Discretionary Funds: Redux

In the story below, the names have been changed. Maybe you have heard a similar story before?

Rob Cohen, the synagogue treasurer was reviewing the monthly financial reports a couple of days before this month’s executive committee meeting. He noticed that the Rabbi’s Discretionary Fund had accumulated $50,000. Yes, he has reviewed this fund – among all of the synagogue’s funds – each month in preparing for the same meeting. For some reason, the number $50,000 was the cause of special focus.

Rabbi Ben Wolf has been with the synagogue for many years. He recently announced he would be retiring at the end of June 2017. He is 64 years old, and while some think it is a comforting thought for Rabbi Wolf to continue with the congregation for many years to come, the synagogue’s leadership – and Rabbi Wolf –realize that he will not be the synagogue’s rabbi forever.

Over time, the synagogue board created guidelines for the use and management of the Rabbi’s Discretionary Fund. It is a fund of the congregation that the rabbi has the sole control over. The purpose of the fund, as outlined in the guidelines approved by the board is is to “help congregants and others in the community in need, and to support other charitable organizations as well as the synagogue”. Every year, a local CPA who is not a congregant audits the fund. His selection is endorsed by both the board and the rabbi. The board is aware of the general purposes as to how the funds are expended, but is never aware of the names of any individual recipients.

Rob is aware that the annual expenditures from the Rabbi’s Discretionary Fund have never exceeded $25,000. Rob was really thinking about what will happen to this fund when Rabbi Wolf retires? Can the remaining funds be transferred to the general fund of the synagogue? Do they need to be spent down before a new rabbi begins? Can Rabbi Wolf take the money remaining as a part of his retirement package? Can they simply be transferred to the Discretionary Fund that will be created for the new rabbi?

Remember, the rabbi’s – and cantor’s – Discretionary Fund belongs to the congregation. Read my blog on this topic from September 2012. It is a fund of the congregation for which synagogue board members have fiduciary responsibility. Clergy can’t just take the funds that remain on their last day of employment. People who made contributions to the Discretionary Fund did so with a specific purpose in mind. And they received a charitable tax deduction. Just taking the money upon retirement or leaving employment of the synagogue would also mean that it is taxable income. And that would mean the issuance of a 1099 by the congregation and that such income be reflected as such on one’s tax return.

On such matters, it is always good to consult with an attorney or CPA.

If the retiring rabbi remains affiliated with the congregation through emeriti status, use of the discretionary fund for the same purposes as before could continue.

If at the end of the day monies remain in the discretionary fund when a clergy members leaves the employment of the synagogue, it also does make sense that such a corpus be used to start the discretionary fund of the new clergy member.

 

 

 

 

 

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