Endowment Fund

• Endowment fund created in 1997

• Policy summary in 2016

• Whole document as PDF file

• All sections individually

• Side-by-side comparison of existing vs. proposed (PDF)

The biggest proposed change is to expand how the Endowment can be used:

• Allow some of the income (that is, interest + dividends + realized capital gains) to be used in the annual operating budget

• The principal (that is, the sum of all donations to the fund) may never be withdrawn unless the Congregation approves on every occasion. 

• The proposed maximum annual withdrawal is 4% of the total value of the fund (that is, principal + income), which seems to be a typical fraction. 

This change is the main reason that the Board recommends changing the Endowment policy. 

• Side-by-side comparison of existing policy vs. proposed policy (PDF)

Cedar Lane Unitarian Universalist Congregation

The amount of the Endowment Fund appropriation is to be determined as follows:

a. The fixed annual rate of allowable appropriation will be 5 percent of a 13-quarter rolling average of asset values as of the close of the calendar year (December 31).

b. Determination of whether principal would be invaded by a 5 percent appropriation will be made on the basis of the valuation of the Fund at the close of its calendar year.

c. In the event the 5 percent appropriation would invade the principal of the Endowment Fund, the Board shall appropriate a lesser percentage that does not invade the principal.

River Road Unitarian Universalist Congregation

...the Board is authorized to annually assess for expenditure a portion of the Endowment Fund’s income. The amount of income assessed for expenditure within one year shall be within the Board’s discretion, but ordinarily shall not exceed 7% of the average of the quarter-ending values of the Endowment Fund for the preceding twelve quarters.

All Souls Church Unitarian

All Souls benefactors have bequeathed ten separate Endowed funds each with its own set of operating procedures. All funds do annual distributions of earnings above, the amount of which is decided by the Board of Trustees with assistance from the investment committee. Much of these funds are used to supplement the All Souls operating budget. In general, all (100%) of accumulated income are available for distribution and can be released in any given year.

Mount Vernon Unitarian Congregation

The MVUC Bylaws allow the use of Endowment funds up to 4% of the total value of the Fund as of December 31 of the previous calendar year. Exceptions to this require a two-thirds vote cast at a congregational meeting.

Unitarian Universalist Congregation of Fairfax

Shortly after commencement of the fiscal year on July 1, the Board shall determine and withdraw income from the Endowment Fund for deposit directly into the UUCF Endowment Income Reserve (EIR). Income withdrawn shall be between 4% and 6% of the Average Market Value (AMV) of the Endowment Fund, as recommended by the Finance Manager and determined by the Board.

All Souls Unitarian Universalist Church of Kansas City, Missouri

The Endowment Committee shall distribute to the Board annually on July 1 or later as determined by the Board a sum equal to four percent (4%) of the average market value of the Discretionary Fund (principal and accumulated earnings) and Legacy Fund (accumulated earnings only) in the preceding 13 quarters ending the previous December 31 for use in the All-Souls Operating Budget (“Annual Distribution”).

Tennessee Valley Unitarian Universalist Church

1. By a vote of at least four (4) of its seven (7) members, may recommend to the Board a distribution of no more than four percent (4%) of the fair market value of a Sub-Fund.

2. By a vote of at least five (5) of its seven (7) members, may recommend to the Board a distribution of more than four percent (4%) up to and including seven percent (7%) of the fair market value of a Sub-Fund.

3. By a vote of at least six (6) of its seven (7) members, may recommend to the Board a distribution greater than seven percent (7%) of the fair market value of a Sub-Fund.

Holston Valley Unitarian Universalist Church

Endowment fund enhances the long-term financial health of the church. The endowment fund provides an annual payment to the church of 4% of the fund’s holdings as averaged over the prior three years. This ensures the fund continues to grow, as does its benefit to the church.

UUA Link: Sample Endowment Investment and Distribution Policy

Excerpted from Beyond Fundraising: A Complete Guide to Congregational Stewardship, by Wayne B. Clark

In order to protect and preserve the corpus [principal] of the endowment over the long term, the Committee shall distribute no more than 4 percent per year of the total market value of the assets, as determined by the average total market value on the last business day of each of the four immediately preceding calendar quarters. If less than 4 percent is distributed in one year, the Committee may distribute more than 4 percent in a subsequent year, as long as the distributions do not exceed 4 percent on a cumulative basis.

A large university (Harvard University)

Generally, the annual endowment payout rate is 5.0 to 5.5% of market value, though the actual payout rate can vary each year based on endowment returns. For example, following extraordinary endowment returns in FY21 of 33.6% that served to boost the endowment’s market value, the payout rate (i.e., the annual distribution as a percent of market value) fell, despite the fact that the annual distribution increased. Each year the Harvard Corporation approves the final distribution amount. 

A smaller university (Prairie Valley A&M University)

Each year, a portion of the value of the fund is distributed to support the fund’s purpose in accordance with our donors’ wishes—without withdrawing from the principal. To meet the investment needs of current income and long-term growth, our spending rule calls for a payout of 5 percent of the endowed fund’s market value based on a five-year average. In this way, an endowment fund can grow and provide support for its designated purpose in perpetuity. 

The UUCR Endowment is not a charitable foundation.  But the "5% rule" and its history are an informative comparison.  Charitable foundations are required by the IRS to spend at least 5% of their assets every year (hoarding money is not a charitable activity).  This percentage was selected to be meaningfully large but still allow the foundation's assets to grow.  Read more...

• Kent Hancock

• Bruce Baskett

• John Miles

• with contributions from Ken Ambrose and others