Nonprofit Law/Matching Funds


Our nonprofit was recently given the opportunity to receive matching funds for a fundraiser from another nonprofit agency.  It sounds like a great deal, but the other nonprofit wants us to write give them a check for the entire amount raised. Then, in about 30 days, they will give us a check back for the same amount, plus their match of $2500.  Is this how it is normally done in the nonprofit world?  I am new to nonprofit accounting, and it seems a little fishy to me.  I know others have received funds from this agency, but that doesn't mean it isn't on the shady side!  Also, when the check for the full amount is presented, it is usually a photo op in the paper, so most people don't even realize that they aren't actually giving the charity the full amount.  The matching agency claims the first check is simply to make sure the funds were actually raised.  Any thoughts on this?  We hate to pass up the matching funds, but we don't want to be involved in anything that has the appearance of fraud!  Thank you for your time.

No. That is not a standard procedure for a matching funds grant. Normally, the grantee would not need to provide funds to the grantor organization which would then grant back double.

One source explains the normal procedure, "The system of policies and procedures for valuing, documenting, recording, processing, and reporting in-kind match is similar to the process used for tracking cash, is easy to set up, and is very effective at acquiring match when staff are dedicated to the effort."

Also see

The method that you are being offered certainly provides that other nonprofit agency the opportunity to keep the funds that you provide to them, but it appears from what you wrote that they have a history of following through on their promise, so it is your call.  Your group would not be involved in any fraud or conspiracy to commit fraud simply by agreeing to their terms.  You would, though, be involved in a material misrepresentation if you take part knowingly in a photo-op for the paper where it is not announced that half of the funds came from your organization. That material misrepresentation would only apply, however, to potential donors to that other nonprofit agency, because you would not be engaged in the misrepresentation for your own group's benefit.

Harvey Mechanic
Attorney at Law

P.S. This response is intended to be a general statement of law, should not be relied upon as legal advice and does not create an attorney/client relationship.

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Harvey Mechanic


I am an attorney and I volunteer time to answer general questions about U.S. Federal income tax issues of nonprofit 501(c)(3) public charities only. Those questions could be about establishing and maintaining legal requirements for such non-profit organizations in the United States, including Internal Revenue service filings and requirements. I will not be working on this free forum to answer questions about Nonprofit's possible unrelated or for-profit businesses or how to fill out forms. This forum is only for general questions about federal tax law, not as the law applies to your specific situation. If you do not make your question public then I will not be spending much of my donated time on answers that would not benefit the public. If you have other questions, please contact me at I will reply from my email. In any case, do not reveal confidential information to me until after I have contracted with you to provide personal legal services. My responses on this forum are intended to be general statements of law, should not be relied upon as legal advice, and do not create an attorney/client relationship. For me to consider your individual situation and how the law applies, I would need to gather extensive information about the situation. To search my previous answers you can do a Google search by "" without the quotes and then add your search terms before hitting enter.


I have been practicing law and especially the law of nonprofit organizations since 1990 when I was admitted to the New York Bar and I have maintained my status with the Bar since that time.


B.S. Columbia University in New York City, 1970

J.D. (Law Degree) Brooklyn Law School, 1990 -- Cum Laude.

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