Question

Explain the rules related to one nonprofit organization (Nonprofit A) receiving donations, that a donor expects the organization to pass on to a second organization (Nonprofit B)

Answer 1

The donor non-profit needs to make absolutely certain that there is:

1. No conflict of interest. Any person or persons responsible for the transfer of the donated funds must not personally (their families, friends, associates, etc.) benefit in any way. Example: The donated funds are used to purchase equipment in some way connected to business interests of a Board member of the donor non-profit
2. No violation of donor restrictions. While exacting restrictions are not generally connected to most donations, nevertheless, the risk is that some donors would not approve of their money, in principle, going to another charity they did not choose, no matter how it fits or how worthy.
3. No misuse of the donated charitable resources by the receiving non-profit. Should the receiving non-profit subsequently have publicized financial problems, even though the donated funds were not in fact misused, the overall perception of the receiving organization trumps the reality. Perception is everything. There could be serious trouble for the donor non-profit requiring it to justify its support of the ailing organization.
4. No question that donating funds in any way will imperil the donor non-profit’s own financial health. In other words, that the donation was not over the top, excessive, or out of the realm of good judgment.