What Is a Benevolence Fund? A Simple Definition for Churches
A benevolence fund helps church members and neighbors through hardship. Learn what it can be used for and how to track it correctly.
What Is a Benevolence Fund?
A benevolence fund is money a church sets aside specifically to help people — usually members, but sometimes anyone in the community — through a financial hardship. It is one of the most common ways small churches put tithes and offerings to direct, practical use, but it also comes with its own set of accounting rules that are easy to get wrong.
Benevolence Fund: The Simple Definition
At its core, a benevolence fund is a restricted fund: money donors have given for the specific purpose of helping people in need, rather than for general church operations. Because it's restricted, it has to be tracked separately from your general fund and spent only on its intended purpose.
Common benevolence needs include:
- Emergency rent or utility assistance
- Help with a medical bill or funeral cost
- Groceries or gas cards for a family in crisis
- Short-term support after a job loss or natural disaster
Why Benevolence Funds Need Careful Recordkeeping
Because a church is a nonprofit, how it handles benevolence gifts matters for tax purposes as well as good stewardship. A few rules to keep in mind:
- Gifts to the benevolence fund should be tracked as restricted contributions, separate from general giving.
- Disbursements should generally go to third parties (a landlord, a utility company, a hospital) rather than as cash directly to the individual, which helps protect both the recipient and the church.
- Churches should avoid giving benevolence to a specific, named individual in a way that lets a donor treat the gift as a tax-deductible contribution "for" that person — the IRS requires the church, not the donor, to control how the money is used.
- Keep a simple record of each request and disbursement — who was helped, how much, and for what — separate from personal or medical details that don't belong in the church's general books.
ChurchBooks3's fund accounting keeps a benevolence fund cleanly separated from your general operating fund, so it's easy to see what's available to give and to show, if ever asked, exactly how the money was used.
Frequently Asked Questions
Is a benevolence fund the same as a designated fund? A benevolence fund is one specific type of designated (restricted) fund — money set aside for a particular purpose, in this case helping people in need, rather than for general use.
Can a donor tell the church exactly who their benevolence gift should go to? Not if they want to deduct it as a charitable contribution. The IRS requires the church to have full control over how benevolence funds are distributed; a gift earmarked for one specific named person is generally treated as a personal gift, not a tax-deductible donation.
Does the church need to report benevolence payments to recipients? Generally, benevolence assistance is not considered taxable income to the recipient and isn't reported on a 1099, since it's charitable aid rather than compensation — but keep good records in case questions come up.
How much detail should we keep about who received help? Enough to show the money was used for its intended purpose — amount, date, and general reason — without keeping sensitive personal or medical details in the church's general financial records.
This article is general information, not tax or legal advice. Talk with a qualified accountant about your church's specific benevolence fund policies.