Adfap bootcamp for economus 2015 by ann mayeen magno

A member firm of Ernst & Young Global Limited

ADFAP Bootcamp for EconomusUsing accounting information to make effective management decisions

16 June 2015

Page 2 ADFAP Bootcamp 2015

The seven deadly sins of church accounting



The seven deadly sins of church accountingSin one: Misuse of accounting information

Lapse:► Church often forgets that accounting is an information-generating science designed to manage complex

organization in both the short-run and the long-run. ► Undue emphasis placed on operating budgets only with little emphasis placed on capital replacement plans► There is a paucity of provisions for major repairs/replacements to buildings.

Resolve:► The church ought to realize the many ways in which accounting statements are used in order to satisfy the various

requirements of the church.► More careful planning through the establishment of contingency reserve accounts and addressing capital budget

problems before they become serious can greatly aid in long-term planning and viability for the church.


The seven deadly sins of church accountingSin two: Limited acceptance of FS and problems with controls

Lapse:► Financial statements were not important to the church custodian of funds as the focus is only on actual versus

budget operational reports, thereby ignoring critical information that was contained within the statements.► Often congregations demonstrate lack of internal controls within the parish, such as only one signature is required

on a check with the result that incumbent church officers and employees are not able to appropriately utilize the funds

Resolve:► Church officers, especially the handlers of funds must be more aware of the importance of the totality of the financial

statement information and its intended functions including controls.


The seven deadly sins of church accountingSin three: Lack of understanding of financial information

Lapse:► There are very few questions asked about the financial statements during parishes’ annual general meetings as

many people are intimidated by the complexity of the statements► Congregants also do not understand the notes to the statements or focus on minute/trivial amounts as opposed to

more important issues.► Most congregants are content with being told whether or not the parish is under, over or at budget, and then being

presented with a plan to address these issues, if problems exist.

Resolve:► Financial statements should include a narrative budget and use charts and graphs in order to make points more

succinctly, as well as projected statements to see where the parish might be heading.


The seven deadly sins of church accountingSin four: Donor fatigue when giving is not tied to relevant financial information

Lapse:► Congregants are often only given projected financial statement at the beginning of a financial campaign which could

lead to donor fatigue as they knew that the request for additional giving was forthcoming.

Resolve:► Priests may provide regularly a one-page report that showed the difference between actual giving on a monthly or

yearly basis with comparisons on the previous month/year figures. Members of the congregation are found to be encouraged to give when they see the improvement of numbers.

► A variance analysis as opposed to a projected statements may also lead to increased giving.


The seven deadly sins of church accountingSin five: Lack of ownership for financial resources and uneven distribution of cash flow

Lapse:► During the summer months the need for cash is particularly acute owing to holidays and other reasons for non-

attendance► Members of the congregation often do not feel that it is necessary to provide additional donations to the church for

provision of a sacrament (e.g. being married or baptizing a child) as that is what a church is supposed to do, despite the fact that many church officials often perceive themselves as being overworked and underpaid.

Resolve:► Frequent reports to the congregation regarding updates on fund collections and disbursement may lead to donations

being more evenly disbursed over the 12 months of the year rather than at Christmas (fourth quarter) and Easter (late first quarter or early second quarter).


The seven deadly sins of church accountingSin six: Being Shrouded in the Past

Lapse:► The church often ignores the fair market value (the price that a given property or asset would get in the marketplace)

of its existing land and properties or other assets such as artwork or sacred vessels, sometimes gold and encrusted jewels.

Resolve:► Looking at the fair market values might be a consideration for a potential sale of church assets, integrating parishes

and relocation of parishes.


The seven deadly sins of church accountingSin seven: Robbing Peter to pay Paul

Lapse:► Congregations often do not link its revenues and expenses with its size.► Many congregations are unreceptive to the idea of cutting expenses particularly if they are associated with salaries.

In cases of declining congregations, they often dip into capital or sell their assets to pay operating expenses.

