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Endowed Money and the Church

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by Greg Gibbs

Does your church have an endowment or a foundation? Is this a positive or a negative aspect of your church’s health, stability and its future ministry prospects? Is this off your radar completely because you see it as something “only wealthy churches do”?

The answers to these questions depends on, of course, whom you ask.

  • For the fiscally conservative person or group that wants to cover future contingencies, it is a big positive.
  • For churches that have dreams for ministry impact that are way beyond the scope of the yearly budget of the church, this can be a fund with incredible usefulness.
  • For families that sometimes need a place for very large gifts from the sale of a business or inheritance and would prefer to give it to the work of the church in some way (but not the operating budget).

Funds like these can be repositories for millions of dollars of money earmarked for Kingdom building!

But there is another side that’s a little less fun to talk about. Some endowed churches will unintentionally neutralize the giving and engagement of the congregation because the endowment acts as a smothering safety net. Why would anyone give to special projects, debt reduction, staff expansion, local or global mission, capital improvements or really anything when there is a general sense that “the endowment can cover that if I don’t”? In this case, money does grow on trees and people miss out on the faith-growing and unifying experience of a congregation making sacrifices to see something amazing happen. The endowment stole that opportunity from them.

Over time, I have noted a kind of love-hate relationship between church leadership and endowments. We have all heard of the senior pastor that needs funds for a critical project to invest in a youth center but can’t touch even one dollar of the millions tied up in the endowment. The opportunity cost is painful as the window closes on a ministry that could use financial backing, but endowed funds sit idle - bound by donor intent and board approval.

With the largest transfer of wealth happening now and for the next few decades, the idea is experiencing a bit of a comeback and church leaders are talking. Some talk about it as the way to sustain the church into the future as younger generations are giving less and less to the church.

It is widely known or suspected that in many churches, small and large, just a few families in the congregation could represent millions in wealth transfer. In very large churches, there could be a few hundred families that represent hundreds of millions of dollars that will change hands in the next 20 years. This requires some thought, discernment and wisdom. It is time to have another serious conversation. It has been calculated that:

  • 95% of those that have a gift plan do not have a charitable component
  • 70% of inheritance is gone after the first generation
  • 90% is gone after the second generation

For this cursory treatment of the topic, we will use the word endowment as any fund that is not immediately expendable. This implies that there is a bucket into which money comes and goes under certain guidelines, timelines, restrictions, and permissions and is not part of the operating (or general fund) of a church. There are other buckets that can be created including foundations, but to simplify a complex topic, let’s stick with endowments.

Many churches will create such a fund because sometimes donors have reasons to give without depositing into the operational “checkbook” of the church:

  • It is too big and will skew the general budget (e.g., a one-time $500k gift given to a church with an annual budget of $300k)
  • It is a lifetime or legacy gift, and the donor feels compelled to fund a specific passion or burden of theirs – poverty, missions, justice, orphan care, etc.

When Endowments Work Well

Endowments work well when they are clearly defined – both the reasons why a family or individual may want to consider making a gift and the parameters around which the money is spent. Because churches rarely have the governing structure to oversee endowed money, a board can be created to navigate the questions, decisions, approvals and release of the money. And if structured well, it will link with the values of the church, be managed by people from the church, and will have provisions so that it does not simply accrue interest, swell and remain idle.

Another way that the presence of such a fund could be helpful, is that for very wealthy households, it forces a conversation about generational wealth, how much may be harmful to leave to children and grandchildren, and what God may be intending by providing the family with such an opportunity for impact through their giving. It forces healthy spiritual conversations about God’s provision.

When Endowments Do Not Work Well

As mentioned before, there can be a neutralizing factor that causes people to rest on their laurels because they are aware that an endowment exists. They may not understand the limitations or restrictions on that money – they just know that the church has a lot of money in an account somewhere, so the urgency to “grow in the grace of giving” (1 Corinthians) may not be as high.

Another way in which an endowment may backfire is that a large sum of money is built up to support a church that probably should die or merge with another church, but because there is an endowment, it can remain on life-support forever. This is not a wise use of resources God has provided.

There is nothing morally or legally wrong with a church having an endowment. So, to evaluate, we must look at other questions:

  • Is it prudent?
  • Does it help forward the mission?
  • Is it a distraction?
  • Do we have qualified people to oversee it?
  • How long should money be in an account like this? In perpetuity?
  • What donor intent fits within our boundaries and what would not?

The Non-Profit Versus the Church

I will hear people say, “Well, the university I attended uses these to raise millions, so why shouldn’t the church?”

In my view, the reason other institutions use these giving vehicles (endowments, foundations, etc.) is because they do not have the same ultimate mission as the Church. Their mission is to further the institution and it should be – I am not being critical of this intent at all.

Because a university or art museum uses endowments very effectively to raise money and advance the cause does not translate directly to the Church. Again, it is not a bad thing, but the mission of the church is discipleship – it is what Jesus asked the church to do as its core competency. So, without life transformation happening in people (including those who give financially), we are potentially creating donors more than disciples. And we may be forwarding the institution and not forming the individual. If an endowment deflates the spiritual formation journey of the members of a congregation, we have lost our way.

My friend and donor development professional, Jeff Hewson, encourages churches away from one big endowment. For the sake of encouraging people’s spiritual growth, he challenges the church to ask the person, “What do you care about? What has God led you to give a large gift to that will grow the Kingdom?”

In this way, people are engaging their prayers and conversations as a family in a way that is more specific and meaningful.

Endowments are here to stay. And they can be harnessed for incredible God- honoring activities both inside and outside the Church. We can form great disciples who are also great donors as they are not mutually exclusive. Leaders need to understand the challenges and opportunities associated with launching an endowment fund and linking it to their church and then discern the best way forward.

For more information and to discuss creative funding and giving options through the lens of discipleship, contact greg@auxano.com, Senior Lead Navigator and Team Leader of Auxano Generosity.