Tuesday, January 29, 2019

Hey Fletch … What are our obligations in handling donor designations? These come either verbally during a church service, on our website, or by text. They can also be formally given in writing by the donor to the church on the memo line of a check or in a letter. 

DRF—There are several questions floating out there about restricted gifts to churches. This is the second in a series of questions that I’ve consulted with my friend Dan Busby, President of the Evangelical Council for Financial Accountability. Here are his thoughts.

There are both moral and legal obligations surrounding these gifts. The moral implications are the more obvious—following through on our commitments. If the church requests gifts for a certain purpose, the church is morally bound to spend the money for the identified purpose. Concerning the legal implications, courts have repeatedly enforced designated gifts (giver-restricted), even when it involves a church. This is true whether a gift was designated on the memo line of a check, in a separate note that accompanied the gift, or even based on a conversation with a church leader about a need which is closely followed up with a corresponding contribution.

What is a designated gift? First, the formal term is “restricted” gift. A restricted gift is one that has time or purpose limitations on it that are narrower than the exempt purposes of the church. For example, a church that receives a gift to “share the love of Christ within the community and around the world” generally has no restriction because it matches the exempt purposes of most churches. However, a gift that is restricted for a building fund or debt retirement is restricted because those gift purposes are narrower than the church’s exempt purposes. 

A church should carefully consider in advance what designated (restricted) funds a church will accept and then formalize that list as part of the church’s gift acceptance policy. ECFA has provided a sample gift acceptance policy for Hey Fletch readers at: http://www.ecfa.church/Content/Contribution-Policy.

More detailed issues relating to designated gifts will be covered in later posts on this topic. To learn more about designated (restricted) gifts, get free access to more resources at: ChurchExcel.org or by getting a copy of The Guide to Charitable Giving for Churches and Ministries or the smaller booklet Charitable Giving Guide for Giver-Restricted Gifts.