The Role of Endowment Funds
Endowment funds are used to meet a goal important to many people when donating funds to a charitable institution, especially at their passing. That goal is to support the long-term effectiveness of the organization. Usually, this means that the principal amount granted is not to be spent in the near-term but rather only the income derived from that amount is to be spent. This allows the donor to truly leave a long-term legacy for the institution.
Related to that goal, it is common to have the funds segregated and managed in a manner designed to assure that long-term legacy. Endowments are governed by specific conservative rules and are usually professionally managed in order to avoid conflicts-of-interest or other considerations that might undermine their long-term value.
When you give to one of First Church's endowment funds, your gift is added to gifts from those who have already given generously through the years. These funds are pooled with funds from over 200 congregations and other UU-related entities and managed by professional advisers chosen by the Unitarian Universalist Association (UUA). They are tasked with finding ways that will balance the desire for income with the importance of assuring the safety of the principal. By the Constitution of the Church, unless you specify otherwise, the original principal will remain intact forever, with the exception of a major emergency (such as the church burning down) and then only with a 2/3rds vote of the congregation.
As of October 2011, the total value of the Church’s Endowment Funds was about $700,000. The Board has approved the use of 5% of the value of each Endowment, averaged over the previous 3 years, so First Church will benefit from distributions from the Endowments of about $35,000 in the FY 2011-2012. These distributions are already large enough to expand the staffing available to pursue the Church’s mission.
A Choice of Endowment Funds
There are three endowment funds currently in operation at First Church. Each account has a different specification on how the money can be used. The Planned Giving Committee, also known as the PGC, recommends that you assign your gift or bequest to the General Endowment Fund, because the income from that fund can be used to meet whatever is the most pressing purpose that the Ministers and Board see at future times. However, the PGC fully appreciates that these are your funds and wants you to also see if you would prefer to support a specific activity at the Church. (See below if you wish to start an additional Endowment.)
Please see the Our Endowment Funds page for details on how General Endowment Fund, The Helen Meyers Fund and Social Justice Endowment Fund address different aspects of the Church’s mission.
Alternative Designations of Gifts or Bequests
Not all donors wish to focus on the long-term. Some may wish to boost support for the Church in general or specific functions in the medium-term. For example, one large bequest was received with the wish to expand the Caring Ministry over the medium term. The principal as well as earnings were made available for such activities at the discretion of the Church. In this case, most of the funds were expended over a period of 3-5 years.
As a practical matter, such funding can be disruptive of the budgeting and staffing pattern at the Church. For example, a bequest to significantly expand a program over a 5-year period could create an expectation of continuing such an expanded program indefinitely, which may not be possible after the 5 years. Thus, the Board must review all such bequests when over $10,000. The PGC encourages donors considering such a bequest contact the Director of Membership and Development to discuss it and, if at all possible, include wording granting the Church flexibility in the use of the funds if their designated use is not approvable.
Creating a New Endowment
The General Endowment of the Church was started in 1990. Since then, there was a large bequest that created the Helen Meyers Fund and a fund-drive that created the Social Justice Fund. Funds with other goals can be created, but they must be approved by the Board. The criteria include whether the size of the Fund will generate enough income to support additional on-going mission-related activities. Based on the normal rate of income distribution of 5%, the minimum size of such a gift or bequest is probably over $100,000. For smaller amounts, it may be more appropriate to create a limited-period funding window as discussed immediately above.
Undesignated Gifts or Bequests
If you make a gift or leave money to the church without specifying one of the Endowments noted above, normally half of your gift will be added to the General Endowment Fund and half will be allocated to the church Board of Trustees for general operating purposes. If that latter amount is over 5% of the Church’s operating budget (at least $75,000), there will be a vote of the congregation on its use.
However, because the Church is in the middle of a major renovation of the Hillcrest campus, this allocation process has been suspended through June 30, 2013. During this period, 100% of undesignated bequests will be used to fund the campus renovation, thereby reducing the burden of the associated mortgage.
To discuss your options please contact First Church Development Manager Pam Bates at (619) 398-4442.