Getting Started

Building the Structure

Begin with a Vestry Resolution

Whether your parish is large and well endowed or is a smaller congregation doing careful planning for the future, when the leadership has made a clear commitment to introduce planned giving, it is the right time to establish a viable and sustainable program. The first steps are to formalize the leadership’s commitment to planned giving through a official vestry resolution, and then to construct a “well-woven basket” to receive gifts; that is, the creation of a structure that will assure careful and prudent management of assets given to the parish through planned gifts.

Form a Task Force

A task force or ad hoc committee of credible parish leaders—possibly former wardens—can be responsible for developing the idea into a permanent structure through formal action of the vestry. Some members of this group are likely to be elected to a permanent endowment board or committee, which will oversee the program’s development, define how assets from planned gifts are received, invested, accumulated, allocated, disbursed, and reported.

Guidelines for the Endowment Committee

Usually the most effective structure is a board or committee, separate from but accountable to the vestry, that can maintain the long-term focus necessary to oversee a planned giving program (in contrast to the short-term problems and issues with which vestries have to be involved). Also, with their long-term view, committee members will understand that their responsibilities include not just the oversight of the endowment fund, but also its growth.

The composition of the committee will, of course, depend on the size and tradition of the parish, but some guidelines might be worth consideration:

Five to seven voting members, one or two of whom may be ex-officio (e.g. the rector and senior warden).
Rotating membership, such as
- Terms of three years that allow for re-election once, or
- Terms of five years that do not allow for re-election, except after one year off the committee
Meetings at least quarterly, with complete minutes that are forwarded to the vestry, along with current reports on the status of the endowment fund.
As a general rule, it is not recommended to establish a separately incorporated 501 (c)(3) organization, such as a foundation or trust to manage the endowment, as this can lead to an autonomous “power center” that can potentially function in opposition to the vestry. That’s more “separateness” than is healthy and can lead to unnecessary problems and conflicts.

Planned Giving Committee

Parishes also might want to establish a planned giving committee, more focused on building awareness in the parish about the importance of planned gifts. In situations in which a new endowment committee is necessary, its composition is very important and should be agreed upon before the vestry resolution is passed. As leaders of the planned giving program, committee members would be actively involved in its implementation, through their advocacy and hands-on participation.

The Necessary Tools

There are several documents that will be helpful in formalizing the program. Following are basic principles and ideas that will help you understand the importance of these tools and how to use them effectively.

Samples of the following documents are include in “Sample Endowment Resolution & Policies” link on the Legacy Giving page:

vestry resolutions, with an illustrative plan of operation;
policies and guidelines covering disposition of bequests,
designated funds,
investments,
spending rules, and
gift acceptance

The samples and guidelines should be understood and adapted according to the circumstances and needs of each parish.

Basic Principles and Ideas

1. Resolution of the Vestry and Statement of Purpose

The essential idea supporting this program, which should be communicated clearly to the vestry and to the parish, is that endowment resources empower ministry. Our personal and corporate understanding (and demonstration) of our discipleship and stewardship responsibility should lead us to the conclusion that endowment funds are not savings accounts to protect us against the uncertainties of the future. Rather, they are God given resources and should be used to do the work God has called us to do, work that we could not do without them.

The more mission-oriented the endowment fund, the more additional gifts it will inspire. How the parish leadership understands this principle is often expressed in the relationship between the operating budget and endowment expenditures. For the long-term health of the parish, the less the operating budget is dependent upon the endowment, the better. If your parish is just organizing an endowment fund, you have the opportunity, as these resolutions are being drafted, to “put a gate” around the endowment by preventing its routine use in the operating budget.

The technical requirements for the resolution of the vestry are to:

name the fund,
description of purpose,
name the initial committee members (as well as their terms and the process for rotation of members),
officers,
election procedures,
frequency of meetings, and
reporting requirements.

The competence and stature of the endowment committee members are critical in establishing credibility that will be essential to the success of the planned giving program. A good way to assure the selection of persons with appropriate qualifications is to have the vestry, rather than the entire parish, elect the members of the committee. As membership rotates, it would be appropriate for the endowment committee to recommend nominees to the vestry, and for the vestry to elect. This maintains an appropriate relationship between the vestry and the committee.

(Link to sample Vestry Resolution)

Policy Development By Endowment Committee

For your “well-woven basket” to receive gifts, several critical issues need to be addressed when formalizing the management of the endowment fund. While not intended to be an exhaustive list, the following policies or guidelines should be among those addressed as the first items of business for the newly formed endowment committee.

2. Disposition of Bequests

The disposition of a testamentary gift should be clearly defined.

Normally, any gift coming to the parish by virtue of the death of the donor is directed to the endowment fund, unless otherwise designated by the donor. If that is true in your parish, it should be explicitly described in a formally adopted policy statement. This can head off future misunderstandings; it also provides guidance when bequests are being written. (Link to sample Policy Regarding the Disposition of Bequests)

3. Restricted Gifts and Designated Funds

Most planned giving professionals agree that providing the opportunity for donors to designate gifts for specific purposes will increase giving. If a congregation wants to make this accommodation, a specific policy needs to be formulated, spelling out the limitations and procedures.

