Q&A: Adopting a New Budget During Extraordinary Times

If your fiscal year begins July 1, budgeting during the pandemic presents unique challenges—but there is a way forward.

Q: We have a fiscal budgeting year that ends on June 30 and starts on July 1. According to our bylaws, our congregation is supposed to meet in June to adopt a new budget. The current economic dynamics created by the pandemic means that we won’t be ready with a new budget in time for the meeting—which we might not even be able to have. Without being able to follow our historical budgeting model, what’s the best way to put something together that can be reviewed for accruable?

You are not alone. Although most churches begin their budgeting year on January 1, it’s estimated that about a third use a non-calendar fiscal year for budgeting purposes. Like yours, many of those churches have a year that starts July 1 and ends June 30. They are no doubt dealing with a situation similar to your own.

You certainly want to be respectful of your governing documents. Your bylaws may stipulate what the budgeting process is supposed to look like. But at the same time, we’re dealing with a very unconventional situation. Even if you were to comply exactly with your bylaws and create an annual budget, it would be largely irrelevant as a useful document.

While being respectful to your historical budgeting model, you should also consider alternatives that may be available to you. You’ll want to talk with your church’s governing body, perhaps your legal counsel, about the possibility of having your members or your elders, depending on how your church is governed, waive the current requirement for an annual budget and look at the possibility of doing a quarterly rolling budget. Existing policies should govern the approval of incurring indebtedness at all times.

Along with possibly shifting your budgeting process, you should also conduct regular cash-flow forecasting. I would suggest that your cash-flow forecast look out at least six months and that it be updated semimonthly in the current environment. Such forecasting will help your various ministry teams plan better and make needed adjustments in their spending going forward.

I must stress that I am not suggesting you disregard your own governance requirements. But, at the same time, those requirements were designed for normal circumstances. Look for the proper way to do something different in the current environment and, perhaps, waive the requirements for this budget go-round.

Michael (Mike) E. Batts is a CPA and the managing partner of Batts Morrison Wales & Lee, P.A., an accounting firm dedicated exclusively to serving nonprofit organizations across the United States.

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