A flood. A tornado. The death of a close family member. A medical emergency.
Each of these things can be catastrophic and devastating for the individuals impacted.
In these circumstances, the inclination is to act and act quickly. For nonprofits and for-profits alike looking to provide hardship assistance – either to their communities or individual employees – advanced planning will help you ensure that you comply with IRS standards while providing a caring and timely response.
How do you prepare? In our two-part series we will outline key planning considerations for:
- Nonprofits considering providing hardship and disaster assistance
- Employer-related programs
PART 1: Basic Considerations for Providing Hardship and Disaster Assistance
What IS hardship and disaster assistance?
Hardship and disaster assistance means providing funds, services, or goods for basic necessities (food, clothing, shelter, transportation, medical assistance, etc.) to distressed and needy individuals who have encountered financial hardship for reasons beyond their control. What’s “beyond their control”? This could be serious illness or injury, fire, flooding, tornados, violent crime, and more.
How should we best prepare to offer assistance?
Make sure you establish written policies and procedures in advance to operating assistance programs. These should do the following:
- Establish a “Charitable Class”: You need to identify a charitable class that is large enough and open-ended so the class cannot be quantified. This means, you can’t set yourself up to deliver assistance to one specific family or person, for instance.
- Establish a Method for Identifying Individuals in Need of Assistance: Reach must go beyond board member and employee contacts. Consider how you can “advertise” the help you’re providing.
- Create an Application Process that is Committee-Reviewed
If you’re a nonprofit and this is going to be a significant activity, you must also consider whether a disclosure is required on your Form 990.
What do we need to document?
This will vary depending on whether you are providing short-term or long-term aid.
For short-term aid, you will need:
- Type of assistance provided
- Cost of the aid
- Charitable purpose accomplished
- Criteria for disbursing assistance (how did you ensure that those who received aid were legitimately in need of aid?)
- Date and place
- Estimated number of victims assisted
- Individuals names/addresses not required
For long-term aid, you will need:
- Description of assistance provided
- Cost for providing assistance
- Purpose for which aid was given
- Objective criteria for disbursing assistance
- How recipients were selected
- Name, address and amount distributed to recipient
- Any relationship between recipient and officers, directors or substantial contributors
- Composition of selection committee approving assistance