Benevolence is the money a church is quickest to give and slowest to document. A family's power is about to be shut off, the pastor knows them, a check goes out the same afternoon, and three months later the treasurer is looking at a payment to a utility company with no note on why. The help was right. The record is what protects the people who gave it, the person who received it, and the fund's purpose.
Why the records carry weight
IRS Publication 1828 says a church's activities may not serve the private interests of any individual, and that its income and assets may not inure to insiders. Helping people in need is charitable work. The file is what shows that a given payment was that: made to someone in need, for a stated purpose, chosen by the church under its own criteria rather than as a favor.
The IRS has published what it expects such records to show. Publication 3833 was written for charities providing disaster relief and emergency hardship aid, not for churches in particular, but its documentation list is a sound checklist for any benevolence fund. It says documentation should generally include a description of the assistance, its cost, the purpose, the criteria for disbursing it, how recipients were selected, the name, address and amount for each recipient, any relationship between a recipient and the organization's officers, directors, key employees or substantial contributors, and the composition of the committee approving the assistance.
Start with a written policy
A short policy adopted by leadership answers the questions before a hard case arrives:
- Who the fund is for, such as members, attenders or anyone in the community
- What kinds of need it meets: rent, utilities, food, medical bills, travel for a funeral
- How a request is made and who may approve it
- A limit per request or per household, and how often someone may be helped
- That payment goes to the vendor wherever possible
- That the church, not the giver, decides who receives help
The request and the need
Publication 3833 says an organization generally must make a specific assessment that a recipient is financially or otherwise in need. For a church that means something in writing for each request, even if brief: who is asking, what the need is, the amount, and what supports it, such as the shutoff notice, the lease or the bill. A one-page form does this. When a pastor takes the request in person, the pastor fills in the form.
Approval by more than one person
No one should be able to request, approve and pay benevolence alone. Two or three named people approve each request, or a committee does, and the approval is signed and dated. Anyone related to the recipient steps out of that decision, and the form says so. That is the relationship item on the IRS list above, and it is also ordinary internal control: the person who approves is not the person who writes the check.
Pay the vendor where you can
A check to the power company or the landlord, with the account or unit noted, is its own evidence of how the money was used. Cash and gift cards are sometimes the only practical help. When they are used, record the amount, date, recipient and who delivered it, with a second signature, and keep any stock of gift cards logged and counted like cash.
Gifts earmarked for a named person
This is where benevolence most often goes wrong, usually out of kindness. A member hands over a check and says it is for a particular family. IRS Publication 526 addresses the donor's side directly. It says a donor cannot deduct contributions to individuals who are needy or worthy, even if made to a qualified organization for the benefit of a specific person, and that a donor can deduct a contribution to a qualified organization that helps needy individuals if the donor does not indicate that the contribution is for a specific person. Publication 3833 puts the same point from the organization's side: donors cannot earmark contributions to a charitable organization for a particular individual or family.
What the records need to show, whichever way the church handles it:
- What the giver said or wrote about the gift's purpose, kept with the deposit record
- Whether the church accepted it into the general benevolence fund, under the church's own control
- Who decided how the money was used
- How the gift was treated on the giver's contribution statement
How to respond to an earmarked gift, whether it belongs on a year-end contribution statement, and what the giver may deduct are questions for the church's tax adviser and the giver's own preparer. A bookkeeper records what happened and raises the question; a bookkeeper does not answer it.
Help for staff, leaders and their families
A pastor or employee can be in real need too. Publication 1828 names the minister, board members, officers and, in certain circumstances, employees as insiders, and says the prohibition on inurement to insiders is absolute. Whether a payment to a staff member is permitted benevolence, and whether it should be treated as compensation, are tax questions with consequences for the church and the person. Take them to the CPA or tax adviser before the payment, and keep their answer in the file.
Confidentiality without losing the trail
Benevolence files hold some of the most private information a church has. Protecting it does not require leaving it out of the books:
- Keep request forms and supporting documents in a restricted file, paper or electronic
- Use a case number, not a name, in the accounting memo and in anything the board sees
- Limit access to the approvers, the treasurer and the bookkeeper
- Report to leadership in totals: number of requests, amount given, fund balance
The full file still exists and can be produced for an outside reviewer who needs it.
In the books
Gifts given for benevolence are normally tracked as a restricted fund (your CPA can confirm the classification), so the fund carries its own balance and is reported monthly like any other; see restricted, designated and general funds. Tracking that balance is part of church fund accounting.