Resolve:► Congregations must link the revenue and expenses to the actual size of the congregation and use this information

for future planning.► If the population is declining the revenue and the expenses should be adjusted accordingly to mirror those

conditions.


Financial vs. Management accounting


Financial vs. Managerial accounting

Information Financial accounting Managerial accounting

What information? Internal reportsFinancial statements

Who uses the information?

Managers who work for the company and officers of

the company

Stockholders, creditors, and government

regulatorsWhen are the

information prepared?Whenever neededQuarterly and annually

How much details are presented?

Very detailed, to address specific decisions to be

made by managers

Very general, pertaining to the whole company

How are the information prepared?

In accordance with the needs of managers and

officers

In accordance with Generally Accepted

Accounting Principles (GAAP)How is the information

verified?By internal controls among

managerial accountantsBy external CPAs


Selected topics in managerial accounting


Cost allocation

Revenue/Receipts Direct expenses

Floor area

Number of workers Direct wages

• Advertisement• Discount allowed

• Provision for discount on debtors• Travelling salesman’s salary and

commissions

• Discount received• Provision for discount on creditors

Value of asset• Depreciation

• Repairs and maintenance• Insurance

• Compensation to workers• Holiday pay

• Group insurance

• Insurance• Food and travel expenses• Labor welfare expenses

• Personnel office• Supervision

• Rent• Repairs and maintenance

• Insurance• Utilities

Revenue/Receipts• Advertisement• Discount allowed• Provision for discount on debtors• Travelling salesman’s salary and

commissions

Direct expenses• Discount received• Provision for discount on creditors

Floor area• Rent• Repairs and maintenance• Insurance• Utilities

Number of workers• Insurance• Food and travel expenses• Labor welfare expenses• Personnel office• Supervision

Direct wages• Compensation to workers• Holiday pay• Group insurance

Value of asset• Depreciation• Repairs and maintenance• Insurance


Time value of money

0 1 2 3

Future Value

PhP10,000 + interest

PhP10,000

Option A

Option B PhP10,000 - interest PhP10,000

Present Value

PhP10,000

Option A:

Received PhP10,000 today

Option B:

Received PhP10,000 after 3 years


Chart of accounts


Income statement accountsRevenues

Account name Description

Revenues

Mass collection/Plate offering This includes collections during the Holy Mass on Sundays and weekdays

Stole feesThese are the offering of the faithful for the celebration of baptisms, confirmations, marriages and funerals.

Donations/Undesignated gifts and bequests These include amounts given by the faithful as donations to the Church without any specific intention

Other receipts/Other income

These include the fees paid for the publication of marriage banns, processing of marriage permits, issuance of baptismal and confirmation certificates, donations from collection boxes inside the church, sale of baptismal candles, decorations and other fees.

Interest earnedThese are income received from deposits and deposit substitutes. At the end of the year the total is entered to the Parish fund - Cash.

Chapel remittance This represents the 60% share of the Mother Parish in the net cash flow of the Chapels.

Net realized gains on investments This includes net earnings from the increases in value of the church’s investments

Restricted gifts not for operations This include donations specifically identified as not for the operations of the parish.

Capital fund receipts This include gifts specifically identified for as for capital acquisitions of the parish.


Income statement accountsExpenses


Parish pastoral programs

Parish Pastoral Council (PPC) BudgetThis is composed of the approved budget of the PPC that will be coming from the Parish Fund, i.e., Formation expenses. (Retreat, Recollection Seminars).

Social Services/Charities:This includes donations given to the poor and needy in the Parish. This account also includes expenses of an organized social service in the Parish.

Preschool/Christian education This includes expenses for the educational programs run by the parish

Parish operating expenseElectricity and Water/Utilities This includes the bills from Meralco and MWSSTelephone and other Communication/Utilities This includes the PLDT bills, telex, fax, postage and other communication expenses.

