It is common for a local church to establish a fund which is intended to give its pastor complete discretion and authority to provide confidential financial support to persons in need.
The details of clergy discretionary funds can vary. In some cases, no guidelines or instructions as to the acceptable use of the funds are provided, effectively giving the clergyperson free reign as to how they are spent. In other instances, the clergyperson is given some guidance, but it may be very general or unclear and may be given orally or understood culturally.
These funds can lead clergy to unknowingly run afoul of relevant Internal Revenue Service regulations and can result in unintended tax consequences to clergy and to donors. GCFA’s Legal Services Department is providing guidance to help churches and clergy avoid the pitfalls present with clergy discretionary funds.
Find their report in the document linked below:
CLERGY DISCRETIONARY FUNDS
General Council on Finance and Administration of The United Methodist Church
Legal Services Department