Elements of A Successful Church Endowment Program
SUCCESSFUL CHURCH ENDOWMENT PROGRAMS
T. BRUCE WEAVER, JR.,TREASURER, THE P.E.E.R. NETWORK
Church endowments are not easy. First, there can be controversy about whether a church should have an endowment. This usually leads to discussion, sometimes heated, on how to use the endowment within the church. Second, there are escalating issues about the church’s responsibility to manage the funds in a social and fiduciary responsible manner. The latter is becoming more important as both the public and the courts are demanding that trustees of funds become more sensitive to the issues of total return and ravages of inflation on the principal. Finally, there is the issue of development or increasing the endowments through gifts and bequests. The competition for these types of funds is becoming more aggressive and sophisticated. The trends are disturbing. Studies indicate churches may be slowly losing this competition. This article presents a model of church endowments that a church must understand to have a successful endowment program. The ideas derive from both research work, and the successful experiences of churches and individuals. The structure presents the ideas in a way that a church can understand that a successful endowment program involves the entire church, not just specific committees.
A successful church endowment program is one where the endowment is
- affirmed by the clergy, lay leadership and congregation;
- managed in a social and fiduciary responsible manner;
- increasing in size through bequests.
This statement addresses three critical areas—Theology, Management and Development. It means that:
- The church leaders and congregation have a theological and philanthropic understanding of endowments and their uses, and communicate this to the congregation.
- The church has established sound and well-understood investment policies.
- Development programs are in place and functioning.
These three areas of Theology, Management and Development are interdependent in a successful program and can be expressed as an equilateral triangle (See Attachment). This configuration is important because all sides must be equal to remain in balance. Over-stressing, under-stressing or eliminating one of the variables will weaken the program.
Theology in this context is the belief system of the church around endowments. It is the top of the triangle because the attitudes of the clergy, lay leadership and congregation about endowments and how the church uses them will influence both management and development. If the leadership is equivocal about endowments, attempts to start or expand the endowment will be marginal. A more serious impact will be dissension among the congregation on the uses of the endowment.
Indicators of Success
- The clergy are knowledgeable in the theology of endowments and willing to present this theology in their sermons and discussions with the congregation.
- The clergy and the session are sensitive to both the blessings and responsibilities of endowments. They understand the dangers of allowing the income of an endowment to be taken for granted (that is, lost) in the annual budget. Because of this concern, the church has a written policy specifically discussing how the endowment is used in the programs of the church as well as when and how money may be withdrawn from the principal.
- The session accepts that the fact that the church must be a good steward of the resources given it and through the endowment management committee establishes social and fiduciary responsible management practices.
Donors expect a church to be a good steward of the resources it blessed with. There is an implicit trust that the gifts will be well managed¼that is, they will not be allowed to suffer the erosion of inflation nor be invaded whenever the church has a budget problem. The endowment management committee has the responsibility to establish this trust with donors through its policies and management practices
Indicators of Success
- The Endowment Management Committee understands its social and fiduciary responsibilities in the management of the investments. It has written investment policies which define asset allocation parameters, and establish realistic and demanding performance criteria.
- It has a program for routinely meeting with the investment managers to review performance. If the committee uses in-house management, it has procedures to maintain an official and arm's length relationship.
- The committee has established a spending policy (e.g., income taken from the endowments) which is logical, consistent and protects the endowment from the erosion of inflation.
Development activities in most churches are usually haphazard with an occasional Wills’ Emphasis Sunday or estate-planning seminar. This is rarely satisfactory. Development programs must be continuous over a long period. It takes time for the program to show results. Development is easier if the previously discussed areas are being properly managed. Congregations will understand how endowments allow a church to reach beyond itself and accomplish things that it could not do on the annual giving budget. They will recognize that the church is being a good steward of how the funds are being handled
Indicators of Success
- The church has either a full time Director of Development or a Development Committee that has the responsibility to develop and implement a development program. This committee consists of two types of individuals¼(a) those who are highly respected in the church and have an extensive network of contacts in the church, and (b) those have a good understanding of tax advantaged gift alternatives.
- There is an organized program to identify potential donors.
- The church has a good understanding of its mission and objectives, and identified new programs it would initiate with additional funding or existing programs that would be expanded with additional funds. All of these programs are communicated to the congregation.
- The church has an organized program of wills' emphasis and estate planning.
- The committee has studied seriously the use of a recognition program for donors to the endowment.
A CLOSING COMMENT
The importance of communication with the congregation cannot be overemphasized. Individuals are continuously receiving requests for gifts. Many of these requests are very well presented (such as universities). This is resulting in sophisticated donors who are becoming sensitive to many of the issues discussed in this document. Either implicitly or explicitly, they want to know what the church is doing in its programs and with the resources it has been given. In the absence of information, they will arrive at their own conclusions and they will likely be wrong.
Please note that these are all samples and should not be used without careful review.
This is not intended to be legal, financial or accounting guidance but as a guide for the church to write its own material according to your local needs and restrictions. Please refer to your own accountant or attorney for accounting and specific legal counsel.