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It is in the community’s interest to meet with trustees of congregational and burial society cemeteries to provide advice on long term financial and management planning, before the eleventh hour of the cemetery’s life cycle while there is still time for them to make mid-course adjustments. This is so because sectarian cemeteries are often not regulated by the government and may therefore be unaware of how to handle an endowment fund. This is especially important for stand-alone cemeteries that are not part of a larger cemetery organization, since they must provide for both routine maintenance and capital repairs in perpetuity.
A key way to bolster such a cemetery to keep it from future abandonment is to place this question in front of its trustees: “Are you on track to meet your endowment goal?” Then, we can roll up our sleeves and work together to devise a plan that assures a preserved, rather than an abandoned future. The attached document addresses the question of how much should be in a cemetery’s investment account by the time all other sources of revenue have ended. I invite your comments.Mike Wasserman
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In addressing the question of how much should be in a cemetery’s investment account by the time all other sources of revenue have ended, the initial set of values were a worst-case scenario of: 3% annual inflation of routine expenses, 3% payout rate from the endowment, and 4.5% net investment return of the endowment fund. An additional amount equal to 10% of each year’s routine expenses should be set aside for capital improvements and repairs. These values projected a need to accumulate 80 times the routine annual expenses by the time the only revenue will be from the fund.
I reran the model using the following more optimistic values: 2% annual inflation of routine expenses, 4% payout rate from the endowment, and 5.0% net investment return of the endowment fund. An additional amount equal to 10% of each year’s routine expenses should be set aside for capital improvements and repairs. Using these values suggests a need to accumulate 60 times the routine annual expenses to ensure the investment balance does not get exhausted.
I welcome feedback so we can continue to refine our estimates and guide trustees to plan for responsible, sustainable investment accounts.
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