Welcome back to our Church Facility Budgeting series. Congratulations, you have made it to the conclusion.
Before we look at the last components, let me remind you of something: these concepts are not exhaustive. You will need to take time and identify what is right for your facility. No church facility is exactly the same. Therefore, you need to take the principles and concepts from this series and personalize them to fit your specific needs.
The next section will focus on three interconnected components often neglected in the facility budgeting process. In fact, a couple of deferred items are often overlooked entirely during forecasting. Can you guess where I am heading?
As we look at future facility budgets, we must identify any significant projects on the horizon. These could include the following:
- Additions: Increase to the existing footprint.
- Renovations: Changes to existing spaces.
- New Construction: Is there a plan for adding new facilities to the existing campus or other locations?
- Major upgrades: These are often combined with capital replacements. In this case, these projects could include the following:
- Adding handicap-accessible elements
- Installing a fire alarm system or fire sprinklers in a building without one
- Upgrading to LED lighting
- Adding alternative fuel sources
Capital Renewal Projects
Now, these are different than the above. Capital renewal projects are a direct result of reaching the end of life for a piece of equipment facility system. If you are utilizing a tool, such as our free Life Cycle Calculator, you could review this prior to setting your facility budget to plan accordingly.
The issue we often see is churches have not properly planned for inevitable capital renewals and do not have adequate funds in a capital reserve account — ouch.
An evaluation of any item in the Life Cycle Calculator that may be set for replacement in the next 1-5 years should also be identified. While noting the items needing attention soon is critical, you should also determine if items with end-of-life terms are eroding your operational budget.
For example, let's say you have an HVAC unit that needs to be replaced in two years. However, you're averaging an excessive amount of service calls for that specific unit. Now, you may need to accelerate the replacement. By doing so, you will save on operational budget costs.
Know Your Deferred Maintenance and Plan Accordingly
Deferred maintenance is the facility killer. In many cases, it is the “silent” killer. In others, it is as blatant as the noses on our faces. Smart Church Solutions has performed Facility Condition Assessments for about 5 million square feet of ministry facilities. There is not a single church that did not have a significant list of deferred maintenance items.
As a reminder, deferred maintenance is “the practice of postponing maintenance activities such as repairs on both real property and personal property to save costs, meet budget funding levels, or realign available budget monies.
The failure to perform needed repairs could lead to asset deterioration and ultimately asset impairment. Generally, a policy of continued deferred maintenance may result in increased costs, asset failure, and even health and safety implications. In "The "4 X" Reality of Deferred Maintenance" blog, we provided very sobering realities from national research projects, such as the following:
- Every $1 in deferred maintenance costs $4 of capital renewal needs in the future.
- If a repair is deferred and allowed to remain in service until the next level of failure, the resultant expense will be 30-times the early intervention cost.
Planning and preventive maintenance, along with properly funding your annual maintenance accounts, is much cheaper in comparison to deferred maintenance.
That’s a Final Wrap
There you have it. These past four blogs are packed with great information regarding church facility budgeting. To quote Sean Connery as Jim Malone in The Untouchables: “What are you prepared to do?”