Discretionary Funds

Maybe it is something in the water, or because it is Spring.

I have been asked a few questions recently about the Rabbi’s Discretionary Fund. One synagogue leader inquired about auditing his synagogue’s discretionary fund. Their rabbi had been at the synagogue for many years and the fund has not gone through an audit.

Another question came from a rabbi who asked me about what happens to the discretionary fund upon retirement.

Synagogue leaders must remember that the Rabbi’s Discretionary Fund – and a similar fund for a Cantor – is a fund that belongs to the synagogue. So ultimately, the synagogue board is a “fiduciary” for this fund, like all of the various funds of the synagogue.

What is a fiduciary anyway? The definition from “Investopedia” states that a fiduciary

“might be responsible for general well-being, but often it involves finances – managing the assets of another person, or of a group of people, for example. Money managers, bankers, accountants, executors, board members, and corporate officers can all be considered fiduciaries.”

Synagogue board members are the “fiduciaries” for the community’s money. And when you think about it, this is truly an awesome as well as a sacred task.

So what about auditing the fund? While it is really a good practice for a synagogue to undergo a comprehensive financial audit annually, I know that this can get kind of pricey. The Rabbi’s discretionary fund should be audited separately and shouldn’t be that expensive.

My blog from September 2012 on this topic holds true today:

“The best thing for both the clergy and the synagogue board is for the discretionary fund to be audited on an annual basis. A report can be made to the board as to how the funds were distributed noting amounts by category (people in need, $5,000; community organizations, $1000). Confidentiality regarding recipients is certainly important.”

The audit protects both the rabbi and the board and demonstrates that synagogue leaders are true fiduciaries of the community’s funds.

It is also essential to have guidelines for the use of the discretionary fund that are agreed to by the rabbi and board and memorialized through a board resolution. This will of great help to the person conducting the audit of the discretionary fund. Check out the proposed guidelines from the Central Conference of American Rabbis.

And it is always good practice for a synagogue to consult with a CPA or Tax Attorney when creating such guidelines.

So what happens to the fund when the rabbi retires or leaves the synagogue for another job? The practice in many synagogues is to spend down the fund – all for purposes described in the guidelines- before the date of retirement or last day of employment. When the new rabbi begins, a new discretionary fund will be established by a board resolution in the name of the new rabbi, and a new bank account established.

 

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4 comments on “Discretionary Funds
  1. Brian Rissinger, Executive Director Keneseth Israel, Elkins Park, PA says:

    an increasing number of synagogues are tightening financial controls by eliminating separate checking accounts controlled by the rabbi, auxiliaries, youth group, etc. We process philanthropic (discretionary) fund contributions and disbursements in the same manner we process other funds. We prefer the name rabbi’s philanthropic fund because it emphasizes the purpose of the fund.

    • admin says:

      Brian,

      Thank you so much for sharing this information. It is right on point to a question I recently received from a synagogue leader. Many thanks again for taking the time to read my blog and to share your comment.

      Best,

      David

  2. The best practice from a fiduciary point of view, especially in light of that fact that the ultimate responsibility of the correct use of the funds is by the Board of the Temple, not the Clergy, is to ignore the recommendations of the CCAR and have constant monitoring of all expenses from their funds. The Board should have several members of the Board that are available to do this in case there is a confidentiality issue with one of the expenses. An audit by a CPA or an attorney is a good step, but the Board is delegating their fiduciary duty which they should not be doing.

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