Should the president and board members of a 501(c)(3) private nonprofit corporation know the name of an anonymous donor?
When you say 501(c)(3) organization, I assume you mean a public charity and not a private foundation. With a private foundation, there is no such thing as an anonymous donor because all donors have to be disclosed on the annual Form 990-PF tax return, which is a public document.
With a public charity, a large donor has to be disclosed to the IRS on Schedule B to the annual Form 990 tax information return. But that is not a completely public document so that the name on the form might be known only by the preparer and the officer who signs the return. Directors, of course, have a legal right to inspect the books and records of the corporation so they have a legal right to know the identity. They may decide to rely on the president, the board chair, or an executive committee to determine whether to accept such a gift without personally knowing its source, but they have a right to know. (If there are voting members of the corporation, they may also have a legal right to inspect the books to find out.)
You have to assume that the anonymity, no matter how few know the identity, won’t be totally maintained. Because of the potential for adverse public reaction if it becomes known that an organization is being funded by a creep, as a director or trustee, I would want to know the donor’s identity if it is a significant gift. Even if I don’t object to the gift, I would want to be prepared if people start asking questions.
If the donor really wants to keep it anonymous, he or she should give it — or “launder” it if I want to be pejorative — through an attorney or other intermediary, such as an anonymous donor advised fund at another charity. In that case, the organization has to decide whether it will accept what many would consider a “tainted” gift. Keeping a gift anonymous as to the general public is one thing. Keeping it anonymous as to those responsible for the organization is another thing entirely.
Comments
Am I correct that a gift to a "donor advised fund" goes into a pool, so that when a gift is made to a charitable organization by that fund, the money come from the pool, not from any one person? --V. via email
Normally, the assets of a donor advised fund are invested with the sponsoring charity's investment pool, but each fund is accounted for separately and grants are made from the "fund" at the charity. The recipient would receive the grant from a fund at the sponsoring charity, but if the fund name does not reveal the identity of the donors to the fund and was intended to be anonymous, the recipient would not know their identity. --Don Kramer
So what do you do if somebody leaves a paper bag full of cash with the name of the foundation in the mailbox where the foundation receives its mail? --J.J. via email
It must be wonderful to have such an optimistic imagination! I suppose that what I would do depends in large part on how much money was left. I would try to find out who left the money to see if it was intended as a gift and to thank them. If it were a large amount, I might report to police, or if over $10,000 to the FBI because the IRS requires reporting of cash transactions over $10,000. If over $10,00, it must be reported to the IRS on Form 8300 within 15 days of receipt. The IRS is suspicious of cash transactions in excessive amounts. IRS Publication 1544 on reporting transactions over $10,000 requires the reporter to include the Taxpayer Identification Number of the person who gave the cash. It doesn't say anything about anonymous donors. If I couldn't find out who left it, I would hold it for a while before I spent it, just to make sure that no one else has a claim on it. If the amount were substantial, I would hold the actual cash to see if any of the bills were marked in some sort of a sting operation. --Don Kramer
I am the E.D. of a small nonprofit. For a recent fundraiser, we asked all staff, volunteer, and board members to ask their friends for donations. When a volunteer, staff, or board member says to me, "Hey my Aunt Martha said she donated, did she?" what is my ethical obligation? I always assume that donor info is not to be shared with anyone, not even board members. Thank you. --Laura
I am the president of a 501(c)(3). We removed our Treasurer this year, due to some minor misconduct and personality conflicts. After her removal, we discovered she had not issued receipts to several donors of non-cash gifts. We demanded the names of the donors so we could issue our own receipts. She refused. We persisted, and she finally issued receipts on our behalf, using our Tax ID without our permission. She then sent us redacted copies of the receipts, with donor names and addresses blacked out. What, if any, right do I have to pursue this further? I feel the names have value to our club and I would like to be able to verify that she did not keep some of the donated items.
I think you have every right to the full story since she was acting only as an agent of the organization. If any of the donations was $5000 or more you may have to report on the Schedule B of the Form 990. Other officers, directors, or members could ask her as well for the information. She might not enjoy stiffing everyone. If she persists in withholding the information, however, you may untlimately have to determine whether it is worth actually suing her to get it. It sounds like you should win, but is it worth the cost? --Don Kramer
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