision? If the fiscal issue is occurring because the administration is not managing the budget well, should the board step and provide the necessary oversight?

 

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