Clear Guidelines Help Ensure You Fulfill Your Charitable Mission
Nonprofit organizations are generally the recipients of donated funds and are expected to be good stewards of the money and goods entrusted to them.
Some charities are also distributors of those funds and goods, benefitting individuals and organizations as they conduct their ministries. For these institutions, establishing and following a defined benevolence policy is especially important.
Simply stated, a benevolence policy clearly describes the purpose of the benevolence program and the criteria used to determine eligible recipients.
Non-church, tax-exempt charities must complete Form 1023, Application for Recognition of Exemption under Section 501(c) (3) of the Internal Revenue Code to receive their exemption. In completing this extensive application, organizations must identify the focus of their mission and the recipients of any distributions.
Churches, which don’t need to complete Form 1023, lack this outside stimulus to define their policies. As a result, this important step sometimes gets overlooked. Consequently, hearts sometimes rule heads when needs are presented.
Consider the story of the Kenyan siblings who managed to illegally gain entrance to the United States. They claimed that serious health issues—including malaria and tuberculosis—and significant immigrant-related legal bills rendered them homeless. Compassionate Midwestchurches came to their aid and assisted them with about $1.1 million over the course of four years…before their elaborate scam was discovered.
These “siblings” were in fact a married couple who engaged in a fraud to target churches for donations for their “bills.” In actuality, the couple used the money to fund two apartments and their gambling habit. These con-artists were eventually apprehended and the husband is serving time, but the ministry funds are gone—no longer available to meet genuine needs.
This misdirection of funds could have been prevented if a clear benevolence policy—requiring due diligence before the distribution of any significant amount—had been followed. Elements of an effective benevolence program answer questions such as:
- What support documents will you require to verify the need?
- Is there a limit to the number of times you’ll provide assistance?
- Is there a relationship between the recipient and the organization (or anyone in the organization)?
- Who will approve the gift?
- Will you permit up-to-a-certain amount to be given without approval?
Account for all gifts to substantiate their charitable nature. At a minimum, record the recipient’s name (and address, if possible). Note the reason for the payment and get the signature of the person in charge of approving the gift. These extra steps assure your donors and any regulatory agencies that your charitable work is legitimate, and also could help spare you the financial and emotional loss of being tricked.
Compassion is at the heart of ministry. Don’t let those who would prey on your kindness prevent you from fulfilling your mission.
If we can help with accounting, internal control or other stewardship needs contact us at 904-398-4747 or Lynn@onlinestewardship.com.
