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First Lutheran Church Endowment Fund

Endowment fund formally established on July 14, 2002
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On July 14, 2002, the Voters' Assembly established the First Lutheran Church Endowment Fund as drafted by the Interim Endowment Committee and recommended by the Church Council, with these two amendments:
  1. The Voters' Assembly (a) authorizes the Board of Christian Growth and Education to determine how this year's endowment distribution for Tuition Aid for Students at our School shall be used and (b) allocates this year's endowment distribution for Help for People in Need to the Elders' Fund (a fund, administered by the Board of Elders, to assist people in our church and our community who have unmet physical, emotional or spiritual need, such as food, temporary housing, or counseling).
  2. The Voters' Assembly reserves the right to make amendments to the by-laws of the First Lutheran Church Endowment Fund at its next regular meeting in October 2002, and only then, with a simple majority (as opposed to a two-third majority). [Note: There was some inconclusive discussion on which church body shall make the final decision on how endowment distributions will be used, in particular for restricted funds.]
The Voters' Assembly also authorized the Church Council to decide, on a case by case basis, how much of future estate planning gifts given to First Lutheran Church will be placed in the endowment fund.

Endowment fund overview
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In December 2001, our church received a significant donation from two of our church members who decided to share the fruits of their stake in a successful company. Our church is truly blessed and we are very joyful to have this wonderful opportunity to start an endowment fund, something we have long been looking forward to. In January 2002, the Church Council appointed an Interim Endowment Committee to work out a proposal for the establishment of an Endowment Fund, including a vision, investment policy, and by-laws governing the fund. The committee adapted and augmented sample endowment fund by-laws that the LCMS Foundation kindly provided to us. In July 2002, the Voters' Assembly approved the proposed establishment of the new endowment fund. Here are some endowment fund highlights:

  • The purpose of the endowment fund is to further the growth and mission of our church by providing long-term funding of important ministries. Every year, about 4.5% of the endowment fund will be spent on selected ministries. We expect that this percentage will preserve the principal of the endowment in inflation-adjusted dollars over time so that the Endowment Fund can continue to bear fruit for many many years to come.
  • The Endowment Fund shall have two types of funds: restricted and unrestricted. For the distribution from unrestricted funds, an Endowment Committee will make recommendations to the Voters' Assembly every year as to where it believes proceeds are most needed. See also the separate handout for categories of restricted funds that donors can choose to give to.
  • The new Endowment Committee shall have as its ex-officio members the pastor, president, treasurer and principal plus five elected members. Besides making proposals on which programs to support, the committee shall also promote and administer the fund.
  • Based on investment policies for endowments of other churches and universities, the committee drafted an investment policy to provide prudent stewardship over the funds of the endowment.
The proposal consists of (1) the main section of the Endowment Fund By-Laws, (2) an appendix with Endowment Fund Categories, (3) an appendix with the Endowment Distribution Policy, as well as (4) an Investment Policy as it pertains to the Endowment Fund.

Endowment Fund By-Laws (main section)
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Download First Lutheran Church Endowment Fund By-Laws (7 pages, without appendices) in pdf or postscript format.
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Appendix: Endowment Fund Categories
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Download Endowment Fund Categories (1 page) in pdf or postscript format.

Appendix: Endowment Distribution Policy
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The Endowment Distribution Policy determines how much of the endowment fund is distributed to designated endowment projects every year. This policy is part of the First Lutheran Church Endowment Fund By-Laws.
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Download full Endowment Distribution Policy (10 pages including appendices) in pdf or postscript format. Download endowment distribution program as listed in Appendix C of the policy.
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The endowment committee is aware that some donors might want to make contributions to be exhaustively spent in a period of several years, with a significantly higher rate of spending than the endowment fund. The endowment committee notes that those donations might either be held in a restricted fund within our general (non-endowment) funds or that we might start a new multi-year project fund for projects with such time frame.

Related document: Investment Policy
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The Investment Policy was written to be applicable to both the Endowment Fund as well the Church's general funds. It was approved by the Voters' Assembly on July 14, 2002 in so far as it applies to the endowment fund and by the Church Council on September 3, 2002 for the general funds (i.e. the non-endowment funds).
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Download full Investment Policy (2 pages) in pdf or postscript format.
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For the investment policy there are a number of choices to be made.
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Should there be separate investment policies, one for the endowment fund and one for the general funds, or should there be a single investment policy (as reflected in the current proposal)?
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Shall we try to beat the market? Shall we give wide latitude to our investment manager(s)? Shall we have a very sophisticated investment policy? (Current proposal answers all questions with `no'.)
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Disadvantages of a simple approach:

  • We won't beat the market.
  • Investment manager(s) might not feel very empowered, because execution of investment policy is almost mechanic.
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    Advantages of a simple approach:
  • We can expect average market return.
  • Less risk.
  • No blame game if investment strategies don't work out.
  • Less time consuming.
  • We don't need highly skilled investment manager(s).
  • We don't have to pay a highly skilled investment manager and can generally keep overhead expenses low.
  • Keeps policy relatively short and simple.
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    For the proposal of the Investment Policy we used Chris Graves' analysis of our general funds as well as two investment policies that Reese Anderson got from other churches (Southminster Presbyterian Church and First Presbyterian Church). Thanks to Chris and Reese for those very valuable contributions.