ECCU Blog

by Mark Jones

I wonder how many ministries had to replace their air conditioning systems during this summer of record-breaking heat. Maybe yours is one of them. 

Did you have enough liquid funds to cover that expense, or did you have to come up with those funds another way? Maybe a special fundraising effort, a loan from your financial institution, or “borrowing” funds from another area of ministry?                                 

Even if we do all the scheduled maintenance, things like AC systems and roofs and parking lots and carpeting eventually need to be repaired or replaced. Unfortunately, these expenses create an emergency for many ministry organizations because they don’t have funds set aside for them. 

This is why you need a replacement reserve fund. It’s simply good stewardship of capital assets to have an account that’s specifically earmarked for the upkeep of your property, building, and contents. 

Are you unsure how to calculate the appropriate replacement reserves? Here’s a good starting point: 

  1. List all the items your ministry must maintain or eventually replace.
  2. Identify how long each item was expected to last when it was new (useful life in years).
  3. Determine the remaining life of each item (again in years).
  4. Determine how much it would cost to replace each item today.

By conducting this type of inventory, you can calculate how much should be in your replacement reserve fund today and how much to add to it each year. Better yet, you’ll avoid jeopardizing important ministry to pay for unexpected facilities expenses. 

Need some help? We created a replacement reserves calculator tool that performs these calculations for you. (There’s no charge to use it.) 

Have unexpected facilities expenses negatively impacted your ministry? Or have you been able to avoid situations like that because you have had a replacement reserve fund? Post a comment and tell us your story.

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2 comments

  1. Mark, this is such an important topic. Last year I attended the annual NACBA conference an spoke to a vendor who did replacement reserve studies for churches. I came back to my church ready to move forward with the study. The problem was we could not find the funds to do it. So I found a volunteer in our church who did this for condo associations and he prepared it for us at no cost. We now know how much we should fund annually from our budget and have a project schedule of items that need to be replaced over the next 30 years. I encourage every ministry to do this exercise.

  2. Mark Jones @ 2012-10-04 10:18

    Jeremy, that’s a great idea of using a volunteer who has experience in doing your reserve study. I’m sure this helped with both short and long-term financial and facility planning at your church. Speaking of volunteers, at our church, we used a retired contractor who assisted us in doing the replacement reserve fund study. While it is nice to use a professional firm, many times you may be able to find capable folks within your ministry to assist you at little or no cost.

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