What is the rule for a church selling an asset which was bought with disignated donations for that asset?

Question

Asset, church chimes, was bought from donations of several people each donor designating their gift as a memorial to a specified individual. There is still money in the fund which is to be used for any maintenance required.

Answer 1

It's a neat way to skirt the ethical issue of spending the money on something besides the asset for which the donations were intended. Buy it....their obligation to the donors is at an end...sell it and use the money to buy something else.

Answer 2

This info. should not be used as a substitute for legal advice.

In the future, if your church uses envelopes for it's collections, the envelopes should have a phrase similar to the following: we thank you for your donation, but the board reserves the right to utilize funds in other ministries of the church, as the need arises (or something to that effect).

I assume that the church is still organized as a church. If the church dissolved, for example, you would have to review their articles of incorporation to see if there is a dissolution clause. Most dissolution clauses that are found in church articles of inc. state that assets must be donated to another not-for-profit organization (churches are usually considered not-for-profit entities).

Nevertheless, I would think that as long as all donations of any kind are used in furtherance of the not-for-profit activities of the church, there is no inurement involved, and financial records exist to demonstrate all activities, both the donations received and expenses paid, there may not be a problem resulting from the sale of assets that are approved by the board of the church.