Within the documents of the Society of St. Vincent de Paul, there are found a number of instances where hoarding is prohibited. Please look at the Appendix to this document to see those specific references. Unfortunately, there is no specific place in the SVdP documents where the word hoarding is actually defined. There have been many times over the years that the National Office has been called to give a definition so our members can have a better understanding of the prohibition. The explanation was given a number of times in the Q&A section of the National Council’s Frederic’s e-Gazette. However, it has been deemed appropriate by the National Governance Committee to give a formal definition.
Webster’s New Collegiate Dictionary defines hoarding as “to collect and lay-up, amass and conceal.” The considerations related to hoarding within the Society of St. Vincent de Paul, however, are slightly different when looking at this from a Conference perspective and a Council perspective. We will treat each separately.
(For Frederic’s e-Gazette readers: Part One addressed Conference considerations. Part Two deals with Council considerations.)
TYPES OF FUNDING HELD BY COUNCILS
The first thing to keep in mind is that Councils do not do direct assistance. The primary purpose of the Council is to support the work of the Conferences. On the Council annual report, there is no designation for direct assistance. So, typically, the funds raised by the Council are for something other than direct assistance. The primary concern for hoarding is the decision to bank funds rather than give assistance to those in need.
Not all Councils have Special Works that provide direct assistance. Usually when they do, they have designated fundraising to support those Special Works. If a Council receives donations intended for direct assistance and they have no Special Works, then they should be distributing those funds in one fashion or another to the Conferences; if they do not, then that is hoarding.
The next consideration before answering the question “What is Hoarding?” is to understand the different types of funds that Councils may hold.
- General Donations: These funds are received from the Conferences, the public, other SVdP entities, general fundraising efforts of the Council, benefactors, general bequests, memorials, and organizations. There is no specific intent associated with these funds other than the assumption that the funds will be used for the purposes of the Society to support the work of the Conferences and better serve those in need. These funds are held in checking accounts, savings accounts, money market accounts, CDs, and other financial instruments that are essentially considered to be liquid (easily accessible). A few comments must be made related to the fundraising efforts by Councils. Special care must be given to the way fundraising appeals are made. Sometimes, a Council will create an appeal that looks to the donor as if the donation will be used for direct assistance to those in need when the actual intent of the Council was for the funds collected to be used for other purposes. If the implication from the appeal is different from the actual intent of the Council, then the appeal must be clarified. These funds can be susceptible to hoarding.
- Donor-designated Funds: These funds are received from a donor (individual or organization) that identifies a specific purpose for the use of those funds. For example, an individual gives a check to a Council and on the line preceded by the word “for” the donor has specified “utility payments.” Another example is a check from a donor that is accompanied by a note or letter that designates the donation for a particular purpose. If the Council accepts the check, it accepts the responsibility to track those funds and only use those funds for utility payments. The funds cannot be used for any other purpose. In this case, if the Council has a Special Work that provides utility payments for those in need, then the Council must use the funds in that Special Work. If it does not, the funds can also be distributed to the Conferences to help make utility payments. Another example would be a Council receiving a check from ABC Organization for $10,000 to be used for rental assistance. If the check is accepted, the Council must hold those funds in reserve and only use those funds for rental assistance. The Council would do so in a similar way to that described for utility payments. The Council can also distribute the funds to the Conferences and the Conferences have a legal obligation to ensure the funds are not used for any other purpose. These funds must be used for the purpose given. When not used for the purpose intended, these funds may also be considered as hoarding.
- Funds from Grants: These funds, for the most part, are similar to Donor-designated Funds. They are usually given for a specific purpose and that purpose must be honored. These funds must be used for the purpose given and are not susceptible to hoarding. However, sometimes, but rarely, grant funds are issued for general use by the Council. In this case the funds are treated the same as general donations. These funds must be used for the purpose given. When not used for the purpose intended, these funds may also be considered as hoarding.
- Capital Campaigns/Endowments/Disaster Relief: Capital campaigns are normally established to purchase land, buildings, special equipment, or fund special programs. Endowments may be established to provide special programs or services with ongoing income. Disaster relief funds are normally established to provide relief to people suffering from a recent disaster in the area. The key thing about these funds is that donors contribute to them for their specific purpose. These funds are collected for a specific purpose and can only be used for that purpose. These are treated the same as Donor-designated Funds. These funds must be used for the purpose given. When not used for the purpose intended, these funds may also be considered as hoarding.
- Interest Earned/Investment Income: If funds are placed in financial instruments that gain interest or in an investment account that generates income, there are two options available:
- If the donor requires it, the interest earned/investment income on his/her donation must be used for the purpose of the fund for which it was originally designated.
- Otherwise, if the allocation of interest creates an unnecessary burden there is no legal requirement for the interest earned/investment income to be restricted for any purpose and may be used as the Council determines. It may create an unnecessary burden to try to allocate the interest to specific funds.
