Can One Non-Profit Donate Money To Another?

I was asked if one 501(c)(3) non-profit can give money to another 501(c)(3) charity. With the usual, and necessary, caveat of, “I am not attorney, nor am I giving legal advice,” I responded that, Yes, when the transaction advances the donor non-profit’s charitable mission, a non-profit can donate money (and other resources) to another non-profit.

In some instances doing so is an essential part of a non-profit carrying out its mission. Example: An orchestra could donate funds to an organization which seeks to develop overall marketing and PR education and outreach to that city’s arts and culture population.

Along with that necessary start to the process, the donor non-profit needs to make absolutely certain that there is:

  1. No conflict of interest. Any person or persons responsible for the transfer of the donated funds must not personally (their families, friends, associates, etc.) benefit in any way. Example: The donated funds are used to purchase equipment in some way connected to business interests of a Board member of the donor non-profit
  2. No violation of donor restrictions. While exacting restrictions are not generally connected to most donations, nevertheless, the risk is that some donors would not approve of their money, in principle, going to another charity they did not choose, no matter how it fits or how worthy.
  3. No misuse of the donated charitable resources by the receiving non-profit. Should the receiving non-profit subsequently have publicized financial problems, even though the donated funds were not in fact misused, the overall perception of the receiving organization trumps the reality. Perception is everything. There could be serious trouble for the donor non-profit requiring it to justify its support of the ailing organization.
  4. No question that donating funds in any way will imperil the donor non-profit’s own financial health. In other words, that the donation was not over the top, excessive, or out of the realm of good judgment.

Of course, there are always exceptions, and at times such arrangements can be mutual beneficial. But, from what I have mostly come to know, the donation-to-another-charity question is most often asked by people who hope the answer is “No” because they are unhappy about, or uncomfortable with, a proposed action of this type. I know I would be as director of development, especially when challenges are possible by my donors asking that I explain the above point 2. I would not want to risk hearing, “Not with my money, you won’t!”

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254 Comments

  1. Francine,
    The way I see it, the Sober Living House (SLH) project/organization, may be seen as being unduly influenced for creation as a “cash cow” for the Church.

    Even if that is not so, the fact that the SLH and the Church’s finances are linked well before the SLH even exists, is not a good thing.

    The concept waters down the future Mission of the proposed SLH, and looks elsewhere for the operating funds the Church needs.

    The Church should focus on how to maximize offerings from its parishioners, and not look away from where the money must come internally, to a far and distant source not even yet created.

    The SLH, in turn, should not be created with the thought mainly, or mostly, that income from its services will support the Church.

    As well, the proposed SLH could not be operated by the Church, nor its officials be able to serve on the board of the SLH, due to potential conflict of interest relating to the money donation issue.

    The Mission of the Church must be directed to the spiritual well-being of the people it serves—its parishioners, and not have its leadership misdirect their stewardship obligations to the Church by way of the SLH.

    Should that SLH non-profit be created, it would belong to the “community” in general, and the Church would have no say in its operation.

    Even more realistic, as a separate entity, should the SLH become operational, there is no guarantee that it would have funds to donate practically or legally to another non-profit in the first place, and even if it did, the SLH leadership could very well choose not to give its money to the Church

    Reply
  2. Hello, my church 501(c)(3) church has a continual deficit each month due to staff salaries. We are meeting expenses and payroll by spending down our start-up funds. The idea to open up a Sober Living House is being investigated. The church leaders have presented that the Sober Living House would be is own 501(c)(3) entity and have separate staff. The Sober Living House is projected to generate significant revenue above it’s operating expenses. The church leaders present to us that the excess revenue the Sober Living House can be transferred / donated to the church to make up the church’s shortfall in revenue. Is this true? Can the Sober Living House give money to the church?

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