The Do’s & Don’ts of Benevolence Funds
Putting formal procedures in place is always a wise decision. A Benevolence Fund is no exception. Benevolence Funds are used by churches and other nonprofits to help those in need during a financial crisis.
Here are some helpful hints for maintenance and oversight. Documenting is essential for protecting your ministry and putting in place checks and balances.
Benevolence program Do’s:
1. Adopt and adhere to a written policy.
2. Make distributions from a general fund or benevolence fund.
3. Pay assistance directly to service providers (rent, mortgage, utilities, etc.).
4. Allow contributions only to the fund, not to any specific individual or family.
5. Develop adequate criteria to determine individual need.
6. Document the need including external verification for larger amounts.
7. Assign personnel or a committee to approve requests.
8. Include reasonable limits of support per person during a specified time period.
9. Determine the kinds of needs that will receive support, keeping in mind typically assistance is allowed for basic needs: food, shelter, clothing and medical
Benevolence program Don’ts:
1. Distribute funds to people without supporting documentation.
2. Disburse funds out of a bookstore cash register or out of uncounted offerings.
3. Disburse funds without a written record of the transaction.
4. Allow members to donate to a specific family, individual and receipt these donations as tax deductible.
5. Give one individual control over benevolence distributions, without oversight or accountability measures in place.
To read more, check out this great article:
Rockwell R. Carr CPA
Any US tax advice contained in the body of this article was not intended or written to be used, and cannot be used, by the reader for the purpose of avoiding penalties that may be imposed under the Internal Revenue Code or applicable state or local tax law provisions. Always consult with a tax professional, or other appropriate professional, about your specific situation before making any final decisions.