All interest earned/investment income that is for general use is not susceptible to hoarding (see #1 – General Donations, under Council Considerations). All interest earned/investment income designated for direct assistance to those in need is susceptible to hoarding, if not used for the purpose intended.
- Council-designated Funds: There are times when the Council takes a certain amount out of the general fund and sets it aside for a particular purpose. Those funds will remain in the designated area until the Council decides to use them for another purpose. These Council-designated funds may be changed from one purpose to another as often as the Council decides. An example of this is a Council budget, where funds are designated to be spent for a fundraising dinner. The budget designations may be realigned at any time by the Council. These funds, having originated in the general fund, are not susceptible to hoarding.
- Council Reserve Accounts: Councils sometimes have fixed expenses. For these, the Manual’s recommendation is to maintain a balance for the future of up to six months of expenses. Councils, like Conferences should not seek financial security by building up excessive balances for future needs. There may be needs for capital campaigns, endowments, and disaster relief, but those are addressed in number 4 above. So, unless a Council has some fixed expenses, there is no need for a reserve account. Surplus funds should be shared generously with needy Conferences or Special Works of other Councils. The “balance for the future” and/or the reserve account may be susceptible to hoarding.
- Special Works Reserve Accounts: Stores and other Special Works that may be operated by a Council may legitimately have fixed expenses. The recommendation from the Manual is to maintain a balance for the future of up to six months of expenses. This balance for the future or reserve account should be maintained at such a reasonable and necessary level as the Council or the Board of Directors determines is needed to assure the financial stability of the Special Work. Surplus funds should be shared generously with more needy Conferences or Special Works of the Councils. There may be needs for capital campaigns and endowments but those are addressed in number 4 above. The “balance for the future” and/or the reserve account may be susceptible to hoarding.
So, it boils down to two types of funds that are held by the Council: those that are susceptible to hoarding and those that are not. Those funds that are designated for a particular purpose must be honored (by law) for that purpose. Our concern in this document is to define hoarding, so let us recap which funds are susceptible to hoarding:
- All funds designated for direct assistance to those in need (normally in Special Works);
- Grant funds designated for general use for direct assistance to those in need;
- Council Funds designated for direct assistance to those in need.
REFLECTIONS ON HOARDING RELATED TO COUNCILS
Regardless of the source of its income, a Council needs to start by asking if and why it is amassing funds. The following are guidelines and principals that should govern the use and accumulation of funds by Councils:
- If the Council operates a Special Work, then it should consider having a reserve to operate that Special Work based on the expenses normally incurred over a period of time designated by the Council Board.
- If the Council has employees or fixed expenses such as rent and utilities, then it should consider having a reserve to cover the expenses normally incurred over a period of time designated by the Council Board.
- The Council should, as part of its annual budgeting process, set aside funds to share with those Conferences that have inadequate funds to meet the needs which they face to help people in need.
Hoarding occurs when a Council decides to keep funds in its financial instrument instead of using the funds as they were originally defined or to advance the purposes of the Society.
The fact is that once the Council in its Special Works decides that the request for direct assistance is legitimate and it has the resources to fulfill the request, then deciding to keep the money in the bank is the wrong decision.
There are Councils that do not have Special Works who use their funds to support the Conferences: training materials, running Ozanam Orientations or other workshops, holding days of recollection for spiritual growth, sending members to regional and national meetings, etc. This spending fulfills the purpose of the Council and is not susceptible to hoarding unless the Council simply sits on the money.
It is wrong for a Council to decide to NOT use funds for the purpose for which they were donated. There are certain circumstances that may occur that would prevent a Council from using funds accumulated for a specific purpose. An example of this is the case of a Council collecting funds for a particular disaster in its area. If, after a period of time, funds are no longer needed to address the effects of the disaster, but the Council still has funds on hand, there are three ways to resolve the unused designated funds:
- The remaining funds may be returned to donors;
- The donors may be contacted to re-designate the use of those funds; or
- If it is not practical to contact donors, State laws vary and local legal counsel should be sought before taking action; but generally, UPMIFA (Uniform Prudent Management of Institutional Funds Act) requires the nonprofit to provide written notice to the Attorney General of the State and wait 60-90 days, and then only if the restriction is deemed:
- Unlawful, impractical, impossible to achieve, wasteful,
- The amount is less than the amount defined by the State,
- The fund is more than 20 years old, and
- The charity uses the fund in a way that is consistent with the charitable purpose of the donor restriction.
Other releases of restrictions will require a Court Petition.
STEPS TO BE TAKEN WHERE A COUNCIL HAS ACCUMULATED EXCESS FUNDS
Here are some examples of things Councils may do if they have accumulated excess funds:
- The Council should set aside funds to share with those conferences that have inadequate funds to meet the needs which they face to help people in need.
- A Council can reflect and discern on whether they ought to direct additional funding, towards achieving various goals set forth in “Standards of Excellence Questions for Diocesan Councils.”
- If a Council has additional funds, then it should look for ways to help the Society and its members through the Disaster Services Corporation, International Twinning, domestic twinning with Councils in need of financial help.