Liturgical ParaphernaliaThis includes sacristy supplies, mass wine, hosts, candles, flowers, decorations and missalettes, charcoal and incense as well as liturgical pamphlets like Rite of Baptism.

Security Services This includes the payment of the salaries of security guards.

Office Supplies This includes cost of papers, pens, books, records and subscriptions to periodicals and newspapers.

Transportation Expense This account refers to the transportation expenses incurred by the parish personnel

Repairs and Maintenance

This includes building maintenance supplies (floor wax, brooms, brushes, soap, etc.), minor repairs of buildings, minor repairs of equipment, retainer for equipment maintenance contracts for the Church, Parish Office and Parish Hall

Other Operating Expenses These include those disbursements which were not in the category of those already defined.

Depreciation Expense - Parish This is the regular ordinary wear and tear of the asset being charged to operation on a periodic manner.

Gifts and Donations These include giveaways for Christmas and other donations for special occasions and feasts.




Parish rectory expense

Food

This includes the actual cost of all food items and catering in the Parish Rectory. Cost of food served during the birthday or ordination anniversaries of any of the priests in the parish is not chargeable to this account.

Repairs and maintenance -transportation equipment

This includes actual repairs and maintenance of vehicles being used in the Parish for pastoral work. This account also includes the repairs and maintenance of the cars of the Parish Priest and Parochial Vicar which should not exceed the amount of PhP1,000 per month or PhP12,000 per year.

Transportation expense This includes actual transportation expense in the Rectory

Depreciation expense – Rectory This is the regular ordinary wear and tear of the asset being charged to operation on a periodic manner.

Lay Employee-Related Expenses

Salaries, Wages and Allowances This includes the salaries of the employees, choirs and organists rendering services in the Parish Office and the Rectory

13th Month Pay This includes the payment of an extra month for the year as provided by law.

SSS/Medicare/ECC/BenefitsThis includes SSS benefits to lay personnel and workers, including workmen’s compensation, HDMF and Phil Health.

Medical and Hospitalization ExpenseThis includes the expenses incurred by the Parish for its permanent employee’s medication and hospitalization.

Catechist Allowances/Clergy salariesThis includes additional amount given to the Catechists of the Parish aside from the Salary they received




Priest – related expenses

Decoroso sustento

This includes the Apostolate Fund of Guest Priests with official assignment from the Office of the Vicar of Guests Priests in the amount of P10,000.00 per month. This also includes the stipend given to the ministers who administer weddings, baptism, confirmation and funerals. This is also being charged for the excess of the Mass Stipend given to priest over the Masses Fund balance.

Retreat and recollectionThis includes the expenses incurred by the Priest for his continuing spiritual formation activities like seminars and retreats.

Bahay - Pari dues These are the dues paid by the priests to Bahay- Pari

Medical and hospitalization expenseThe hospitalization of Priests are taken cared of by the two hospitals; Cardinal Santos Medical Center and San Juan de Dios Hospital. Take home and maintenance medicines are 50% subsidized by RCAM.

Transportation AllowanceThis includes the gasoline allowance of all diocesan priests assigned in Parishes with a maximum amount of P5,000.00 per month.

Repairs and Maintenance – Priest’s vehicle

All diocesan priests assigned in Parishes are entitled to reimburse their expenses on repairs of their personal car in the maximum amount of P1,000.00 per month.

Remittances

CatechesisIn the absence of a Catechetical Fund, expenses for the catechetical program in the parish on the Archdiocesan level should be charged to this account.

Curia/Diocesan apportionment This includes the contribution to the Chancery such as the Monthly offering, MASF, Poor seminarians, Quota for the Standardization of the Apostolate Fund, Catechetical Quota, etc.


Balance sheet accountsAssets


Current assets

Petty cash fundIt is a fund set aside to take care of daily disbursements, usually not exceeding PhP500 to PhP1,000 depending upon the size of the Parish. This fund takes care of small disbursements.

Cash on handAll cash, money order, checks received as payment, treasury warrants, which are still on hand and not deposited in the banks.

