Emergency Assistance Fund Expenses: Some Considerations

When setting up an emergency assistance fund for employees, there are both set-up and ongoing expenses to be considered. Some of the most important decisions about fund management accompany decisions around whether these expenses will be covered by donations, by the organization, or through existing administrative functions. Ensuring that there is a plan in place is a necessary part of fund set-up and management.

Some of the biggest fund expenses come from staffing, including accounting for salaries and benefits. Other expenses include overhead costs, legal and accounting fees, and various indirect costs. Administrative expenses are a separate category of costs that can be covered in a variety of ways. Some expenses to consider include start-up, grant, and investment fees.

In deciding how to split up costs, it is important to obtain legal advice on the implications from a tax and fund development perspective. Some companies prefer to pay for fund expenses out of the donations received, while others prefer to take the costs from the organization. Understanding how each method affects the corporation and the fund can help fund developers decide on the best method for their organization.

Legal and tax advice is important, because the structure of the program does much to drive its success. This is particularly true since there is already a balancing act regarding the tax efficiency of the program, and the associated regulatory compliance requirements. With that sensitivity in mind, it is crucial to carefully decide how to pay these expenses. Transparency is also critical – employers should openly explain the nature of their contributions and involvement, to show their dedication and support for the program. Keep all of these factors in mind when designing your program, and consider consulting with experts in the nonprofit field who specialize in disaster relief funds.

 Source: Stockham, D., Clontz, B. 17 May, 2012. Emergency Assistance Funds (EAFs) for Employee Hardship and Disaster Relief: Legal, Tax and Design Considerations. Planned Giving Design Center. Accessed from: http://www.pgdc.com/pgdc/emergency-assistance-funds-eafs-employee-hardship-and-disaster-relief-legal-tax-and-design-cons