Not-For-Profit Organizations have a number of options when it comes to generating revenue, but fundraising is generally the easiest, most prevalent source of raising money for funding programs and initiatives. Making sure the organization is properly accounting for special event fundraising revenues and expenses is an important step in planning your next event!
Fundraising revenues:
- Special event tickets – accounting for ticket sales involves determining the amount of the ticket price that is for goods and/or services, that amount is non-deductible by the donor and is considered event revenue by the organization. The other portion of the ticket sale is considered contribution revenue to the organization and is deductible by the donor. This type of donation is called a “quid pro quo” contribution.
- Event sponsorships – as with event tickets, sponsorships must be carefully accounted for as well. Any goods and/or services received for the sponsorship is considered event revenue, while the rest of the amount is considered a contribution to the organization. Sponsorships are often received in advance of events; these amounts should be classified as deferred revenue, then recognized as revenue in the period the event occurs.
Fundraising expenses:
- These are expenses associated with fundraising events, materials, software, etc.
- When preparing the organization’s statement of functional expenses, these expenses will fall in the fundraising “bucket.”
- The organization may also decide to allocate a percentage of total salary expense for certain employees to fundraising expense if they spend a significant amount of their time fundraising.
- For Form 990 purposes, generally only direct fundraising event expenses (i.e. entertainment, facility costs, food, etc.) are reflected in the net fundraising income.
It is especially important for filing the Form 990 that your organization can clearly break out the gross revenue between contributions and actual fundraising event revenue, as noted above. The Form 990 requires a special schedule for fundraising events that breaks this out, as well as the different fundraising expenses.
Quid pro quo contributions:
An important requirement to note, if the amount of the quid pro quo donation exceeds $75, the organization is required to give the donor a disclosure statement. This statement is to include both the fair market value of the goods and/or services received and the amount of the donation that is tax deductible. This disclosure statement is not required by the IRS if the total payment is less than $75.
Please contact the Not-for-Profit Niche team at Gilliam Bell Moser LLP for further guidance.
