Josh Wagner, Principal
413 Western Drive #15
Santa Cruz, CA 95060-3078
ph 831-423-two-3-two-3
fax 831-401-one-zero-eight-two



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    Special Accounting for Fundraising Events

    If an organization conducts an event, the main or sole purpose of which is to raise funds (as opposed to an event that directly accomplishes the exempt purposes of the organization), that event is sometimes referred to on Form 990 as a “Special Event” and requires special accounting, according to the example that follows.

    • Let’s say you sell 20 tickets @ $25 each for a fundraising dinner and collect and additional $100 in contributions at the event.
    • The cost to you for the food, rent, etc., comes out to $8 per person.
    • And that same dinner in a regular restaurant would cost patrons $18 per plate (“retail value”).

    The following six principals apply:

    1. 20 tickets x $25 = $500 + $100 (contributions) = $600. This is called your “Gross Receipts” for the event. -- [Sched. G, Part II, Line 1]
    2. Since attendees paid $7 over the “retail value” of the meal ($25 less $18), that $7 is considered a contribution. Total contributions are 20 x $7 = $140 + $100 additional contributions = $240. -- [Sched. G, Part II, Line 2;  990-EZ, Part I, Line 6a parentheses;  990, Part VIII, Line 8a parentheses].
    3. The “retail value” of that dinner is 20 x $18 = $360. This is called “Gross Revenue or Income.” -- [Sched. G, Part II, Line 3;  990-EZ, Part I, Line 6a;  990, Part VIII, Line 8a]
    4. (Notice that Gross Receipts less Total Contributions = Gross Revenue or Income.)
    5. The “Direct Expenses” are $8 per person x 20 people = $160. -- [Sched. G, Part II, Lines 4-9;  990-EZ, Part I, Line 6b;  990, Part VIII, Line 8b]
    6. The difference between Gross Income and Direct Expenses is called Net Income (or Loss)  $360 - $160 = $200. -- [Sched. G, Part II, Line 11;  990-EZ, Part I, Line 6c;  990, Part VIII, Line 8c.]

    So, the information that needs to be collected (and tracked separately) for each fundraising event is the following:

    A. Total number of tickets sold (whether people attended event or not)

    B. The total amount generated by ticket sales and donations made at the event (Gross Receipts)

    C. A good faith estimate of the retail value per ticket of the goods or services received

    D. The total direct expenses attributable to the goods or services received, which are broken down into:

    E. Cash and non-cash prizes awarded each the event
    F. All facility costs (rent, etc.)
    G. Food and beverage costs
    H. Entertainment costs, and
    I.  All other direct expenses.

    You should educate those who purchase tickets for Special Events about the “Retail Value” of the event and the resulting contribution. One way to do this is by including a statement on the tickets themselves.

    For example, if the ticket price is $25 (see the above example) and the Retail Value of the goods or services is $18, the ticket could carry a statement saying, “The retail value of this event is $18. Any amount paid above $18 is considered a charitable contribution.” (If people purchase a ticket but don’t attend the event, the above formula still holds, because they essentially purchased a right to receive the goods or services.)

    If fundraising merchandise (which doesn’t directly accomplish the organization’s exempt purposes) is sold at a Special Event, those sales must be tracked separately from fundraising merchandise that is sold outside of a Special Event.

    Furthermore, the sales of such merchandise must be tracked and accounted for separately at each Special Event because it figures into the above calculations (Gross Receipts, Direct Expenses, etc.)