Cash in Bank – Checking accountThis is cash in bank in the form of Checking Account where all the disbursements are made through checks. This account should be maintained in an automatic transfer system.

Cash in Bank – Savings account

This is Cash in Bank in the form of savings account where all the deposits made. Interest earnings on this should be directly credited to the Parish Fund - Cash. The entry is Debit Cash in Bank and Credit Parish Fund - Cash.

InvestmentsThese are temporary short term investments (i.e., Short term Time Deposits) to earn interest on idle funds on a short term basis.

Advances to employees

This represents cash advances given to employees payable in installments; SSS sickness benefits pending their claims with the SSS, etc. This account is reduced every time an installment is made upon receipt of deductions from payroll, SSS benefit claims, etc.

Accounts receivable This represents amounts lent to Priests and other parties other than the employees.

Due from the Parish PriestThis represents unpaid advances of the Parish Priest or over withdrawal of his Apostolate Fund at the end of the accounting cycle.

Prepaid expenses These are already paid but not yet incurred such as Insurance, Rents, etc.

Unused suppliesThese are supplies which are still unused at the end of the year or the month depending on the cut-off period for report preparation.




Long term investments

Time Deposit This represents investments in time deposits whose term go beyond one accounting cycle.

Other Long Term Investment This represents investments in stocks and other long term investments.

Land, Property and Equipment

LandThis represents land acquired by the Parish using Parish Funds. All land acquisitions should be done in coordination with the Properties Administration Department of the Arzobispado de Manila.

Land improvement This includes wall enclosures, landscaping, grottos, pavements and other improvements.

Building and structureThis includes all cost of construction of the church, Parish Hall, Rectory, Office, garage and other buildings.

Building improvement This includes major repairs of all building and structures

Furniture and fixtureThis includes pews, benches, confessional boxes, chairs, beds, bookshelves, chandeliers, cabinets, movable partitions, living room set, dining set, tables, missal stands, paintings and others.

Machinery and equipment

These include sound systems, amplifiers, microphones, generators, adding machines, calculators, air conditioners, electric fans, electric motors, inter-communication system, projectors, video player, mimeographing machines, tape recorders, television sets, typewriters, pumps and others.

Kitchen utensil and equipmentThese include oven, stoves, refrigerators, coolers, freezers, rice cooker, pots, pans, plates, glassware, silverware, china wares and others.

Transportation equipment This includes buses, cars, jeeps, motorcycles, bicycles, etc, owned by the Parish.

Sacred images and other accessoriesThese include statues, crucifixes, stations of the cross, candle holders, processional cart (Karo), glass encasement of sacred images, benediction stand, incense boat, thurifer, etc.




Sacred vessels This includes chalices, ciboria, cruets, monstrances, communion plates, tabernacles.

Altar linens and vestmentsThis account includes linens that are used in the altar and vestments worn by the Priest during the services (Liturgical Celebrations).

Musical instruments This includes organs, pianos, guitars, harmonium, stereo, phono, violin, banduria, etc.

Accumulated depreciation This includes the wear and tear of the asset amortized periodically as stated in the policy on depreciation.

Construction - in - progress

All expenses and disbursements in connection with a major construction should be recorded in this account until the construction is finished. Upon completion of the construction, the total cost of construction will be transferred to Building and Structure account through a journal voucher.


Balance sheet accountsLiabilities


Current Liabilities

SSS/ECC/HDMF/PHILHEALTH These are premiums deducted by the parish from the payroll of the employees to be remitted to SSS, Pag-ibig and Phil Health.

Tax withheld These are income taxes deducted by the Parish from the payroll of the employees to be remitted to BIR.

Accounts payable These are unpaid accounts at the end of the year

Parish Priest’s Apostolate Fund This includes undisbursed apostolate fund and other stipends of the Parish Priest.Advances from the Parish Priest Advances made to the Parish by the Parish Priest from his personal funds.Mortgage payable (Current Portion) This is the portion of the loan which should be paid within the following accounting period.

