February 04, 2010

Donor Control Over Gifts to Churches

Question:

How much influence may donors exercise on the disbursement of church benevolent funds that they have contributed to?

Answer:

As members of a local church congregation, donors to benevolent funds may help to identify and encourage the church's aid of individuals in need just as those who do not contribute may. Often, donors to these type of funds are among the more sensitive to observing these needs so it is not surprising that they may be the originators of discussions by the church leadership to consider making benevolent disbursements.

Having said this, the process must be an open one. Clearly, once funds are donated they must be fully under the control of the church. The church must be very careful to avoid becoming a conduit for donor "contributions" that really satisfy their own personal obligations. For example, a donor's gift that is designated to pay her granddaughter's Bible camp admission or youth activity to visit the local amusement park is not a deductible contribution. The church may assist the grandmother in maintaining her anonymity, if that is the underlying purpose for the gift, but should not issue a receipt for tax deduction purposes.

Let's change the scenario a little bit. Imagine, instead, that the church congregation decides to establish a designated gift fund to enable children of financially challenged families to attend Bible camp. The grandmother makes a contribution to the fund. Unbeknownst to her (or at least without her direct influence), her granddaughter qualifies and receives assistance. This will not deny tax deductibility. This scenario can repeat itself in multiple situations (e.g. missions or church planting support to ministries of church members' families, scholarship funds).

Donors should not exercise control over the disbursement of these funds. Further, if the disbursements are predominately funded by a recipient's family member, even if others contribute in small amounts, the church should assure itself that the disbursements are truly reflective of church action and endorsement. Let me repeat, the church must be very careful to avoid becoming a conduit for donor "contributions" that really satisfy their own personal obligations.

1 comment:

  1. Well stated. Thank you for both types of outcomes to the giving of a fund and how it is dispersed.

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