The primary issue to be addressed is at what level a gift may be named or restricted. The level might be $10,000 to $25,000, depending on the size and nature of the parish. A smaller gift could be accepted with the provision that it will be increased periodically until the minimum level is reached. Accrued earnings would help that happen. (Link to sample Designated Funds)

4. Investment Policies

Sound investment policies are also important in maintaining the credibility of the “well-woven basket.” Guidelines governing the investment of the endowment funds must be clearly articulated so the vestry and the congregation are aware of the approach taken to preserve and grow the funds. This is an important aspect of the parish leadership’s stewardship responsibility, led by members of the endowment committee.

Investment policies should include asset allocation guidelines based on a prudent level of risk that is consistent with the endowment fund’s growth objectives and with the current climate in the investment markets. It is useful to establish performance benchmarks, though evaluating actual performance of the investment manager should be done from a long-term perspective—over at least three to five years.

The Episcopal Church Foundation in West Texas is available to help the endowment committee develop its investment policy. (Link to sample Investment Guidelines)

5. Spending Rules

The guidelines and protocol for using endowment funds need to be very clear. This aspect of the management of the “well-woven basket” is the real test of the system’s integrity. The decision to expend funds, and for what purposes, is ultimately the vestry’s responsibility, though the endowment committee has a responsibility to determine whether the requested expenditures are consistent with the Statement of Purpose to which all parties have agreed and are in compliance with any restrictions that may be associated with specific funds.

Until the early 1980s, not-for-profit organizations typically invested their endowment funds to yield a certain amount of income, which they would then expend for their charitable purposes. Private foundations, for instance, are required to spend at least five percent of their assets annually, so their boards would construct the investment portfolio to produce at least five percent income in dividends and/or interest.

Since then, however, many charities have adopted the “total return” method (rather than “income” or “interest and dividends”) as the preferred approach for determining the amount of funds that will be available for expenditure in a given year. Using the total return method, at the beginning of the year the endowment board decides what percentage of the endowment fund may be spent. Often the allocations policy will incorporate a specific percentage (usually between four percent and six percent) available to be used unless it is modified by a vote of the board in a given year. Once that percentage is determined and the amount available is computed, the vestry may include those funds in the annual budget. Funds available but not expended are held in the fund and continue to grow and accumulate for their intended purpose.

In general, and over the long term, the total-return approach will likely increase the funds available to further the parish’s ministry. The endowment fund can be invested for total growth without concern for generating income for expenditure, and the difference between the percentage designated for expenditure and the total growth will usually more than cover inflation, thus preserving the fund’s buying power. (Link to sample Spending Rules and link to a more detailed discussion of the total return policy)

6. Gift Acceptance Guidelines

Horror stories abound about charities that have received gifts that have proven to be anything but beneficial and are often expensive. Generally the donors are completely unaware of the problems they may be passing on. Real estate gifts tend to come with the greatest risk, but there are many other potential problem categories. Consider, for instance, the following:

An eager parishioner responds to the church’s plan to construct a new building by offering a key corner lot at an important intersection in your town. You jump at the chance to acquire the perfect location for a new church. But the lot used to have a gasoline filling station on it, and there might well be leaking underground tanks or contaminated hazardous materials in the ground. Does your church have written policies about how to investigate the viability of such a gift?

In general, an offer of any gift to the church (in life or by bequest) other than cash or publicly traded securities needs to be reviewed by a competent group representing the interests of the congregation. Note that this is a parish issue, not just an endowment fund matter. However, if a structure is being set up with a separate endowment committee, that group logically can be asked to serve also as the Parish “Gift Review Committee.” (Link to sample Gift Acceptance Policy)

Record Keeping

The importance of maintaining professional standards when keeping records associated with planned gifts and the endowment fund cannot be overemphasized. The confidentiality and security of files containing information about the personal plans and commitments of parishioners are critical features of the system, and they warrant the special attention of clergy and staff, as well as of the endowment committee.

Timely acknowledgment of all new gifts and commitments is essential, with letters from the rector as well as from the endowment committee chair. While in larger parishes the acknowledgment procedure is often systematized, it should always be personal. Further thoughts about gift acknowledgments are found in the awareness section.

Accurate lists should be maintained of everyone who has notified the parish of some form of estate commitment, and, as said earlier, information on the lists should be kept in strict confidence. Often such information is filed with records provided to the clergy regarding funeral preferences and the disposition of remains.

The financial information about assets in the endowment fund must be maintained in an accurate, open, and professional manner. As noted above, complete and thorough reports must be provided to the parish regularly, including new gifts and additions to the endowment fund, current value of the fund(s), expendable balances, disbursements made, and so on.

This information should be provided to the vestry at least quarterly and to the parish at least annually. Both the accuracy and accountability of the financial information should be affirmed by periodic audits, and the specific requirements should be stipulated in the establishing resolution. Intentional openness with this information will aid in maintaining the credibility you will need for a successful program.

Adapted from Funding Future Ministry