Loan payable - ATF (Current Portion) This is the portion of the loan which falls due within the following accounting period.

Accrued expensesThese are expenses already been incurred as of the financial statement date but not yet paid like Catechetical Quota, Monthly offering, MASF, SSS Premium, etc.

Interest payableThese are unpaid interest on mortgage payable. Computation is done at the end of the accounting period based on the terms and conditions of the loan agreement.

Long Term LiabilitiesMortgage payable This include long term liabilities which are secured by a collateral like land and building.

Loan payable - ATFThis is a long term portion of the loan availed of through the Archdiocesan Trust Fund (ATF) of the Archdiocese of Manila.


Balance sheet accountsLiabilities


Trust Funds

Masses fund This includes stipends given by the faithful for the celebration of future masses (Pamisa). The stipend is for the Minister who celebrates the Holy Mass for the requested intention.

Special collections This includes collections for special intentions, i.e., Mission Sunday, Fil-Mission, Donations for Caritas, Earthquake victims, etc.

Cemetery fund This includes contributions received for the use of the lots and the improvements in the cemetery.

Catechetical fund This includes donations, contributions and collections for the expenses of the Catechetical program in the Archdiocese and in the Parish.

Construction fund This represents donation for construction projects of the parish and other fund raising proceeds intended for construction activities in the parish.


Balance sheet accountsFund equity


Parish fund – CashThis is a portion of the fund equity showing the Cash (Cash on Hand and in Banks and other assets convertible to Cash) balance.

Parish fund – Land, property and equipment

This is a portion of the fund equity showing the value of the land, property and equipment acquired through the use of the Parish Fund - Cash and loans.

Parish fund – Donated assetsThis is portion of the equity showing the value of land, property and equipment which were donated to the parish.


Bootcamp Exercises


Vertical/Horizontal Analysis

A parish priest is notified that the parish generated net loss of PhP48 thousand in 2014, way below the 2013 net income figure of PhP314 thousand. The priest is astonished since the receipts in 2014 are PhP6.9 million while receipts in 2013 were only PhP6.4 million.

Analyze the financial result by doing vertical analysis and looking at the trends.

Hint: Vertical analysis Horizontal/trend analysis % to total Y-o-Y (%)

PhP000 2013 2014 2013 2014 2013 -2014 ReceiptsMass collection 2,225 2,055 (7.6)Stole fees 1,262 1,484 Donations 1,054 1,245 Other receipts 540 797 47.6 Interest 428 465 Chapel remittance 866 910 Total revenue 6,375 6,956 100.0 100.0 9.1

DisbursementLay employee-related expense 1,387 1,843 Parish operating expense 1,339 1,521 Parish rectory expense 1,357 1,574 Parish pastoral programs 1,254 1,189 Priest-related expenses 646 823 27.4 Remittances 78 54 Total expense 6,061 7,004 95.1 100.7 15.6 Net income 314 (48) 4.9 (0.7) (115.3)


Fixed/variable expenses

Identify whether fixed or variable expense.

Hint:PhP000 2013 2014 Fixed/VariableLiturgical paraphernalia 15,298 12,582 Depreciation expense - Parish 12,748 10,485 Fixed Repairs and maintenance 7,863 8,550 Electricity and water 6,243 7,316 Variable Gifts and donations 5,700 6,615 Telephone and other communication 5,242 5,700 Office supplies 3,800 4,410 Transportation 2,300 3,278 Security services 4,000 2,643 Fixed Other operating expense 3,600 2,379 Variable Total 66,795 63,958


Breakeven

A parish's income statement for two years is given below. Upon checking, the parish priest was shocked by the net loss in 2014. He does not want to have another net loss in the coming years therefore he wants to find out the minimum revenue needed to cover the parish operations.

He asked the treasurer to compute for the minimum revenue to at least cover the operating costs of the parish.

