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Financial Reporting for Fundraising Events

Holding a special event is one way for nonprofits to generate revenue through fundraising. Read on for a summary of special event reporting. 

Fundraising is an important revenue-generating activity for nonprofits that can be accomplished in a variety of ways, one of which is holding a special event. When your organization holds a special event, it requires detailed financial reporting to maintain tax compliance for items such as donor acknowledgment letters and Form 990 filings.

Accounting for a special event includes managing contributions (cash, in-kind items, and in-kind services), expenses, and ticket sales.

Revenues

Gross revenues for a special event come from ticket sales, cash contributions, and in-kind contributions. Net revenue is equal to total revenue less contributions. While you might be tempted to believe that contributions are easily determined, remember that ticket sales will typically have a goods/services received component and a quid pro quo contribution component.

Cash contributions are monetary donations to the event with no expectation of goods or services in return.

In-kind contributions could be in the form of goods or services. For example, a local florist donates flower arrangements for each table at a dinner gala. This is an in-kind donation of goods. Next, a local radio station agrees to provide free advertising for the gala. This is an in-kind donation of services.

Quid pro quo contributions come from a donation wherein the donor receives some form of goods or services for their contribution. Keeping with the dinner gala example, assume each attendee paid $100 for their ticket. This ticket guarantees the attendee a dinner plate at the gala. If the fair market value of the catered meal is $20 per meal plate, the attendee is actually paying $20 for their meal and then donating the remaining $80 of their ticket purchase to the organization. When quid pro quo contributions are part of the special event, keeping track of the number of attendees (ticket sales) can help simplify determining net revenue of the event.

Expenses

While special events are held to bring in donations for the organization, expenditures are still necessary for a successful event. When the special event has gross revenue of $15,000 or more, it is necessary to provide detailed reporting of a special event on Form 990, Schedule G. The form requires expenses to be broken out into six categories: cash and noncash prizes, facility costs, food, entertainment, and other direct expenses. Not every special event will have all these expenses; it depends on the type of event you are hosting.

Prizes (cash and noncash) are given out to attendees in relation to the event. Examples of prizes would be medals for a race, swag bags put together for attendees, T-shirts, golf balls, etc. Prizes related to games of chance are not considered part of the event net expenses (revenue collected from games of chance at the event also are not considered part of the event net revenue; games of chance should be reported separately).

As a reminder, in-kind contributions are included as an expense as well, meaning that the in-kind contribution effect is net zero for financial presentation. The idea is that the expense would have been incurred by the organization if not for the in-kind donation.

After hosting a successful event, you are likely to send thank-you notes to the attendees who made it successful and helped raise money for the organization. At this point, it is important to revisit the quid pro quo contributions concept. Any quid pro quo contributions in excess of $75 require that a donor acknowledgment letter outlining the breakdown of donation and goods/services received be sent to the donor. In the dinner gala scenario, the ticket price of $100 is the quid pro quo contribution. Since the ticket price exceeds the $75 limit, you are required to inform the donor of the amount considered a contribution to the organization: “Thank you for purchasing a ticket in the amount of $100 to the dinner gala. The amount of your ticket purchase that is deductible for federal income tax purposes is $80.”

Hopefully, this summary of special event reporting alleviates the administrative burden you might face with IRS compliance to keep the spotlight on your successful fundraising endeavor!

If you have questions or need assistance, please reach out to a professional at Forvis Mazars or submit the Contact Us form below.

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