from the Carolina office of
Jerry W. Henry | Managing Partner for Faith-Based & Human Services
 

To Endow or Not to Endow: That is the Question 

After 27 years as a fundraising consultant, I sometimes look back at the ebbs and flows of church campaign priorities I’ve experienced. 

For years, almost every church that approached our firm was seeking to launch a campaign to address deferred maintenance issues. We’ve focused on ministries to people and haven’t cared for our physical plant as we should have, church leaders would say.

Then, it seemed there came a wave of church campaigns seeking to blend a campaign for a “bricks and mortar” project while also folding in an endowment fund designated to support the ongoing care and repair of that specific facility in the future. The leaders would say, We’re going to repoint the stones for our aging building as well as repair the stained-glass windows that are leaking, and we want to build an endowed fund to make sure we care for them well into the future and don’t have to do this again!

There were others who said, We want to establish an endowed fund for our outreach ministries. Or they would say, We’d like to have a campaign for installing new carpet in our worship space, and  10% of every gift for the carpet will go to fund our outreach program.Recently, I’ve been approached by churches of various denominations and varying membership sizes who have said to me: We’ve been looking at our ‘peer congregations,’ and we need to increase our endowments to match their level of endowment.

Hmmmm. Is that last statement compelling and urgent? I don’t think so. Were there specific challenges in raising endowment in the earlier examples I shared? In many cases, yes.

So, what about church endowments? What is the appropriate level? It’s complicated.

My response is what is known as the consultant’s typical answer: It depends!

Of course, there are books written on the church endowment topic (or maybe I should write a definitive one!), and there are as many opinions about church endowments as there are churches! Some consultants recommend a specific ratio as an appropriate level, such as “twice a congregation’s annual budget while relying on a 5% annual draw from the endowment.” 

Let me state what for me is the obvious:
For a church, annual giving from the congregation should always be the primary source of funding. Revenues from an endowment — IF a church even has one — should be a supplement for special projects or should serve to support long-term financial stability. However, determining what that appropriate amount is for your congregation requires a significant amount of study and a deep understanding of what motivates your members to give.

A 2019 study by the Lake Institute on Faith and Giving found that, among churches with endowments, revenue from these funds accounted for 4% of their annual income on average. It suggests a strong dependence on active, yearly donations rather than investment income for daily operations. [NOTE: Much has changed since this 2019 study, and a new research project is underway! Stay tuned.]

There are some other benchmark studies that suggest annual revenues from an endowment should fund no more than 10–20% of a church’s operating budget. The rationale is that any higher percentage “could” discourage congregational giving.

Philanthropic giving in our congregations is a spiritual practice central to the life of a church — in every denomination and in every faith. The finances of a congregation — and especially endowments — are first about our faithfulness to the theology in which we believe.

That’s why, in these challenging times for many of our congregations [see the latest Giving USA 2025 report on giving to religion], we should focus not just on survival, but on our faith.