1. Compute for contribution margin (Revenue less variable cost)2. Compute for breakeven revenue (Fixed cost over contribution margin ratio)

PhP000 2013 2014Revenue:Operating income:

Plate offering 8,820 6,879

Pledge receipts

75,684 73,847

Investment income

230 382

Other income 3,210 2,591

Undesignated gifts and bequests

600 554

Total operating income

88,544 84,253 Non-operating revenue:

Net realized gains on investments

645 933

Restricted gifts not for operations 1,405 864

Capital fund receipts

25,000 24,300

Total non-operating revenue

27,050 26,097

Total revenue

115,594 110,350

Expenses:Operating expenses:

Clergy salaries 37,000 37,000 Parish rectory expense 7,649 6,291 Lay employee salaries 21,500 19,842 Payroll tax expense 1,578 1,496 Benefits (pension, health ins., Etc.) 5,622 6,018 Diocesan apportionment 9,268 9,268 Utilities 13,345 15,637 Office supplies 2,621 2,850 Parish pastoral programs 1,200 793 Priest related expenses 1,900 2,205 Preschool/Christian education 1,150 1,639

Total operating expenses 102,833 103,039 Net operating totals (operating income less operating expense) (14,289) (18,786)Non-operating expenses:

Depreciation expense 9,837 8,436 Total non-operating expenses 9,837 8,436 Total expenses 112,670 111,475 Net profit 2,924 (1,125)


BreakevenHint

Hint:PhP000 2013 2014Total revenueVariable

UtilitiesOffice suppliesParish rectory expenseParish pastoral programsPriest related expensesPreschool/Christian educationLay employee salaries

Total variable costContribution marginCM ratio 57% 55%

Fixed costClergy salariesBenefits (pension, health ins., etc.)Diocesan apportionmentDepreciation expense

Total fixed costBreakeven revenueNon-operating revenue 27,050 26,097 Minimum operating revenue requirement 80,686 82,868


Overall budgeting

The priest reviewed the income statement of the church and was astonished with the negative net income for the year 2014.

The church is the second largest in the city and is aiming to be the largest (in terms of structural size and size of congregation) in the coming years. To reach this, a budget committee is set up to plan, forecast and monitor the church's expansion. This year, committee plans to improve events such as feasts, celebrations and outreach programs to attract mass goers for the coming years. In addition, well-regarded priests are to be invited to lead the masses. These changes entail an estimated 5% increase in program costs. Operating expenses are also projected to increase by 3% in 2014 then remain stable in the next years. Depreciation is expected to increase by 2% yearly. From the new planned feasts and celebrations, the income is expected to be at least PhP2.0 million yearly.

1. Given the expected income and other expense assumptions, compute for the target revenue for five years.

2. Plate offering and pledge receipts are expected to increase yearly by 3% due to the increase in mass goers. Other items of revenue are expected to remain the same as the 2014 revenue. Given the revenue and expense assumptions and without taking into consideration the target net income of PhP2.0 million, compute for the expected revenue for five years.


Overall budgeting

PhP000 2013 2014Revenue:Operating revenue:

Plate offering 8,820 6,879 Pledge receipts 75,684 73,847 Investment income 230 382 Other income 3,210 2,591 Undesignated gifts and bequests 600 554 Total Operating Income 88,544 84,253

Non-Operating Revenue:Net realized gains on investments 645 933 Restricted gifts not for operations 1,405 864 Capital fund receipts 25,000 24,300

Total Non-Operating Revenue 27,050 26,097 Total Revenue 115,594 110,350

Expenses:Operating Expenses:

Clergy salaries 37,000 37,000 Parish rectory expense 7,649 6,291 Lay employee salaries 21,500 19,842 Payroll tax expense 1,578 1,496 Benefits (pension, health ins., etc.) 5,622 6,018 Diocesan apportionment 9,268 9,268 Utilities 13,345 15,637 Office supplies 2,621 2,850 Parish pastoral programs 1,200 793 Priest related expenses 1,900 2,205 Preschool/Christian education 1,150 1,639

