ENDOWMENT FUND GUIDE
For
ST. PHILIP LUTHERAN CHURCH
ROANOKE, VIRGINIA
CONTENTS
Introduction
Purpose
Definitions
Investment of the Fund
Gifts to the Fund
Distribution
Administration
Liability
Amendments
Severability
Attestment
I. Introduction:
This document sets forth the policy (“Policy”) by which St. Philip Lutheran Church (“St. Philip”) shall establish and manage any and all endowments for the purpose of providing for the long term financial security of St. Philip or for specific and described goals.
Good stewardship of financial resources is a very important part of the ethical and religious development of individuals and groups. Making the best use of the gifts we have been given is a life-long learning process. Many church groups find that establishing and administering an endowment fund challenges assumptions about the role of money in a religious organization. It stretches individual learning and provides new opportunities
II. Mission Statement:
What is the purpose of an endowment fund in the life of a congregation like St. Philip? There are a number of reasons for St. Philip to establish formally, support and manage an endowment fund. Operating funds, capital reserves, and endowment funds are three legs of one stool upon which a healthy and mature organization balances its work and service.
Endowments provide longevity and emergency assistance. They can also provide additional monies for establishing other permanent programs—necessities that cannot be funded by the general revenue provided annually by the congregation's members and friends.
Creating and administering an endowment fund is one of many ways to care for St. Philip
and our community of people. These funds are created by gifts we have received from others.
We sit in the shade of trees we did not plant. The trees help us and rely
on us. We are the gardeners, the trustees, the stewards who will ensure
that the trees are healthy and growing for the next generation to enjoy and
“husband.”As Christian people who cherish freedom, search for truth,
and work for justice and mercy in the world, the trees of our faith will be our legacy.
The purpose of an endowment is to help secure, strengthen, and extend the long-term survival and mission of St. Philip. In very simple terms, an endowment fund is a savings account, a security cushion that can be used to get through an emergency. In addition to providing a safety net for the future of our work together as religious people, it can help us today in our common work to strengthen and extend the reach of St. Philip in our community, both here and worldwide.
At its best, an endowment fund further secures an already stable financial situation. Everyone in our congregation can and should take pride in the endowment fund, understand its purpose and place in the life of our congregation, and be invited to participate in soliciting funds for this purpose.
III. Definition:
What is an Endowment fund? The widely adopted Uniform Management of Institutional Funds Act defines an endowment fund as “an institutional fund, or any part of such a fund, not wholly expendable by the institution on a current basis under the terms of the applicable gift instrument.”
An endowment fund is a financial account with restrictions placed on distribution (i.e., how much of the fund may be spent for what purpose, and under what authorization). It is maintained and accounted for as separate and distinct from all other funds, such as the operating budget or capital reserve fund. An endowment is a financial resource in perpetuity, extending and enhancing St. Philip’s capacity to fulfill its mission and purpose.
People support endowments because they want to do something lasting: they expect their contribution to be invested wisely, to grow in value, and to produce a reliable revenue stream in perpetuity. Gifts to endowment are meant to be permanent resources, with spending only from the income earned on the endowment. The most common form of contribution to an endowment is a charitable bequest, a significant gift from someone’s accumulated life estate- often his or her largest single contribution. In most cases the donor will designate how the income from this gift should be used. The objective of the Endowment Fund Program is to conserve principal and make distributions only from earnings on principal and to reinvest the balance of earnings for future growth (unless otherwise directed by the donor who may provide for the invasion of principal). Otherwise, NO PRINCIPAL may be withdrawn except in extreme and overwhelming circumstances which are necessary to the survival of St. Philip.
What is principal? Principal is defined, at minimum, as the original value of any gifts made to the endowment fund and any capital appreciation upon that gift over time.
What is capital appreciation? Capital appreciation is a rise in the value of an asset based on a rise in market price. Essentially, the capital that was invested in the security has increased in value, and the capital appreciation portion of the investment includes all of the market value exceeding the original investment or cost basis. Capital appreciation is one of the two main sources of investment returns, with the other being dividend or interest income.
What is income? Traditionally, income consists of all earnings, exclusive of capital appreciation. However, according to the Uniform Management of Institutional Funds Act, income from investment earnings (interest, dividends, and sometimes capital appreciation) may be spent.
In all circumstances, it is imperative that there is faithful observance of restrictions made by the donor, sound accounting practices, and compliance with state law regarding endowments and fiduciaries. Instead of the term “principal,” the Institutional Funds Act uses the term “historic dollar value” to refer to the combination of the original gift value, additional gifts, and reinvestment of earnings.
