One of my favorite themes is the idea of a Rotary Club raising money from the community at large; going outside of the club membership to raise money from the community to fund community projects. What I call Other Peoples’ Money. The leaders of any Rotary Club with success in this effort leverage the resources of their members and take on a higher level of responsibility to be good stewards of that money.
When the community makes contributions to fund the charitable good works of the Rotary Club they have a right to expect that their money will not be used for the care and feeding of the members of the Rotary Club. That alone should be ample justification for every Rotary Club to adopt an important provision within the recommended Rotary Club By-laws.
That provision reads, “Article 12 Finances, Section 1. Prior to the beginning of each fiscal year, the board shall prepare a budget of estimated income and expenditures for the year, which shall stand as the limit of expenditures for these purposes, unless otherwise ordered by action of the board. The budget shall be broken into two separate parts: one in respect of club operations and one in respect of charitable/service operations.”
Some Rotary Clubs go one step farther and create two separate corporations; one as a 501(c)4 organization and the other as a 501(c)3 organization. That makes any money donated to the 501(c)3 organization for ‘charitable/service operations’ deductible by the donor from current income. That would seem like excellent stewardship on the part of the leadership of those clubs. The reality is that a Rotary club needs to be sufficiently large and successful at raising money to justify the expense of operating two separate corporations, but maybe they are large and successful because they are good stewards.
In recent years, months and days I have experienced Rotary Clubs and even a Rotary District that claim that separating their budgets and accounting would not be possible without making significant changes in how they raise and spend their money. That justification sounds a lot like the fellow who murdered his parents and sought the mercy of the court because he was an orphan.
Operating with one budget and set of accounts is poor stewardship because it allows for a lack of transparency with both members and the community at large. Worse yet it allows the board of directors the opportunity for self-deception. Not only are they in a hole and continuing to dig deeper, they are avoiding the realization that they are operating in a hole.