ASK ECFA:

Q: What are our obligations in handling donor restrictions either verbally or formally communicated in writing by the donor to the ministry or church like on the memo line of a check, or in a letter.

A: There are both moral and legal obligations surrounding these gifts. The moral implications are the more obvious—following through on our commitments. If the ministry or church requests gifts for a certain purpose, then you are morally bound to spend the money for the identified purpose. Concerning the legal implications, courts have repeatedly enforced restricted gifts, even when it involves a church. This is true whether a gift was designated on the memo line of a check, in a separate note that accompanied the gift, or even based on a conversation with a ministry or church leader about a need which is closely followed up with a corresponding contribution.

What is a restricted gift? A restricted gift is one that has time or purpose limitations on it that are narrower than the exempt purposes of the ministry/church. For example, a ministry/church that receives a gift to “share the love of Christ within the community and around the world” generally has no restriction because it generally matches the exempt purposes of most ministry/churches. However, a gift that is restricted for a building fund or debt retirement is designated (restricted) because those gift purposes are narrower than the ministry's/church’s exempt purposes.

A mininstry or church should carefully consider in advance what restricted funds they will accept and then formalize that list as part of their gift acceptance policy. Click here for sample gift acceptance policy.

To learn more about restricted gifts, purchase a copy of Charitable Giving Guide for Giver-Restricted Gifts—available on Amazon.