Purchasing and Supplier Diversity

Question: Supplier Diversity – As an anchor institution, we have the opportunity to shift resources directly into local communities to help build capacity and wealth within underrepresented communities.  Supplier Diversity efforts focus on transitioning a percentage of the organization’s supply chain purchases to local, minor minority-owned businesses.  As a result, those minority-owned businesses gain revenue, increase capacity to expand, and positively their respective communities by providing jobs and income to their communities.

  • Can expenses associated with implementing supplier diversity efforts be considered community benefit? (The activities are not done to directly benefit the organization, but rather are solely done to benefit underrepresented communities)
  • If yes, which expenses?
  • FTE of supply staff?
  • Consulting fees for identifying suppliers and guiding the transition to supplier diversity?
  • Associated legal fees/FTE?
  • Other?

Recommendation:We commend you for your approach to purchasing procedures to support local minority businesses, investing resources and wealth into your local community.

We recommend not counting these separately as community benefit. Purchasing supplies is considered a cost of doing business. These costs would be included in the direct and indirect costs that are calculated within the items on Part I, 7a-j. Reporting them separately would be duplicative.

We do recommend that you note your purchasing approach in Section VI of the 990 Schedule H and in your reporting to your community as a way you are benefiting the community.

(November 2023)

Please Take Note: The information provided does not constitute legal or tax advice. The material is provided for informational/educational purposes only. Please consult with counsel regarding your organization's particular circumstances.