What is a fiduciary? A fiduciary is someone who holds and takes care of something for the benefit of others. It is a position of responsibility founded on public trust and confidence. Fiduciary responsibilities include observing donor restrictions, administering the funds according to the enabling guidelines, and reporting on fund activity in a timely and accurate fashion to the Church Council of St. Philip.
Endowment Committee: The Endowment Committee is a committee whose members are selected by the Church Council for purpose of managing the endowment funds.
What regulations govern endowments? In the United States, state law governs the management and use of endowment funds. Most states, but not all of them, have adopted either selected portions of a slightly revised version of the “Uniform Management of Institutional Funds Act.” The state office of the Attorney General oversees compliance, ensuring that donors’ wishes are honored and that the fiduciary powers and responsibilities of the institution are exercised appropriately. No regulatory requirement is established for routine reporting to the Attorney General’s office on Endowment Funds.
IV. Selection of the Endowment Committee:
The Endowment Committee shall be comprised of three (3) voting members of the Congregation of St. Philip and shall serve for a term of 5 years along with the senior pastor and treasurer of the congregation as ad hoc members. Members of the Endowment Committee shall serve no more than two (2) consecutive terms. Members of the Endowment Committee shall be appointed upon majority vote by the Church Council of St. Philip, with said vote being held at a duly scheduled meeting of the Church Council at which a quorum as prescribed by the St. Philip Constitution is met. Members of the Endowment Committee may resign their post by submitting a written letter of resignation to the President of the Church Council and the Senior Pastor of St. Philip. Should a member of the Endowment Committee no longer be able to serve, for whatever reason, the Church Council shall elect as soon as possible a substitute member from the voting membership of the Congregation of St. Philip who shall serve the remainder of the term and shall be eligible for one (1) additional term. Members of the Endowment Committee shall be removed for malfeasance, misfeasance or nonfeasance or for any other good reason to be determined solely at the discretion of the Church Council by a seventy-five percent (75%) vote of the Church Council of St. Philip, with said vote being held at a duly scheduled meeting of the Church Council at which a quorum as prescribed by the St. Philip Constitution is met.
Upon appointment, the members of the Endowment Committee shall be fiduciaries governed by the applicable laws set forth in the Code of Virginia (1950), as amended, and as it may be changed by act of the General Assembly from time to time; however, members of the Committee shall not be required to qualify before the Clerk of the Circuit Court for the County of Roanoke, nor make accounting before the Commissioner of Accounts except as may be required by order of a Court with proper jurisdiction, nor shall they be required to post bond upon the performance of their duties.
V. Number of Endowment Funds:
St. Philip may establish as many separate endowment funds as may be required to perform the necessary goals.
VI. Creation of Endowments:
Each separate endowment (“Endowment”) shall be created by majority vote by the Church Council of St. Philip, with said vote being held at a duly scheduled meeting of the Church Council at which a quorum as prescribed by the St. Philip Constitution is met. The individual endowments shall be created to further a specific goal established by the Church Council or to meet the specific requirements of a bequest given to St. Philip as set forth in the applicable testamentary documents or written instructions of the donor. Moreover, multiple accounts may be accounted within each separate endowment at the sole discretion of the Endowment Committee for the purpose of managing funds and avoiding commingling of assets. The Endowment Committee shall retain a General Endowment Fund, into which all unrestricted bequests and donations shall be placed. Additional endowments established to serve a specific purpose may be created at the discretion of the Endowment Committee.
A separate Named Endowment Fund (“Named Fund”) in honor of an individual or family may be established for a one time gift of no less than twenty five thousand dollars ($25,000.00 USD) , upon the recommendation of the Endowment Committee and the approval of the Church Council. The name of the Named Fund shall be designated by the donor and may or may not contain a proper name; however, the Endowment Committee reserves the right to reject any gift that is opposition to the principles and beliefs of St. Philip and the ELCA. Named Funds are usually for a specific purpose and are normally in honor or in memory of some person or persons.
VII. Funding of Endowments:
Funding of Endowments shall be made pursuant to the St. Philip Gift and Bequest Policy. Unrestricted bequests or donations shall be placed into the General Endowment Fund.
