By Shauw Chin Capps
CBF Foundation President

Endowments ─ Blessing or Curse? The answer is it depends. I have heard a spectrum of answers from pastors and ministers on this topic. I have heard horror stories and hopeful stories. In both cases, there are common themes for when endowments are blessings and when they are curses. Before a church decides to start an endowment fund, there are important things to consider.

An endowment provides additional support for church ministry beyond what is possible in your annual operating budget. An endowment should expand the mission and witness of your congregation and can even provide stimulus for engagement, imagination and revitalization. It reassures donors that there is a well-managed fund for their legacy gifts.

An endowment is NOT a piggy bank or rainy-day fund because it is for the long term. Your reserve fund is the source to cover unexpected operating shortfalls. It is also worth noting that endowments are not just for wealthy or well-resourced churches because committed donors can create an endowment with a small amount and then nurture, invest and grow it over time.

The source of when an endowment can become a curse for churches can usually be traced to the lack of a robust endowment policy. Indicators of when an endowment has become a curse:

• When decisions have to be made over and over again about whether to spend the gift or use the income from it, or to determine which ministry gets a bigger slice
• When the endowment is too narrowly defined in purpose, limiting resources exclusively for current needs and expenses, or on other hand, devoting resources solely for special ministries. An endowment short on vision will not grow and may deprive the church of exploring new opportunities in ministry
• When the church consistently uses the fund to offset operating budget shortfalls (This might be a needed decision for a short period of time but should not become the ongoing practice of the church in most instances.)
• When the endowment is not properly managed either because of lack of experience or internal conflict
• When it allows selected leaders to feel more powerful because they control the endowment

A church’s endowment/permanent fund policy should include the following key elements that can pave the way for an endowment to become a blessing:

• A clearly stated vision and purpose
• The types of gifts the church will receive that can be added to the endowment fund to include distinguishing between restricted vs unrestricted gifts
• A clear understanding of the endowment committee and committee structure that will provide the governance for managing endowment funds including the responsibilities of the committee
• A clearly defined spending policy for the endowment fund. For example, this is where you can designate percentages of how the income should be spent and put a limitation for the percentage that can go towards the operational budget.
• Define the terms for amending procedures in the policy
• Define terms of termination to ensure that the endowment fund does not outlive the church

Every church should have a plan and a strategy for gifts and/or income generated through the church. Creating an endowment necessitates careful thought, planning and responsibility, but creating an endowment is a gift not only to your present church community but it is also a gift to your church’s community in the future.

CBF Foundation is here to support your congregation leaders to start the discussion about endowment funds. By working together with your congregation, we can help you explore issues and opportunities created by endowment funds. We can also provide assistance and consultation to help draft an endowment fund policy that will meet your congregation’s current and future needs.