Using a Pooled Concept to Raise Money for Workers

When ministries enlist workers to raise support for a staff member’s particular sphere of the charity’s ministry, compensation to the worker generally bears a relationship to the money that is raised by the particular worker. However, some ministries use a pooled fundraising concept for self-supported workers where the amount of compensation does not bear a direct relationship to the amount raised by an individual worker.

How does the pooled approach work? The key to a pooled approach is that the ministry raises money to support a group of workers instead of worker-by-worker. There might just be one group—all the self-supported workers. Or, the group might be a team of workers, or all of the workers in a country, or all of the workers in a group of foreign fields, or all of the workers in a section of the United States and so on.

The grouping may be based on a geographical area, ministry function (for example, evangelistic group vs. the linguistic group) or another grouping that is consistent with the ministry’s organizational structure.

The fundraising solicitation must clearly indicate that funds are being raised for the charity and will be used under its control and discretion in support of a project or group of the charity’s workers, not for the benefit of an individual worker. For example, the solicitation may identify the geographical area, the team or other group designation.

In a pooled concept, although ministries often account for the donation revenue on a worker-by-worker basis in order to document each worker’s fundraising accomplishments, compensation paid to the worker does not bear a direct relationship to the money that the individual raises. However, compensation could be contingent on funds raised for the entire group. Expenditures are generally tracked by group rather than by supported worker. Balances are not carried forward from one accounting period to the next based on revenue or expenses relating to a particular worker.

Compensation levels for individuals in a group are pre-determined by the ministry. Pay need not be identical for everyone in a group. But pay is usually structured based on responsibility, longevity, family size, educational attainment, cost-of-living in a particular country, and a variety of other factors.

The worker-by-worker tracking permits the ministry to determine how much money has been raised by each worker. However, gift income is generally pooled into one temporarily restricted revenue account for the entire group.

The services of workers may be discontinued or redirected based on periodic reviews of the worker’s performance. The amount of funds raised for the ministry may be one of the criteria used to evaluate the worker.

What are the advantages of the pooled concept? The advantages of the pooled concept are often significant:

  • Equality. While workers are often required to raise the same amount, it is inevitable that some workers are more gifted in fundraising than others. In the pooled approach, higher compensation does not go to the more gifted fundraisers—available funds are shared by all the workers in the group.
  • Administrative savings. The accounting burden can be greatly reduced under the pooled concept since there is no need to track revenue, expense or balances by worker. Tracking this data by groups is generally much easier. This can equate to enormous administrative savings.
  • Management flexibility. The pooled concept allows ministries to utilize personnel in the most effective manner. Based on a particular worker’s skills, time availability and giftedness, the charity may assign different fundraising goals for different team members.

Additionally, it is a tremendous advantage not having to pull workers out of a critical ministry because their support has dropped below a certain level.

  • Possible reduction of IRS scrutiny. The use of a pooled fundraising approach seems to more easily demonstrate charity control and discretion since payments to workers are not based on specific amounts each worker raises. In one significant case, the Tax Court confirmed tax deductibility of contributions to an organization utilizing the pooled fundraising concept, Peace v. Commissioner. In this 1964 case, a giver made gifts to the Sudan Interior Mission (SIM), indicated the names of the supported missionaries on the contribution checks, and the funds were used by SIM in a shared or pooled support concept.

What are the disadvantages of the pooled approach? Some of the possible disadvantages of the pooled approach include:

  • Reduced motivation. Some ministry leaders fear the pooled approach will result in reduced motivation for the self-supported worker to do fundraising—seldom a favorite activity. But Marjorie Barham with SIM International, a missionary sending organization that utilizes the pooled approach, suggests “the motivation is still there in that a worker cannot commence full active ministry until the required support level is reached. If a worker is on home assignment, they cannot return to active ministry on the field until the required support level is reached.”
  • Less giver commitment. “A giver may have less commitment to give knowing the donation will benefit multiple workers instead of only one,” comments John S. Butler, attorney with Capin Crouse LLP. Although it should not be true, there could be a reduced motivation for the giver to pray, since their donations are going to support the ministry of a group of people.
  • Greater budgeting difficulty. With the deputized fundraising concept, budgeting and setting individual funding targets is relatively simple. The pooled approach might require more effort to develop budgets for a group.

Text Box: This text is provided with the understanding that ECFA is not rendering legal, accounting, or other professional advice or service. Professional advice on specific issues should be sought from an accountant, lawyer, or other professional.

This text is provided with the understanding that ECFA is not rendering legal, accounting, or other professional advice or service. Professional advice on specific issues should be sought from an accountant, lawyer, or other professional.