Hot Topics: Discretionary Fund Guidelines

Theses guidelines were written by the Rabbinical Assembly and are printed here with the permission of the Rabbinical Assembly.

We should recognize that every congregation, not only Jewish congregations but Protestant congregations as well, establish what we commonly refer to as a "rabbi's discretionary fund". It is a very usual, if not universal practice, for clergy to administer such funds.

In order for there to be clarity about the fund and its use, as well as to protect the synagogue and the rabbi (i.e., the money in the fund should not be perceived as income to the rabbi and fund contributors should be able to receive a tax deduction for charitable contributions), there are three steps that should be taken and in place:

  1. The Board of the congregation, through a Board Resolution, should establish and define the parameters of the discretionary fund as it should do with all synagogue funds. The discretionary fund's purpose and use should be clear. For example, the Board Resolution could say it is "establishing a Rabbi's Discretionary Fund, the monies in the fund to be used solely at the discretion of the rabbi for charitable purposes consistent with the synagogue's exempt purposes, to assist individual, educational and communal needs that may be necessary to be met in a confidential manner or whose needs would bring a benefit unable to be met through other means, or whose purpose would bring benefit to the congregation." Some such broad definition would enable the discretionary fund to be used for help to the needy or a soup kitchen in the name of the synagogue, or a scholarship fund, or to help with day school tuition, etc.
  2. Our attorneys are of the opinion that the rabbi's contract ought contain a clause indicating that it is the intent of the congregation to maintain a Rabbi's Discretionary Fund as part of the charitable funds of the synagogue over which the rabbi will have control and that this fund will be used for charitable purposes as indicated by the Board of Directors.
  3. The rabbi ought be comfortable that non-congregant auditors, when auditing the synagogue accounts, also audit the rabbi's discretionary fund. (Really, what ought happen is one person who is trustworthy should be able to say that he or she examined the discretionary fund and it appears that all matters are in good order.)

The reasons for the above are (a) to protect the synagogue that is really permitting someone to receive a charitable deduction for a contribution to the discretionary fund, and (b) to protect the rabbi, because otherwise the discretionary fund monies might be construed as income for which the rabbi must pay income tax.

The rabbi can contribute to the discretionary fund and receive a charitable deduction like everyone else, but the rabbi cannot have money passed into the fund and use the fund for personal needs. So, the discretionary fund cannot be used by the rabbi to take a vacation, but it can be used by the rabbi to attend an educational conference that would benefit the synagogue or to purchase a computer for the religious school, or to contribute to a communal fund. The idea is for broad charitable use of the funds. When a rabbi leaves a congregation the discretionary fund remains because it is a synagogue fund and is utilized by the next rabbi.

At times there is a misconception that rabbis have large amounts of money in discretionary funds and that they use these funds for all kinds of personal items. Our experience is that this is absolutely not the case. As a matter of policy, if The Rabbinical Assembly learns of a congregation or a rabbi using the discretionary fund as a means to provide funds for the rabbi, or for any other use than charitable purposes we would seek to have such practice stopped. Discretionary funds are operated as charitable funds by the rabbi, not as collection banks for personal use or for synagogue general use, and rabbis are very sensitive to the need to maintain integrity when using these funds.

We believe the rather straightforward steps outlined above will be helpful to rabbis and congregations alike.

- Rabbi Paul Drazen, January 2011

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