Understanding Endowment Funds in Church Management
Exploring the concept of endowment funds in the context of Chippawa Presbyterian Church, covering topics such as the fund's definition, challenges, potential benefits, policies, investment considerations, spending formula, and designated allocations for various purposes within the church.
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Chippawa Presbyterian Church Chippawa Presbyterian Church Endowment Fund This Photo by Unknown Author is licensed under CC BY-NC This Photo by Unknown Author is licensed under CC BY-NC
Endowment Fund defined: defined: STOCKS DIVIDENDS MUTUAL FUNDS MONEY INVESTED INCOME INTEREST REALIZED CAPITAL GAINS CORP. BONDS GICS THE INITIAL MONEY STAYS INVESTED AND YOU SPEND THE INCOME SO THE FUND CONTINUES TO GENERATE INCOME.
Challenges with an Endowment Fund Unhindered use of money from the endowment can undermine generosity: current generation sees no reason to give more, and potential donors to the endowment lack confidence the fund will be managed into the future
Potential of an Potential of an Endowment Fund (your Budget s new best friend) Income from fund will continue into the future and can grow Added income can expand church s ministry Added income can support an new initiative
Endowment Fund Policy Policy Parameters and limits for annual spending. Reflects the values of the congregation. Ensures oversight and safeguarding of underlying assets. Identifies committee members and mechanisms for communication with the congregation.
Investment Considerations Long time horizon. Time to ride out financial market bumps. Prudent investment risks are okay. Need capital growth to outpace inflation. (100% GICs are high risk due to inflation) At Chippawa we have 70% equities and 30% fixed income
Spending PolicyFormula 4.75% of a 5 year rolling average of year end assets. A rate of 2% to 3% of assets is a standard spending rate. The formula eliminates conflicts over spending and preserves the underlying assets.
Endowment spending designated Board of Managers 37% RTF Grants 27% 9% Presbyterian Sharing 27% Other Mission/Ministry
Chippawas Experience Allows us to send half of our Presbyterian Sharing in the first quarter of the year Annual Spending has averaged $33,000 Since 2010, have used for paying principal on mortgage 10% to 12% of our total church spending
The Endowments Impact Impacton onMinistry Spent $1.13 million since 1989. More than current assets ($737k) and all contributions to the fund ($580k) We have given over half a million dollars to other Christian charities, including Presbyterian Sharing. Generosity of our members continues to grow. Money from the Endowment helps, but does not replace, donations. The policy means annual meetings are NO DRAMA
Fund Year-End Values Since Inception Chippawa Presbyterian Endowment Fund 1,000,000 900,000 800,000 700,000 600,000 500,000 400,000 300,000 200,000 100,000 0 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Annual Rate of Return Chippawa Presbyterian Endowment Fund 25.0% 20.0% 19.1% 18.4% 16.1% 15.0% 14.9% 13.0% 11.5% 10.6% 10.4% 10.1% 10.0% 8.3% 7.9% 7.0% 6.3% 6.1% 5.0% 3.6% 3.0% 0.0% 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 -2.5% -4.5% -5.0% -6.4% -10.0% -13.8% -15.0% -20.0%
Care and Keeping of Care and Keeping of Endowment Fund Grow the fund by adding new capital and/or reducing spending Pay attention to management fees: after fee returns are the only ones that matter Consistently spending beyond the rate of return will erode the fund, so pay attention to your returns
Recap:C Control ontrol Endowment spending. To protect the fund so it can continue to produce income for the future. To ensure that your congregation continues to grow in generosity. To honour/respect the gifts of the donors to the Endowment Fund.
