Financial Policies for Local Churches

Financial Policies for Local Churches

Following is a sample of a Finance and Investment Policy of the kind that a Local Church might adopt. The reason a local church might adopt such a policy is that it can provide several ingredients necessary to a successful endowment fund operation. Indeed, this type of policy is essential to all the financial arenas of the local church This is an in-process document which is being made available to local churches on a trial basis in order to assist such churches in dealing with their financial and investment objectives in a way that is more clear and more able to be handed down from generation to generation of church leadership. This document does not offer legal or investment advice. All the notes contained herein are the result of working with local churches in the Detroit Annual Conference to solve various sets of financial problems that arise. Local church leaders are advised to contact their own legal and financial advisors before finalizing their financial and investment policy. FINANCIAL POLICY for First United Methodist Church Types of Gifts and Their Disposition Pledges Money from pledges made to the church will be used for the church’s operating expenses, capital improvements or general budget needs in accordance with the Finance Committee’s current year planned expenses, as advertised to the congregation at the time of the annual fund drive. Investment Category Very Short Term Investment Objective No risk; spend immediately Investment Example Checking Acct. Undesignated cash from living individuals Undesignated cash donated by living individuals will be used for the church’s operating expenses, or capital improvements, or for whatever uses the Finance Committee with the Board of Trustees recommends, with approval being given by the Administrative Council. Investment Category Very Short Term Investment Objective No risk; spend immediately Investment Example Checking Acct. Designated Cash from living individuals Cash given by living individuals which is designated by the donor for a particular kind of expense, including immediate capital repairs, will be received for its intended use by the Finance Committee with the oversight of the Board of Trustees. If a gift is proposed, or given, for a purpose not helpful to the church or for which the church would have a difficult time fulfilling the wishes of the donor, the gift will be returned. Investment Category Very Short to Short Term Investment Objective No risk to Minimum risk; May hold less than 1 year Investment Example Checking or Money Market Fund Designated Cash from living individuals for Capital Projects Cash given by living individuals which is designated by the donor as a pledge for a capital fund drive, a building project or similar project for which pledges are being taken in advance of contracts being let for the execution of the project. Such projects might include, but are not limited to, additions to the church building, erection or remodeling of a parsonage, installation of new heating or air conditioning equipment, re-roofing, etc. Investment Category Short to Intermiediate Term Investment Objective Minimum to mid-level risk; spend immediately Investment Example Short term Bond fund; Money Mkt Fund Memorial Gifts -- Short Term Gifts given in memory of someone who has just passed away will be collected together in a "Living Memorials Fund" and used for purposes within the church as the Finance Committee, with the oversight of the Board of Trustees, and the approval of the Administrative Council shall see fit. A suitable recognition device will be maintained for the purposes of recognizing the donors and memorializing their friends, colleagues or loved ones in whose memory the funds have been given. Investment Category Very Short to Short Term Investment Objective No risk; spend immediately Investment Example Checking Acct. or Money Mkt Fund 2 mos. to 1 yr. Memorial Gifts -- Long Term Gifts given in memory of someone who has passed away some time ago, which is not otherwise designated, will be placed in the church’s general endowment fund so that the donor’s gift will live on without being used up. A suitable tribute will be devised to celebrate the gift and the one being memorialized. Investment Category Long Term Investment Objective Mid- to Hi-level risk; Desire max yield (= S&P 500 index) Investment Example Balanced, or Growth & Income Fund Gifts of Cash from Wills, Trusts and Estates Gifts that come to the church from the probate process or from trust distributions, or in other ways from wills, trusts and estates, that are not designated by the donor for some specific use, will be placed in the church’s general endowment fund. It is also possible that a donor might give a more general type of designation, such as "for use in mission programs" or "for use in the church’s educational programs." These general types of designations can be handled by the church’s Endowment Committee, and simply segregated into separate funds to benefit such general program areas within the church. It is acknowledged that such funds do indeed benefit the church’s needs and leave the specific use to the discretion of the church’s leaders. Investment Category Long Term Investment Objective Mid- to Hi-level risk; Desire max. yield (= S&P 500 index) Investment Example Balanced, or Growth & Income Fund Gifts that come to the church from wills, trusts and estates, that are designated by the donor, will first pass to the Trustees, who will decide whether the gift’s designation is appropriate for the church and can be reasonably carried out by the church. If the trustees so decide, they will then either give the money to the Endowment Committee to be invested with the church’s general endowment funds, and to be administered as the donor has designated, or will give the money to the Finance Committee to be used up (spent) as the donor has designated. Investment Category Intermediate to Long Term Investment Objective Mid- to Hi-level risk; Desire max. yield (= S&P 500 index) Investment Example Balanced, or Growth & Income Fund Dealing With Various Financial Needs of the Church From time to time it is inevitable that special financial needs will arise within the life of the congregation. Urgent capital repairs, new program expansions, certain types of capital additions or expansions. In these instances, the Finance Committee will enlist the aid of the church Board of Trustees, the Stewardship Committee and the Administrative Council in raising these funds through special fund raising efforts and appeals to the congregation. It is also acknowledged, consistent with the church’s Endowment Fund Resolution, that such projects may also be ones that are appropriately funded, wholly or in part, or with matching funds, from the church’s general endowment fund. The Endowment Committee would first make such a recommendation, which would be approved by the church’s Board of Trustees, and then ratified by the Administrative Council. The decision would subsequently be reported to the Charge/Church Conference. Stewardship and the Faith Journey There are certain financial situations that arise which cannot be dealt with easily or by policy alone. They are manifestations of certain spiritual conditions. One of these has to do with an expressed desire on the part of certain individuals in the life of the church to resist talk of money and finances. All that we have, as individuals, comes from God and is to be used for God’s purposes. So such individuals should be counseled by the pastoral staff and the appropriate lay leaders of the church with regard to their understanding of money and possessions. Another one of these has to do with a reluctance by church leaders, from time to time, to take on the task of raising extra-budgetary funds with certain financial crises or unusual circumstances occur. It is important to remember that the spirit will make available, by moving congregation members to give, monies that are needed on difficult or severe circumstances. We need to pray earnestly, preach effectively and ask the church’s members firmly and forthrightly. The funds will come as the spirit prompts. But we also need to employ sound fund-raising strategies and concepts in pursuit of making opportunities available for congregation members to express their generosity and support. One implication here needs to be spelled out: namely, that when a fund raising project is undertaken, there must be a clearly delineated "case for support" written out and refined and perfected, that clearly and unmistakably links the accomplishment of the church’s mission to the project for which funds are sought.

EXPLORING INVESTMENTS

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about Fund Raising from the Greater Detroit Chapter of the National Society of Fund Raising Executives (NSFRE), or the National Office of the NSFRE. Both sites offer a wide variety of training events, techniques, tools and services to help you learn more about fund raising for your local church.

Catalog Of Topics

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UM Foundation Report on Fund Performance		UM Foundation Investment Policy
How to Set Up an Endowment Fund		How to Market an Endowment Fund
Endowment Primer: The Basics and Background		Gifts People Can Give to Your Endowment Fund
Workshops Available to Your Church		Sample Endowment Resolution
Stewardship Strategies & Issues for Local Churches		Stewardship & the Individual Spiritual Journey
Frequently Asked Questions		Keeping Fund Raising "Spiritual"
Financial Policy for a Local Church		Fund Raising Strategies for Local Churches
What is The "Case for Support?"		Games Church People Play
Prospect Capability Matrix: Who can Give How Much?		A Capital Campaign Gift Pyramid: Where Will the $$ Come From?