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Are a church’s fixed costs too high?

Are a church’s fixed costs too high?

I am not sure what I make of this column by Thom Schultz of Holy Soup. But I thought it might stir some useful conversation. He writes:

The American Red Cross spends 8 percent of its revenues on administrative and fundraising expenses. World Vision spends 14 percent. Compassion International spends 16 percent.


Comparatively, what do churches spend on personnel, buildings and administration expenses? Those items consume 82 percent of the average church’s budget, according a study from the Evangelical Christian Credit Union.

You could argue about comparing a church’s expenses to a public charity’s expenses. But the enormous disparity is striking, especially to the public. It’s made worse by looking at how churches allocate funds to direct ministries. According to the ECCU study, chuches use 3 percent of their budget for children’s and youth programs, and 2 percent for adult programs. Local and national benevolence receives 1 percent of the typical church budget.

When you look at it this way, is it any wonder the public questions the church’s return on investment?

Schultz seems to be prescribing a church that is run largely by volunteers, one that simply does without certain sorts of expertise that the charitable organizations he lists pay good money for. This does not strike me as the kind of church the public is looking for, but perhaps I am missing something. What do you make of his ideas?

(Hat tip: Bishop Andy Doyle.)

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Toepferblue

As many commenters have said, this article is comparing apples and oranges -- and he says it himself.

The first paragraph on non-profits talks about "administration and fundraising expenses."

The second paragraph on churches talks about "personnel, buildings, and administration expenses."

It is absolutely, completely unfair to equate the two.

Laura Darling

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Weiwen Ng

It's not necessarily that our fixed costs are too high. All churches are going to face similar fixed costs - building maintenance, paying for some non-clergy staff like music directors, programming, etc. It's that our average membership per building has declined. We aren't replacing members who are aging out. Urban churches lost a lot of their members to the suburbs, and now the younger adults coming back to the cities aren't all that religious (yet?).

Actually, I do want to see all our staff paid reasonable salaries. We need people who have spent years studying the Bible - my amateur theologizing is great (in my opinion), but it can't compare to years of study. We need people who are professional-level musicians to guide our worship - I feel like they have mis-guided us, but even in my alternate universe, we would need professionals. This will inevitably cost money.

But since we have declining enrollment, we need to adapt. We will probably have to serve more people with the same number of staff ... perhaps by relying more on volunteers? Perhaps by closing some physical churches and relying on mobile volunteers? I don't know.

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Paul Woodrum

And as a sidebar, why are there no accountability standards to which clergy are held and by which they are measured through regular reviews. Most bishops seem only to give a damn about what their clergy are up to if a congregation fails to pay its assessment or a charge of willful and superfluous naughtiness is brought by someone.

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Jim Strader

I wrote about this topic on my blog yesterday. I concur that there are some obvious dissimilarities between the not-for-profit entities that Schultz describes in his article and traditional churches. I would further add that a non-denominational church such as the one that Schultz appears to be describing in his article is dissimilar from a denominational one such as an Episcopal parish. However, underneath all of those facts remain the uncomfortable truths about how much it costs to operate an Episcopal Church and who presently accomplishes most of the Gospel-related work, whether it is theological, pastoral, or missional in nature. A parish priest along with a parish staff often are responsible for these labors and are therefore compensated for them. These costs in addition to the costs of diocesan assessments & building expenses almost always make up the greatest percentages of a parochial budget. Susan just said that we need to look at budgets and make sure that they are in our line with our mission. Great advice! A look at most parochial balance sheets validates that payment for a priest to accomplish her or his work is presently a mission-related cost and often the most expensive one a parish pays for in their budget. This cost has become prohibitive in nature for hundreds of Episcopal Churches. We can make all kinds of inferences about why that is true but until we figure out various solutions that are reasonably just, canonically sound, or creatively transformed we won't change the landscape of dying churches around us. Such human resource expenses along with compensation for program staff who accomplish other work increases the cost of doing business in an Episcopal Church. Should it be that way? What work should the priest and the staff be accomplishing? What should the priest be delegating back to the church to accomplish? Should we reduce costs or strive to increase revenue? My anecdotal observation is that churches who live out their mission as clergy and laity with an outward, engaging, and vibrant focus, whether large, medium-sized, or small, are proclaiming the Gospel much more effectively and evangelically than those who get caught up with the drama and dying that is taking place within their walls, mostly on Sunday mornings. All of these factors plus many more figure into the Transformational work that is going on across The Episcopal Church.

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Susan Snook

Thom Schultz's calculations are comparing apples and oranges. Most charitable organizations pay people to do their program work, and include those salaries as program expenses. For instance, you can find the Red Cross's 2011 financial statements here: http://www.redcross.org/images/MEDIA_CustomProductCatalog/m6340461_FY11FinancialStatement.pdf. "Supporting Services" are indeed listed as about 8% of total expenses on page 3, while the rest of their expenditures are listed as "program." But move on to page 4, and you discover that those program expenses are composed of salaries and benefits (48%), plus other categories such as travel, equipment maintenance and rental, supplies and materials, contractual services, and depreciation, which together total 39%. Direct financial and material assistance totals only 12.6% of their program expenses. Now, I happen to think the Red Cross is a fine organization, and the work they are paying their employees to do is splendid and necessary.

But it is foolish to say that salaries and benefits are not "program expenses" in a church. In my church, we pay six employees, only one of whom is administrative staff (a part-time secretary). The others work on children's, youth, and adult formation, worship, music, and whatever it is that we priests do all day. (I could even make an argument that my secretary does program work, because her primary job is communications, but I won't.) We also have a significant number of volunteer ministers, and we put a significant amount of money into outreach and community service. All of these things are part of a church's mission.

It is important and necessary that we look at budgets and make sure they are in line with our mission. But let's make sure that we know what our mission is, and what it costs to accomplish it. I know our church couldn't do nearly the kind of ministry we do now without our amazing program staff.

Susan Brown Snook

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