Attitudes about budgets vary greatly among churches.  Some churches operate without one, a practice I definitely do not recommend.  Many others swing to the other extreme expending great amounts of time (and blood, sweat and tears…) creating a budget plan.  But that is only the start.  After all of the effort is expended, they then protect their “sacrosanct” budget with all of the additional energy they can muster.  More times than I can count, I have seen this attitude cause a church to slip into our next trap.

Trouble comes when a church that considers its budget as carved in stone is faced with an unexpected (unbudgeted) expense.  These churches find themselves on the horns of a dilemma…

The first reaction is to not pay the bill or postpone the services simply because “it’s not in the budget…”  I cannot tell you how many times, churches in dire need of our services postponed the work until the next budget year even though they were flush with cash.

But often, the expense simply cannot be postponed.  (For example, an air-conditioner malfunction, in mid-August, in Texas with 100+ degree temperature.)   What do they do???

Once again, because the budget is written in stone, they dare not charge the expense to a budget line item.  So they “dump” this expenditure in the next best thing, one of their equity accounts.  The technical title according to accounting principles is “Net Assets” but we have seen equity accounts called by many names including “Fund Balance” and “Retained Earnings”.  We even had one church set up a special fund for unexpected expenses and called it the “Dump Fund”! 

Too much of this “dumping” will render a church’s financial statements meaningless.  The purpose of the Statement of Activities (Income Statement) of a church is to reflect how much money was received and how much money was expended, regardless of what our budget planning had hoped for…  I haven’t checked the Bible closely about this but I don’t think having a negative budget variance is an automatic sin.