- Reviewing its programs and considering the need for starting new non-income producing Special Works such as through an evening or lunch meal program, a Coming Together to Getting Ahead program, or the like.
Appendix: Hoarding in SVdP Documents
In the Rule, Part I, Article 3.14:
Nevertheless, the Society uses money and property to help relieve the suffering of those in need. The Society’s funds must be handled with the utmost care, prudence, and generosity. Money must not be hoarded. Decisions regarding the use of money and property are to be made after reflection in the light of the Gospel and Vincentian principles. Accurate records must be kept of all money received or spent. The Society may not allot funds to other organizations, except occasionally for other branches of the Vincentian Family, save under exceptional circumstances.
In the Rule, Part III, Statute 24:
Councils and Conferences zealously manage and maintain the Society’s assets. The authority to manage the Society’s assets remains exclusively with Councils that may delegate this authority in accordance with the Rule of the Society and the Bylaws and Resolutions of the National Council.
Faithful to the spirit of non-accumulation of wealth, the next higher Council may determine annually the percentage of the funds of each Council or Conference within their area that may be made available to them. The next higher Council will work with the Council or Conference to determine an appropriate reserve for unanticipated events and direct the allocation of funds which exceed the anticipated demands, which may not be hoarded as a capital sum, to the service of the poor in their own area or abroad in the poorest areas of the world.
In Manual, under Council funds:
Sources of Council funds may include contributions from Conferences, donations, bequests, Special Works, and grants. Like Conferences, Councils act as custodians of funds given to the Society, understanding that they belong, ultimately, to the poor. While some Councils prefer not to accumulate funds, others make a point of setting something aside for exigencies. Operating an active Council with a reasonable bank balance is good business practice, not hoarding. A bank balance equal to the operational cost of the Council for six months may be reasonable. A balance of less than three months’ operational cost may be unhealthy. Councils with inadequate balances should review the budget for ways to increase their income or reduce their expenditures. Councils with overly large balances should find ways to expend their excess funds on behalf of the poor, such as subsidizing active Conferences in poorer areas or planning needed Special Works.
In Manual, under Funds of the Conference:
It is wrong for a conference to seek financial security by building up a large balance for the needs of the future. Conference balances generally should not exceed what they expect to spend during an average quarter. Surplus funds should be shared generously with more needy Conferences or the Special Works of the District Council.
In Bylaws, Document 1 for Conferences Without a Board of Directors, Article 16:
Conferences and Councils zealously manage and maintain the Society’s assets. The authority to manage the Society’s assets remains exclusively with Councils that may delegate this authority in accordance with the Rule of the Society. Faithful to the spirit of non-accumulation of wealth the Upper Councils may determine annually the percentage of the funds of each Conference within their area that may be made available to them. The Upper Councils will work with the Conference to determine an appropriate reserve for unanticipated events and direct the allocation of funds which exceed the anticipated demands, which may not be hoarded as a capital sum, to the service of the poor in their own area or abroad in the poorest areas of the world.
In the Conference Audit Manual, under Bank Account:
Every Conference is required to maintain its bank account(s) separate from the parish and separate from the personal accounts of any of the members. There shall be no co-mingled funds. The funds of the Conference must be in standalone accounts not tied to the parish or any of the members. The only exception to this is when a Conference has an approved reserve account. To avoid any perception of hoarding, the reserve accounts should be approved by the next upper Council. The funds in the reserve may be combined into a shared investment account as long as the Conference has sole access to its funds.
In Resolution 114:
Be it resolved that legal issues which involve one Council or one Conference have the potential for affecting the whole Society and therefore if not addressed will lead to the suspension and removal from the Society of the offending Vincentian, Conference or Council if not corrected in a timely fashion. Such legal issues include but are not limited to the following:
- Violation of any state statute, local ordinance, or federal law or any regulations adopted by any state, local government, or federal agency which violation relates to the operation of not-for-profit organizations.
- Failing to conduct an annual audit.
- Failing to file a Federal Form 990 or any required state form.
- Adopting Bylaws that have not been updated to comply with federal requirements
- Giving funds to non-Vincentian organizations or for non-Vincentian activity.
- Failing to submit required annual reports
- Failing to allow women or minorities as Conference members
- Maintaining large balances that do not constitute legitimate reserve for future operations and which constitute hoarding,
- Failing to enact Bylaws that are in compliance with those approved by National Council
- Failing to make home or similar visits in pairs – i.e., allowing only one Vincentian to make such visits
- Having officers who are not active members of the Society
- Limiting assistance to certain groups to the exclusion of others
- Acting in an autonomous manner and as though not answerable to the Society
- Changing Bylaws to permit activity contrary to The Rule of the Society
- Removing members without complying with The Rule of the Society
- Violating confidentiality of those being served
- The failure of National Council Members to attend National meetings
- Raising funds across Council boundaries without permission and without adequate disclosure to the public
- Any other issues having legal implications.