Traditionally, my nonprofit 501(c)(3) service club thanks the outgoing president with a past president's pin engraved with the organization's logo and the theme of the president's year. Cost is usually under $100. Members of the board have, in the past, contributed to an additional personal gift to the president thanking her for her service. Recently, our budget committee earmarked club funds for both of these items rather than collecting from the board members for the personal gift. I have an issue with club funds being used for the personal gift. The pin seems to be an appropriate gift for which club funds could reasonably be expended. Any problems with the use of club funds for gifts? Any impact to our 501(c)(3) status? Or am I just being too sensitive?
It is wonderful to be sensitive about this kind of issue. You can get an organization into trouble if you are not.
Unless the additional personal gift is one of really egregious value, however, you are not likely to jeopardize your charitable exempt status. You are legally permitted to have some activities that are not charitable. You can’t make gifts to insiders that amount to private inurement, but it would have to be pretty expensive to reach that point.
You could have a political problem within the club, however, if significant funds are being used for personal gifts that could have been used for program. This is more likely, as your question shows, when it changes the traditional way of doing things. The members will have to reach some consensus on how much is “significant.”