Total Operating Expenses 102,833 103,039 Net Operating Totals (14,289) (18,786)Non-Operating Expenses:

Depreciation expense 9,837 8,436 Total Non-Operating Expenses 9,837 8,436 Total Expenses 112,670 111,475 Net profit 2,924 (1,125)


Overall budgetingHint: target revenues

Hint: target revenues PhP000 2013 2014 2015B 2016B 2017B 2018B 2019BExpenses:Operating Expenses:

Clergy salaries 37,000 37,000 38,110 Parish rectory expense 7,649 6,291 6,480 Lay employee salaries 21,500 19,842 20,437 Payroll tax expense 1,578 1,496 1,541 Benefits (pension, health ins., etc.) 5,622 6,018 6,199 Diocesan apportionment 9,268 9,268 9,546 Utilities 13,345 15,637 16,106 Office supplies 2,621 2,850 2,936 Parish pastoral programs 1,200 793 874 Priest related expenses 1,900 2,205 2,431 Preschool/Christian education 1,150 1,639 1,807

Total Operating Expenses 102,833 103,039 106,223 106,466 106,722 106,990 107,272 Non-Operating Expenses:

Depreciation expense 9,837 8,436 Total Non-Operating Expenses 9,837 8,436 Total Expenses 112,670 111,475 114,828 115,243 115,674 116,122 116,586 Budgeted net profit 2,000 2,000 2,000 2,000 2,000 Target revenues


Overall budgetingHint: expected revenue

Hint: expected revenuePhP000 2013 2014 2015B 2016B 2017B 2018B 2019BRevenue: Operating revenue:

Plate offering 8,820 6,879 7,085 7,517 Pledge receipts 75,684 73,847 76,062 80,695 Investment income 230 382 382 382 Other income 3,210 2,591 2,591 2,591 Undesignated gifts and bequests 600 554 554 554 Total Operating Income 88,544 84,253 86,675 89,169 91,738 94,385 97,111

Non-Operating Revenue:Net realized gains on investments 645 933 Restricted gifts not for operations 1,405 864 Capital fund receipts 25,000 24,300

Total Non-Operating Revenue 27,050 26,097 26,097 26,097 26,097 26,097 26,097 Expected revenue 115,594 110,350 112,772 115,266 117,835 120,482 123,208 Expenses:Operating Expenses:

Clergy salaries 37,000 37,000 38,110 Parish rectory expense 7,649 6,291 6,480 Lay employee salaries 21,500 19,842 20,437 Payroll tax expense 1,578 1,496 1,541 Benefits (pension, health ins., etc.) 5,622 6,018 6,199 Diocesan apportionment 9,268 9,268 9,546 Utilities 13,345 15,637 16,106 Office supplies 2,621 2,850 2,936 Parish pastoral programs 1,200 793 833 Priest related expenses 1,900 2,205 2,315 Preschool/Christian education 1,150 1,639 1,721

Total Operating Expenses 102,833 103,039 106,223 106,466 106,722 106,990 107,272 Non-Operating Expenses:

Depreciation expense 9,837 8,436 Total Non-Operating Expenses 9,837 8,436 Total Expenses 112,670 111,475 114,828 115,243 115,674 116,122 116,586 Net profit 2,924 (1,125) (2,056) 23 2,161 4,360 6,621


Project budgeting

The church's 200th anniversary is to be celebrated next year. The clergy is planning to invite the Cardinal to lead the anniversary mass. Aside from the Holy mass to be held at the church, it is also planned for the Cardinal to visit other churches around the town. The celebration is expected to last for one month. The table below shows the estimated expense for the Cardinal’s visit.

In addition, the church is expecting to generate a profit from the Cardinal's visit for the church's anniversary. The head priest is expecting at least 15% profit from the anniversary celebration through increased collection from the congregation and other revenues including rosary and novena sales, etc. and sales of souvenir items during the event.Souvenir items (3,000 pieces) are expected to be sold at PhP70.00 per piece at PhP60.00 cost. Other revenues are usually PhP500 per month.

