A congregant of many years has passed away and left your synagogue $100,000. What will you do with the money?
Whatever the amount is of such kindness, how the money can be spent doesn’t change. If the congregant has specified in his/her will that an endowment fund be created and the available interest be used for youth programming or adult education, you have your marching orders. A copy of the page of the will regarding the bequest will be your guide.
If such a gift is undesignated, and the synagogue has no by-law or resolution regarding the treatment of such a gift, according to Generally Accepted Accounting Principles – GAAP – that govern not-for-profit organizations, the contribution in its entirety can go in the synagogue’s general fund.
What if this congregant left the synagogue $5,000 and wanted the gift to be an endowment for a scholar in residence program. The will specifies that interest only can be used for the program each year. Using the $250 of interest that might be generated from this fund when such a program costs $2000 might not be the best thing to do.
Consider establishing gift acceptance policies for your synagogue. You can have a policy for a minimum amount to establish a synagogue endowment fund. At the same time, a policy as to what to do when the scenario described above happens will be in place and everyone will know what to do and what to say to the congregant’s family and representatives.
Check out the gift acceptance policies of Congregation Beth Am in Los Altos Hills, CA.
Of course in the eyes of the IRS, synagogues and churches are treated differently than 501(c) 3 not-for-profit organizations. But in terms of stuff like contributions, accounting regulations, and conflict of interest rules governing board members and staff, following the spirit of such accounting principles is really a good idea.
Following the spirit of regulations should also govern investment policies for the synagogue’s endowment fund. UPMIFA – The Uniform Prudent Management of Institutional Funds Act – has been established by almost every state in the U.S. Synagogue board members have a fiduciary responsibility to follow the spirit of UPMIFA concerning its endowment fund.
The key word here is prudent. You have to keep in mind that you are investing the community’s money, not your own. Investments that involve a great deal of risk, like hedge funds or real estate, would probably not adhere to the prudent standard. Unless the investment was a small part of a mix of different investments including cash, long term bonds and equities.
At the same time, having the entire synagogue endowment invested in Bank CDs and money markets isn’t prudent either.
Here is a great explanation of UPMIFA and how it affects not for profit organizations and their investment practices. There are many resources on the web explaining UPMIFA. I just picked one that is straightforward and without a lot of legal and accounting jargon.
I hope this information is helpful to you. I don’t consider myself an expert about accounting and investment matters. I know how to ask the right questions of people who have this expertise. You should of course consult with your own accountant and financial advisors.