Direct Financial Assistance

Projects may make payments to individuals to provide financial assistance to a member of a defined charitable class with demonstrated need. Direct financial assistance payments must be part of an assistance program and cannot be made to just a single individual.

Criteria for Financial Assistance Programs:

• Defined Charitable Class: The group of individuals who are eligible for this funding. The criteria for the charitable class needs to be clear, objective, documented, and consistently applied. It cannot be so narrow as to only allow only an identifiable or pre-selected group - in other words you must be able to document that this program has a public benefit.

• Needs Based Eligibility: Outside of an emergency, financial assistance must be needs-based. Part of the application for funds and the evaluation of recipients must be based on their actual need for funds. This doesn't mean prying into potential recipients’ financial details, but it does mean evaluating whether the individual could meet a set of needs without the charitable aid.

• Defined Selection Process: You must create objective criteria for selecting the individuals who will receive financial assistance and a process for deciding who meets those criteria. This will typically look like an application process, an evaluation rubric, and a decision making committee. 

• Process for Prohibiting Improper Benefit: The application and decision making process should ensure that the aid program does not improperly benefit organization insiders. Applicants should be asked whether they have relationships with donors, board members or key employees. Donors, board members and key employees should not be eligible for assistance. 

Required Documentation:

• A complete description of the assistance

• The cost of the assistance

• The purpose for which the assistance was given,

• The objective criteria for choosing recipients

• How the recipients were selected

• The name, address, and amount distributed to each recipient

• A W9 for each recipient

• Any relationship between the recipient and officers, directors, or key employees of or substantial contributors to the organization

• The composition of the selection committee approving assistance

Payment Process:

Once you have created a program that meets the above criteria and collected the required documentation, submit the payment request for each individual using the Other Expense option on the AP Form. Include all required documentation for each request.