Some churches seek to increase their resources through public and private grant funding. These sources of revenue can be a financial windfall for ministry work.
In many cases, grant funding can be a complex transaction. The donor can be a counter-party who has certain reasons for making the donation. It is important church leaders understand the benefits as well as the conditions of receiving these gifts.
Donations may include stipulations on the use of the gifts. These restrictive conveyances may come from foundations, government agencies, charities, and individuals.
Restricted gifts require the church to behave in certain ways with the funding. These limitations often require the funding to be used for specific purposes.
Donors make gifts with limitations for different reasons. Agencies often must adhere to statutory and charter mandates. Some philanthropic foundations have a particular purpose for which it was incorporated. Individuals motivated by personal reasons want assurances the gift will be used for specific causes.
It is crucial church leaders recognize how gift restrictions come about. Donors may require the church to sign an agreement that outlines the conditions of the gift. The contract may include terms such as a reversionary clause that compels a forfeiture of the gift if the compact is breached. Other terms include specific warranties and promises from the church.
Grant compliance means different things for different kinds of gifts. In some instances, the donor may require the church disclose some data with its reporting. Other grantors demand a right to inspect the church financial books. It is not uncommon for funders to insist the church commit to an annual independent audit by a CPA firm.
The penalty for failing to comply with the terms of a grant varies. Church leaders could be compelled to return the gift. Financial damages could be assessed against the church. In certain situations, the grantor could seek direct legal remedies from the church officials themselves.
Grant funding may force the church to treat the funds in a special way on its financial statements. Unspent monies may be listed as a liability if the funding is at risk of loss. Church leaders must be mindful not to publish financial statements that misrepresent the true implications of the gift.
The form of the grant funding is a matter to be weighed by the church leadership. Funding can be in the form of United States currency, real estate, stocks, or personal property. Church officials should be cautious of a gift with a claw-back that mandates any refund be in a form that’s different from the original form.
Church management should not overlook its corporate responsibilities when it comes to restrictive gifts. The church governing documents, such as the bylaws and policies, should not prohibit donations of the kind contemplated.
A restrictive contribution may be offensive if it demands of the church activities or endorsements that run contrary to ministry doctrine. Church leaders should avoid donations that could risk the church’s tax exemption status.
It would be helpful for the governing board of the church to discuss grant funding in advance of being presented with an opportunity to receive a gift. The board should decide what kind of gifts would be prohibitive and what restrictions would be off-limits.
Church leaders who agree to receive restricted funding should be mindful of the compliance demands. The ability to comply with the funding requirements is an important governance consideration to the transaction.