Key Tips for Facilities Budgeting

by | Administration, Facilities, Leadership, Operations

Where do you start when it comes to church facility budgeting? For many facilities managers, budgeting is among their top concerns, and it’s often a point of conflict and stress with church leadership.  While every situation is different, these general steps will set you on the right path to handle budgeting moving forward. 

Where to Start?

Starting anything can be the most challenging part. There are two crucial starting points to set yourself up for success. 

1. Confirm Total Heated and Cooled Square Footage 

One of the first steps you need to take in gearing up for budget success is to confirm your facility’s total heated and cooled square footage. The majority of the national benchmarking and budget evaluations for facilities are based on your square footage. 

Without this information, you cannot determine if you’re over- or under-spending, or how to calculate replacement costs. The overall church budget, income, and attendance may vary from year to year. However, your facility size and square footage are far less likely to adjust unless you have added more space or sold property.  Because of this reality, you must understand the impact of the size of your facility. 

For example, if your church budget was $1 million last year and your facility budget was $200,000, that equates to 20% of the total budget. However, if the church budget dropped to $900,000, and you didn’t reduce your facility’s square footage, then you will still need a minimum of $200,000 (plus inflation) to maintain the facility. Therefore, the new percentage would be about 22.5%.

Next, think about evaluating your utility costs. If you go by dollars per square foot ($/SF), you will need to know your square footage. You also need to know your square footage to determine certain renewal and replacement costs. For instance, if you determine the carpet in the children’s spaces needs to be replaced, and the vendor tells you he can do it for $5.00/SF, you will need to know the total square footage to determine the project’s cost.

2. Refer to the Past – Carefully

Looking over last year’s budget and actual spending is one of the most common ways churches will determine the following year’s budget needs. This is not a terrible option, but it can come with some pretty significant pitfalls.

If we lived in a perfect world where all inflationary factors were equal and facility deterioration was at the same rate every year, this could work. But we don’t. For some churches, referring to past dollars spent exclusively was the wrong approach.

As an example, one church spent more than $2.00/SF for utilities for a 200,000-square-foot campus. They did not know that on average they should only be spending $1.25-$1.50/SF. Therefore, they were spending about $100,000 more than the top of the normal range. Their budgeting plan for that year was to just add 3-5% to what they had been paying, which wasn’t right, because they were already spending 25-37% more than they should have been.  In this instance, solely relying on historical data was the wrong approach, and it would have been a waste of ministry dollars.

The cause of the overage in spending on utilities was a matter of poor training and staff behavior. The staff did not know how to operate their complicated building automation system so they just let the system run. User behavior is the leading factor to most issues resulting in overspending underspending.

Another reason why you should not use past data to set future expenses is that it assumes your facility is being used exactly as it was in previous years, and the cost to maintain the facility is the same. Therefore, utilization and maintenance costs should be addressed. 

Biggest Takeaways

Here are a few challenges we have for you, using the information presented above:

  • Determine your heated and cooled square footage if you don’t know it already. If you do know, take some time to verify the data. Remember, facility square footage is calculated from the outside face of the structure and not the interior dimensions. If you use interior dimensions, you will not have an accurate measurement.
  • Go back through last year’s expenses for utilities, janitorial, and general maintenance and plug the costs (and your square footage from above), and compare them to the recommended best practices we have found based on our national benchmarking projects. The best practice annual cost ranges are as follows:
    • Utilities: $1.25 – 1.50/SF
    • Janitorial: $1.50-2.50/SF
    • General Maintenance: $2.25 – 3.50/SF.

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