VIII. Management of the Endowments Funds:
The Endowment Committee is directed to be guided by and adhere to the following investment principles:
1. To conserve the principal.
2. To grow the funds over and above that necessary to offset inflation.
3. To ensure reasonable growth at reasonable risk.
4. To invest assets in institutions, companies, corporations or funds
which adhere to the Social Principals of the Evangelical Lutheran Church in
America.
The Endowment Committee shall be solely responsible for the investment of all monies received by the Endowment Program in those investment vehicles the Endowment Committee believes appropriate to meet the above referenced principles, including one or more accounts with the Evangelical Lutheran Church in America Foundation, or Thrivent Financial for Lutherans at the Endowment Committee’s sole discretion. The specific purpose of each account authorized by the Endowment Committee shall be stated in order to fulfill the wishes of the donor and thereby segregate and maintain gifts for their stated purpose. The Endowment Committee shall oversee the management of funds so as not to commingle the assets of each specified endowment.
The Endowment Committee shall establish its own rules for the conduct of its meetings, except that no meeting shall be held unless all voting members are present and no action concerning the management or distribution of funds shall be made by majority vote.
The Endowment Committee shall make bi-monthly reports to the Church Council as to the assets of each Endowment and shall make an annual accounting of each Endowment to be due in the month of January.
IX. Distributions from the Endowment Program:
In the case of all Endowment funds that are not restricted or Named Funds, the amount of all distributions shall be determined by the Church Council. Until otherwise changed by majority vote of the Church Congregation at a duly called Congregational meeting, the Church Council will limit spending from each of the Endowment Funds to one half the earnings accrued since the last distribution. (Calculation: Compare current year end value to prior year end value after the last distribution, take one half the difference if there is growth, and that is the maximum amount to be distributed.) The remainder of the earnings will remain in the fund to enhance growth for the future. These recommendations will be made in the first quarter of the calendar year. Distributions may be made on annual basis, however Church Council may elect not to make a distribution in any given year.
Distribution from Named Funds or any restricted fund in the Endowment Program shall be made by the Endowment Committee as directed by the donors at the time of their gift or as directed by the testatmentary document if such direction is in conformity with the general purposes set forth herein. Distributions may be made on annual basis, however the Endowment Committee may elect not to make a distribution in any given year unless required to do so by the donation or testamentary document.
Any distribution of principal from any endowment fund requires an affirmative two-thirds (2/3) vote of the voting members of St. Philip present at a duly called Congregational Meeting as specified in Constitution of St. Philip.
X. Liability of Trustees and Members of the Committee:
In absence of gross negligence or fraud, no member of the Church Council, Trustee or members of the Endowment Committee of St. Philip Lutheran Church shall be personally liable for any action made or omission with respect to the Endowment Program. In the event of gross negligence or fraud by a member, no other member of the Church Council, Trustee or the Endowment Committee of St. Philip Lutheran Church shall be personally liable for any action made or omission with respect to the Endowment Program.
XI. Merger, Consolidation, or Dissolution of St. Philip Lutheran Church:
If at any time, St. Philip Lutheran Church is lawfully merged or consolidated with any other church all provisions hereof in respect to the Endowment Program shall be deemed to have been made in behalf of the merged or consolidated church, which shall be authorized to administer the same in all respects and in accordance with the terms thereof. If St. Philip Lutheran Church should ever be dissolved without any lawful successor thereto, the Fund, including both principal, interest or other earnings to date, shall, by majority vote of the Endowment Committee and approval by the Congregational Council, be entrusted to the Virginia Synod of the Evangelical Lutheran Church in America for making distributions while maintaining principal as an endowment in the name of said church.
XII. Amendments:
Technical corrections and amendments to the Endowment Program which do not alter the stated purpose of the Endowment Program may be made by a two-thirds (2/3) affirmative vote by the Church Council of St. Philip, with said vote being held at a duly scheduled meeting of the Church Council at which a quorum as prescribed by the St. Philip Constitution is met.
XIII. Severability:
If any provisions or any application of any provisions of the Endowment Program shall be held or deemed to be or shall be illegal or unenforceable, the same shall not affect any other provisions or any application of any provision herein contained or render the same invalid, inoperative, or unenforceable.
These Endowment Program Guidelines were adopted the ____ day of ______, 2011, in a duly authorized Congregational Council meeting of St. Philip Lutheran Church by a vote of: Unanimous
Attested for Record: St. Philip Lutheran Church, ELCA
By: ____________________________
President, Congregational Council
By:____________________________
Secretary, Congregational Council
By:____________________________
Pastor