Q: I have just taken a position at my church, which includes the duties of Financial Secretary. I discovered that our church has an account dedicated to Honduras. The gifts for this account have come from many sources and have been designated for Honduras and a specific person to take these funds to Honduras during her mission efforts there.
This person, however, has not taken a mission trip to Honduras in quite some time due to her health and does not have any definite plans for a trip in the near future. We would like to see that these funds reach Honduras through another source in order for the funds to be useful for the needs of the people there. Because these funds were designated to a specific person, can we funnel these funds to Honduras through another source? How does this decision within the church dynamic need to be made?
Consult Legal Counsel for Guidance
I suggest you seek guidance from your legal counsel to ensure compliance with applicable state law. Redirecting donor-designated funds requires careful handling to avoid violating trust or legal obligations. Your attorney can review the specifics of the designation and help determine the best course of action.
Notify Donors of the Change
Discuss with your attorney the possibility of notifying donors about the status of the fund. A written communication explaining the circumstances and your intent to redirect the funds to another U.S. 501(c)(3) ministry operating in Honduras may be essential. Transparency with donors builds trust and demonstrates accountability.
Key Considerations for Redirecting Funds
- Donor Intent: Ensure the redirection aligns closely with the original purpose outlined by donors.
- Legal Compliance: Review state laws on charitable funds to confirm that redirection is permissible.
- Church Policy: Consult the church’s bylaws or policies to ensure internal compliance.
- Board Approval: Obtain approval from the church board or governing body to document the decision.
Developing a Resolution
Your attorney can help you draft a formal resolution to transfer the funds. This resolution should detail the original purpose of the funds, the reason for redirection, and how the new recipient aligns with the intended use. Retain documentation of all related communications and decisions for accountability.
FAQs on Redirecting Donor Designated Funds
1. Can donor-designated funds be used for a different purpose?
Not without proper legal and ethical considerations. Donor intent must always be respected unless donors consent to the change or a legal process permits the redirection.
2. What happens if donors cannot be contacted?
If donors are unavailable, consult with your legal counsel to determine the appropriate steps. State laws and the terms of the donation will guide the decision.
3. Does redirecting funds require board approval?
Yes, most church policies and best practices recommend board approval for any significant financial decisions, including fund redirection.
4. What legal risks are involved in redirecting funds?
Improper handling of designated funds can lead to legal challenges or loss of trust from donors. Consulting legal counsel is crucial to mitigate these risks.
