CCCC Benevolence Policies Article
From Canadian Christian Charities Council (CCCC)
by Heather Card
Within our communities, many churches and charities minister daily to those in need through benevolence programs. In this article we will be looking at a number of considerations in developing a benevolence policy.
UNDERSTANDING THE DIFFERENCE BETWEEN PRIVATE AND PUBLIC BENEVOLENCE
A church must meet the law’s public benefit test in order to qualify for registration as a charity. This means that it must show its purposes and activities provide a tangible benefit to the public.
First, it must be understood that a Canadian registered charity may only engage in public benevolence and not private benevolence. What is the difference between public and private benevolence? A common understanding of private benevolence involves a gift given directly from one person to another. For example, if I am aware of a person who is going through a difficult time financially and I give them a gift of money, I am engaging in private benevolence.
The courts have held that an organization established to benefit a named individual is established for private benevolence and therefore is not charitable at law. If we change the above example slightly, let’s assume that a family who attends my local church experiences a fire and that the church decides to take up a special offering to assist them with financial needs. Because we have named the individuals who will be receiving this support, the church is engaging in private benevolence (i.e. facilitating gifts between individuals).
Sometimes CCCC is asked whether the church can give the funds for a named individual even if no receipt is issued. Receipting is not really the issue here. Unfortunately, the church is not able to accommodate this request because the Income Tax Act requires a charity to use all its resources (receipted or not) for charitable purposes. Private benevolence, as discussed above, is not charitable at law.
Individuals can and should be encouraged to heed the call of scripture to personally and directly help someone. However, such private benevolence should occur directly between the individuals, outside of the church, though the church is free to encourage people to others in this way.
A gift by an individual to a church or ministry, even though the beneficiary is the same needy person, is still an act of public benevolence if the decision as to who is needy and how much is given is an exclusive decision of the benevolence committee, rather than the personal decision of an individual donor.
A church must also guard against limiting the help it offers to a narrow interest group, such as to only members of the congregation.
DEVELOPING A BENEVOLENCE POLICY
Any church that engages in benevolence programs would benefit by having clear, written policy. This policy should be approved by the governing board and should specify what kind of assistance may be provided, in what situations it may be provided, how it is to be provided and what approvals are necessary. A written policy will provide a strong, objective support to those administering the benevolence fund and will help them to do so in a fair and consistent manner.
The policy should include a number of elements as discussed below:
The purpose of the benevolence program should be consistent with the charitable purposes and objects of the ministry as outlined in the charity’s governing documents. The main purpose of a benevolence fund should be to further the work of the church. Some ministries have designed their benevolence fund policies to support their community outreach programs.
A general purpose of the benevolence fund might be “to help individuals or families who have experienced a personal financial need due to prolonged illness, accident or emergency”.
ASSESSMENT OF NEED
The policy should indicate the type of information required in order to assess the need to access the benevolence fund. Some ministries find that an informal assessment of need fits with their philosophy of ministry. They collect a minimal amount of information and rely on the verbal information provided. Other ministries may find that a more formal assessment which asks about assets, income, references and other personal information is needed. In either case, it is important that the dignity and privacy of the individual or family is respected and protected, while having adequate information to make the assistance decision.
LEVELS OF ASSISTANCE OR SUPPORT
This section of the policy will outline what kind and levels of assistance may be provided. By being specific in your policy, the task of your benevolence committee or pastor will be much easier. It will also ensure that beneficiaries are treated consistently and equitably. For example, the policy could address the number of times in a calendar year that assistance can be given and the maximum dollar value that can be given in a year.
Certain types of assistance must be reported to Canada Revenue Agency. Generally a series of payments (i.e. two or more payments) over $500 must be reported on T5007 slips. Exceptions include one-time assistance, payment for medical expenses, child care expenses, funeral expenses, legal expenses and job training or counselling.
There are a number of areas to consider when deciding eligibility for benevolent care funds. In a church setting, it is particularly important to ensure that the policy does not restrict support to only members of the church, in order to assist in meeting the public benefit test.
Here are some areas to consider when deciding who will be eligible for assistance:
- What types of needs will be a priority?
- Are there any types of needs that will not be considered? (E.g. insured losses, discretionary expenses, needs of a business,)
- Will token assistance be provided as a demonstration of moral support for those who do not meet the eligibility criteria?
There are several ways that a benevolence fund may be funded:
- funding from the general operating budget through the annual budget process
- funds designated by the donor for the benevolence fund
- funds received through regular offerings (e.g. monthly)
- funds received through a special appeal
The policy should be clear that the direction and control of the funds always rests with the charity and that funds will be distributed and used as set out in the policy.
EVALUATION OF NEED & DOCUMENTATION
As a best practice, benevolence should always be based on a decision made by the benevolence committee or its designate. One of the indicators that a fund is established for benevolent acts that are charitable and not for private benevolence is the presence of objective rules or criteria used to determine the appropriate level of help needed. Objective information regarding the need should be obtained whenever possible.
At a minimum, churches should document the basis for giving financial assistance. Every time assistance is given, the person(s) making the decision should write down how they arrived at their conclusion. To preserve confidentiality, this information should be kept in a secure location.
When cash or vouchers are given to those in need, appropriate documentation is still required. If the guidelines allow one person to make benevolence decisions, it is a good idea for a second person to read and sign the written documentation. This minimizes the potential for people to have the wrong perceptions about how the fund is operated. It can also help prevent people with needs going to each person on the benevolent committee in turn.
Regular reports should be completed outlining the total receipts and disbursements of the benevolent fund along with the number of gifts given.
CCCC members have access to a sample church benevolence policy template that can be downloaded from our website. (Go to www.cccc.org and click on Members, Download Sample Documents)
PROVIDING INFORMATION ON OTHER COMMUNITY RESOURCES
In some cases, the person’s need may be beyond the financial resources of the church or mission to provide. Having a listing of other community resources can be a great benefit. Here are some areas to consider:
- employment insurance information
- community legal services
- counselling and advice
- financial planning & budgeting
- emergency shelter
- emergency food programs
- various provincial & federal benefit programs
- CCCC Sample Benevolence Fund Policy
- Canada Revenue Agency Guide to T5007 – http://www.cra-arc.gc.ca/E/pub/tg/t4115
Bulletin Issue 3, 2008 (Last Reviewed: February 25, 2013)
This article is provided as a general guideline to assist CCCC member charities of which The Free Methodist Church in Canada is an active member. We would encourage local churches to consider the benefits of a CCCC membership.
This information does not constitute legal or other professional advice.
Appropriate modifications are required to suit the facts applicable to each situation.
Where the intent is to use this sample, it should be provided to legal counsel along with appropriate instructions to meet the specific needs and circumstances of the charity.