In connection with this, a budget is needed to be presented to the congregation for fund raising to cover costs.1. Compute for the needed collection from the congregation to finance all cost for the Cardinal's visit.2. Make a statement of receipts and disbursements to be presented to the congregation assuming that sources of revenues are Plate offering, Pledge receipts, Souvenir sales and Other income. Assume further that Plate offering and Pledge receipts are 20% and 80% of Revenue from collections, respectively.

PhP Budgeted expenseDecoroso sustento 20,000Retreat and recollection 25,000Bahay-pari dues 9,000Medical and hospitalization expense -Transportation allowance 5,000Repairs and maintenance - priest's vehicle -Cost of souvenirs 180,000Total cost 239,000


Project budgetingHint

Total cost Expected profit ratio 15%Revenue needed to reach the 15% target Revenue from souvenir sales 210,000 Revenue from collection

PhP Proforma statement Receipts Plate offeringPledge receipts Revenue from collections 71,176 Souvenir salesOther income 500 Revenue from other sources Total revenue 281,676 Expenses: Decoroso sustento 20,000 Retreat and recollection Bahay-pari dues Medical and hospitalization expense - Transportation allowance 5,000 Repairs and maintenance - priest's vehicle - Cost of souvenirs 180,000 Total cost Net profit Profit margin 15%


Budget vs. Actual cost

After the event, an actual collection and disbursement was recorded and presented by the treasurer. Upon seeing the statement, the head priest was astonished by the minimal profit turnout. He needs an analysis of the financial result as well as explanation of the turnout.

1. Compute for the percentage difference2. Provide possible reason for the difference

HintPhP Budget Actual Difference % Difference Plate offering 14,235 13,865 Pledge receipts 56,941 62,703 Revenue from collections 71,176 76,568 5,392 8%Souvenir sales 210,000 159,600 Other income 500 - Revenue from other sources 210,500 159,600 (50,900) -24%Total revenue 281,676 236,168 (45,508) -16%Expenses:Decoroso sustento 20,000 20,000 Retreat and recollection 25,000 27,309 Bahay-pari dues 9,000 9,000 Medical and hospitalization expense - 867 Transportation allowance 5,000 4,922 Repairs and maintenance - priest's vehicle - - Cost of souvenirs 180,000 165,000 Total cost 239,000 227,098 (11,902) -5% Net profit 42,676 9,070 (33,606) -79% Profit margin 15% 4%


Capital budgetingBonus

A parish is currently in the process of expansion and is upgrading its facilities. Donations were raised to buy a new overhead projector and screen. The priest's secretary was asked to check overhead projectors and choose a brand with the optimum specifications. He came up with a summary of three payment options offered by the appliance store.

Which option is least expensive for the church?

Option 1: full priceFull price 32,999 Discount 19%Total cash payment 26,729

Option 2: InstallmentTerm 24 months Per month 1,680 Total cash payment 40,326 Interest rate 2.0%

Option 3Term 12 monthsPer month 3,680 Interest rate 5%Total cash payment 44,160


Capital budgetingBonus

Bonus Option 1 Option 2 Option 3 1 1,647.31 3,504.76 2 1,615.01 3,337.87 3 1,583.35 3,178.92 4 1,552.30 3,027.55 5 1,521.86 2,883.38 6 1,492.02 2,746.07 7 1,462.77 2,615.31 8 1,434.09 2,490.77 9 1,405.97 2,372.16 10 1,378.40 2,259.20 11 1,351.37 12 1,324.87 13 1,298.90 14 1,273.43 15 1,248.46 16 1,223.98 17 1,199.98 18 1,176.45 19 1,153.38 20 1,130.77 21 1,108.59 22 1,086.86 23 1,065.55 24 1,044.65

PV 26,729 31,780 28,416


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Leadership & Management

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