FB15. If our church is successful in raising money to help this family, can the church give the money that is raised directly to the family?
Short AnswerLong Answer
It is considered best practice for the church to create an “impenetrable curtain” between the charity and the aid recipients. The church should consider using the money to buy furniture for the family’s new home or provide gift vouchers for items such as clothing and groceries. This allows the charity to maintain an arms length relationship with the family and to create a clear paper trail for expenditures and receipts for filing with the CRA.
Also, the church must make sure that the family is not materially enriched by the money it receives. For instance, in the example of a family that has been devastated by a fire, the family would be considered to be materially enriched by the church’s financial assistance if:
- There was fire insurance which covers much or all of the costs associated with their loss; or
- A person who died in the fire had life insurance that would meet the needs of the family.
In providing relief to this family, the Board of Directors of the church must determine the amount of support to be given from the benevolence fund on a “needs and means” test. Needs are determined on the basis of total reasonable expenses less all sources of income. Means are determined by assessing non-essential assets that might be sold by the family to meet their needs. Normally, this does not mean that the family would have to use up RRSPs or sell an active business.