The Financial Relationship of a Church and its Preschool

When a church establishes a preschool, it typically subsidizes the preschool for the first few years of operation. After that initial period, the question arises as to what the financial relationship should be between the church and a preschool owned and operated by that church.

There are three general principles that will be helpful in discussing this topic.

Principle I – The Preschool is a ministry, not a tenant.

Principle II – The Preschool ought to reimburse the church for all out-of-pocket expenses directly attributable to the Preschool.

Principle III — The Preschool ought to make such additional contributions to the church as seem appropriate.

Principle I – Ministry, not Tenant

The most important principle is that the Preschool is a ministry and not a tenant. The Preschool is not charged “rent” for its use of space in the church facility. The Preschool should always be referred to as “we” and not as “they.”

Principle II – Full Reimbursement

The second important principle is that the Preschool ought to reimburse the church for all out-of-pocket expenses. Examples:

Insurance and Workers Compensation – The insurance company is usually able to provide a breakdown of how much of the premium is due to the church and how much to the Preschool. The Preschool can then pay its full share. The mechanics of this can be complex, but the principle is simple.

Telephone – The Preschool normally has its own telephone and pays its own telephone bill, including the amount for any yellow pages advertising.

Electricity – The Preschool ought to reimburse the church for electricity used by the Preschool. This requires estimating and approximation. Read the meter to compare Sunday usage versus weekday usage. Also, compare weekday usage when the Preschool is not in session to weekday usage when the Preschool is in session. The Preschool ought to reimburse for the amount of electricity usage directly attributable to the Preschool, i.e., the amount above and beyond the usage normally incurred by the church when the Preschool is closed. Air conditioning usage may introduce some complications in the calculation, but the principle remains simple.

Heat – The Preschool ought to reimburse the church for heating costs incurred by the Preschool. This can be very difficult to estimate. If heating is by gas, it is possible to use the gas meter in much the same manner as the electric meter is used above (comparing Sundays to weekdays and weekdays when school is in session to weekdays when the school is closed). The computation is made more difficult by factors such as the outside temperature (degree-days). When heating is by fuel oil, estimating is even more difficult. The basic rule is that you find out what it would cost to heat the facility if there were no Preschool. Do not assume that the church goes unheated if there is no Preschool. It is still necessary to maintain some temperature such as 60 degrees. It is also necessary to heat the facility for Council and Committee meetings, Boy Scout or Girl Scout troops, church events, community events, and all other normal activities other than the Preschool. You compare the heating costs if there were no operating Preschool to the actual costs. The difference is what the Preschool ought to reimburse for. In many cases, it is necessary to simply make a reasonable guess.

Utilities – In most cases, the Preschool simply reimburses the church for heat and electric utilities as a single monthly payment of a predetermined amount, such as $600 per month. This is much easier than attempting to make the calculations described above. The purpose of describing the calculations above is so that in cases of dispute it is possible to determine if the monthly amount is a reasonable approximation of the true cost.

Maintenance Items – The Preschool ought to reimburse the church for usage of paper towels, toilet paper, soap, and light bulbs, to the extent such usage is by the Preschool. For fluorescent bulbs, ballasts may be included. All of this requires estimation.

Wear and Tear – Above and beyond the above items, the normal operation of a Preschool causes a certain amount of wear and tear on a facility. Floors may need to be refinished or replaced, carpets wear out, walls may need to be repainted or repaired, etc. Part of this cost is attributable to the Preschool It is very difficult to estimate, but this wear and tear is definitely a cost due directly to the operation of the Preschool.

 

CHURCH AND SCHOOL RELATIONSHIPS – FINANCIAL AND OTHERWISE

Interim Consult – SEPA – March 14, 2012                               Pastor Richard A. Mathisen

 

  1. The Role of the Interim Minister with regard to a Church School

 

  1. The School is a Business

 

  1. Financial Status – Deficit / Surplus

 

  1. Financial Reserves [Rule of Thumb – Three months budgeted expenses]

 

  1. Financial Controls and Handling of Money

 

  1. Legal Relationship – Constitution, By-laws, Liability

 

  1. Marketing, Price-setting, Long-range Planning

 

  1. Legal Counsel

 

  1. Employee Compensation

 

  1. Delinquent Parents, Collections, Subsidies

 

  1. Manual for Parents

 

  1. Manual for Employees

 

  1. Conflicts between Church and School

 

  1. Facility Usage – Scheduling and Storage Space

 

  1. Payments to Church (See Worksheet)

 

  1. Communications – Use of the Church Newsletter

 

  1. Working Relationship – Liaisons and Role of Minister

 

  1. Gaining New Church Members from the School

 

  1. Pastor as Teacher — Telling Bible Stories in the School

 

  1. The “School Sunday”

 

Copyright 2012 – No copying without permission from [email protected]

WORKSHEET — Financial Relationship of a Church and a Church School

 

This worksheet is intended to be helpful in evaluating the proper financial relationship between a church school and the church. Two principles guide the financial relationship:

 

1 – The church school is a ministry, not a tenant. It does not pay rent for space used.

 

2 – After start-up, the church school ought to reimburse the church for all out-of-pocket expenses caused by the existence of the school.

 

 

A                    B                      C

 

Cost                 Net Cost

ANNUAL FINANCIAL PAYMENT            Actual cost      if no school     (A minus B)

 

 

  1. Annual heating cost (oil/gas/etc) ________ ________        ________

(Specify temperature in degrees ______)

 

  1. Annual electricity usage ________ ________        ________

 

  1. Water usage ________ ________        ________

 

  1. Telephone usage (if not separate) ________

 

  1. Copier Usage (if not separate) ________

 

  1. Secretarial services (if not separate) ________

 

  1. Portion of liability insurance ________

 

  1. Portion of Workers Compensation insurance ________

 

  1. Bathroom supplies (towels, toilet paper, cups, etc.) ________

 

  1. Janitorial services (if not separate) ________

 

  1. Portion of snow removal ________

 

  1. Portion of outdoor property care (playground, lawn, etc) ________

 

  1. Portion of indoor property care (paint, maintenance) ________

 

Copyright 2012 – No copying without permission from [email protected]